Waystar Holding (NASDAQ:WAY) on Wednesday agreed to acquire Iodine Software from shareholders led by Advent International, a private equity firm, for a total of $1.25 billion.
The proposed transaction is expected to accelerate Waystar’s ability to transform healthcare payments through its leading cloud-based software platform, empowering more than one million providers with advanced AI capabilities to prevent denials, reduce manual work, and improve financial performance.
Waystar expects the acquisition of Iodine to be immediately accretive to gross margin and adjusted EBITDA margin, and accretive to revenue growth and non-GAAP net income per diluted share in 2027.
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The company estimates that up to 60 million claims are denied annually due to administrative errors in the critical stage between care delivery and submission, resulting in billions of dollars in lost revenue for providers.
This highlights the essential role of accurate clinical documentation and coding in preventing revenue leakage and underpayments.
Rationale
Waystar and Iodine will be better positioned to help decrease the estimated $440 billion in annual administrative costs burdening providers.
The addition of solutions is expected to expand Waystar’s total addressable market by more than 15%.
Waystar will benefit from Iodine’s fully subscription-based revenue model as well as significant cross-sell potential to both companies’ client bases. In addition, Waystar has identified more than $15 million in run-rate cost synergies, to be realized within the first 18-24 months following closing.
The transaction will be funded with a 50/50 cash and stock consideration mix. Current Waystar shareholders will own approximately 92% of the combined company on a fully diluted, pro forma basis and Iodine equity holders will own approximately 8%.
Advent, Iodine’s largest shareholder, is expected to only receive Waystar shares in connection with the transaction and will agree to be locked up for 18 months after closing.
Following the transaction, Waystar expects to maintain a strong balance sheet, with an estimated adjusted net leverage ratio of approximately 3.5x at the transaction close.
The transaction is anticipated to close by year-end 2025.
Waystar expects its second-quarter 2025 revenue to be approximately $271 million, representing approximately 15% year-over-year growth, compared to the consensus estimate of $254.96 million.
‘Go-Forward Story’
William Blair analysts “are not surprised to see Waystar strike on a strategic asset given the momentum we see in the market for AI-based RCM solutions.”
Analyst Ryan Daniels writes that Iodine appears to be a high-quality asset with solid channel partners, and leading AI and automation capabilities that drive efficiency in the revenue cycle.
“Overall, we believe Iodine should be both strategically and financially accretive to the go-forward story,” William Blair said.
Price Action: WAY stock is up 3.90% at $38.40 at the last check on Thursday.
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