Healthcare payments tech company Waystar hits the public market, raising $968M

Healthcare payment software maker Waystar debuted on the public market Friday, raising $967.5 million, and marking the biggest health tech IPO since 2022.

The Lehi, Utah-based company's initial public offering priced late Thursday at $21.50 a share, in the middle of its expected range. Waystar, backed by EQT AB and the Canada Pension Plan Investment Board (CPPIB), sold 45 million shares.

Bain Capital also is a major shareholder in the company. Following the IPO, EQT, CPPIB and Bain will beneficially own approximately 29.2%, 22.3%, and 16.8%, respectively.

It plans to use the money from the offering to pay off existing debt, according to a statement.

Based on Waystar's initial share price, the company's market cap is about $3.5 billion. Including debt, the company has an enterprise value of about $5 billion.

The company's stock opened at $21, slightly below the IPO price.

Waystar's shares slide more than 3% in their Nasdaq debut.

The company offers healthcare payment and revenue cycle management tools, serving more than 30,000 customers representing approximately 1 million distinct providers. Waystar facilitated more than $5 billion in healthcare payment transactions last year, according to its filing with the U.S. Securities and Exchange Commission.

The company was formed in 2017 by the merger of revenue cycle management companies Navicure and ZirMed. Renamed Waystar in February 2018, the company provides healthcare organizations with "mission-critical cloud software that simplifies healthcare payments," the company wrote in the S-1 filing. The company's technology helps to manage claims submissions, payer remittances and prior authorizations.

In 2019, Swedish global investment firm EQT Partners and the Canadian Pension Plan Investment Board bought a majority stake in Waystar, valuing the healthcare technology company at $2.7 billion. Bain Capital retained a minority stake in the company.

"We feel like we're building a very high-quality business that we would characterize as highly visible, low double-digit revenue growth, durable revenue growth and a focus on profitability as we invest in innovation and as we invest in growth and creating market-leading client experiences," Waystar CEO Matt Hawkins said in an interview with Fierce Healthcare on Friday.

There were media reports last August that Waystar was eyeing an IPO. The company filed publicly for a Nasdaq listing in October 

"As we looked last fall to that potential opportunity to go through the process of becoming a public company then, we did a lot of work to prepare for that. We reached a point in the early October timeframe where we saw the macroeconomic and even some of the geopolitical conditions that were going on at the time, and we felt like we were building such a good business, we don't have to go public," Hawkins said.

The company hit the pause button, before any formal roadshow, he noted, to "focus on just building momentum."

"We've carried that momentum into this year. As we now debut as a public company today, we're coming off of what I would characterize a really constructive, engaging roadshow where some of the conversations that we'd had last fall with potential investors, they got the chance to become familiar with our story. They see the quality of our business, the great client relationships that we have where they know that we're rated first in the industry in client satisfaction," he said. "They see that long relationship that we establish with clients and the real return on investment that we created for them as our clients use our software. I think that story resonated and, over the course of the last two weeks during the roadshow, we're grateful for the constructive dialogue that we've had and been able to ultimately price and launch a debut today."

In 2023, Waystar reported a net loss of $51.3 million on revenue of $791 million, compared to a net loss of $51.5 million on revenue of $705 million in 2022.

Waystar says it leverages "internally developed artificial intelligence as well as proprietary, advanced algorithms" to automate payment-related workflow tasks and drive continuous improvement. Its technology enhances claim and billing accuracy, enriches data integrity and reduces labor costs for providers.

"Put simply, our software helps providers get paid faster, accurately, and more efficiently, while ensuring patients receive a modern, transparent, and consumer-friendly financial experience," the company wrote in its S-1 filing.

In May, Waystar announced it was working with Google Cloud to use generative AI technology for revenue cycle capabilities. 

"Given the fact that we're already using artificial intelligence on the Waystar software platform, we feel that we can be an important and effective contributor to how generative AI is used to further simplify healthcare payments. Given the fact that we're building scale and that we process over 5 billion insurance transactions a year, we evaluated Google as a potential partner. We think highly of their medical-specific large language model," Hawkins said in the interview.

As one use case, Waystar and Google Cloud have automated the extraction of prior authorization requirements from complex payer data sets. In a proof-of concept study by Waystar, the application reduced the time to generate an authoritative report of procedural preauthorization by 99.93% while increasing accuracy by 13%, the companies said.

The company will continue to invest in technology like generative AI, according to executives.

"Waystar is an innovative software company. We're delivering an average of 300 feature improvements to our software platform each quarter in ways that delight our clients without disrupting them. You'll see us just continue that work as a public company," Hawkins said.

The company is primarily focused on organic product development to build out its software platform, but supplements that work with a "disciplined" focus on acquisitions, Hawkins noted. In 2019, the company went on an acquisition spree, buying several analytics solutions providers including Connance, Ovation Revenue Cycle Services' transaction services tech, PARO and Digitize.AI, a company that applies artificial intelligence to the prior authorization process. 

Hawkins confirmed that Waystar bought some assets from Olive AI, a startup that shut down last fall. In November, the company completed "small, tuck-in acquisitions" of Olive's clearinghouse assets as well as its patient access tools.

"We're beginning to work with those clients to bring them to the Waystar platform. We felt like that was the right thing for us to do, because Olive AI had run into some headwinds and the business itself was headed toward pre-bankruptcy proceedings. As we evaluated this small, tuck-in opportunity, we felt that we could be helpful to these provider organizations that need a long-term, stable home," he said. "Along the way, we've added some talented people that came with that asset purchase and they have expertise in artificial intelligence."

Moving forward, Waystar is open to other M&A opportunities to enhance its platform, Hawkins noted.

"We're always looking for areas where we can further help our clients. There's a couple of things that we are watching in the market. We have such a complete software platform that if we didn't introduce another software module and we didn't add another client to 1 million providers who we serve today, we can approximately double the size of our business just by ensuring that our clients use our whole software platform," he said. "We feel like we're in a very good position and will continue to be very focused and look to deploy capital productively to drive organic innovation and growth supplemented by a disciplined approach to acquisition opportunities."

When competitor Change Healthcare was hit with a cyber attack in February, which forced it to disconnect is systems, Waystar stepped up to offer a temporary program to allow providers expedited access to revenue cycle management software to resume cashflow.

Hawkins said Waystar helped 30,000 providers quickly move to the Waystar platform, in an average of three days.

"As those providers land on the Waystar platform using our claims management suite to help their organizations get paid, we see that there may be opportunities for us to introduce additional software modules to them," he noted.

Waystar's IPO signals a potential upswing in the public investor market. The macroeconomic environment effectively put a freeze on the IPO market for health tech companies during the past three years. There were 20 digital health companies that went public in 2021 and only two, including prescription digital medicine company Akili, in 2022. There were no digital health IPOs in 2023.

So far this year, there have been several healthcare and health tech IPOs. Last week, Tempus AI filed for an IPO. The company is looking to raise up to $400 million in a public offering, according to some reports

BrightSpring Health also plans to raise approximately $960 million in an IPO that would value the company at about $3 billion. The home- and community-based healthcare services provider said it would sell 53.3 million shares of its common stock between $15 and $18 each to raise between $800 million and $960 million. 

 Waystar's offering was led by JPMorgan Chase & Co., Goldman Sachs Group Inc. and Barclays PLC.