Waystar Holding Corp.WAY
Waystar Holding Corp. Income Taxes Disclosure
Income Taxes
Income tax expense/(benefit) consisted of the following for the years ended December 31, 2025, 2024, and 2023 (in thousands):
| Years ended December 31, | ||||||||||||||||||||
| 2025 | 2024 | 2023 | ||||||||||||||||||
| Current tax expense: | ||||||||||||||||||||
| Federal | $ | 3,695 | $ | 44,082 | $ | 36,277 | ||||||||||||||
| State | 10,757 | 11,633 | 12,888 | |||||||||||||||||
| Total current tax expense | 14,452 | 55,715 | 49,165 | |||||||||||||||||
| Provisions for uncertain tax expense | ||||||||||||||||||||
| Deferred tax (benefit): | ||||||||||||||||||||
| Federal | 42,064 | (53,032) | (53,382) | |||||||||||||||||
| State | 3,158 | (6,103) | (8,283) | |||||||||||||||||
| Total deferred tax benefit | 45,222 | (59,135) | (61,665) | |||||||||||||||||
| Income tax benefit | $ | 59,674 | $ | (3,420) | $ | (12,500) | ||||||||||||||
The reconciliation between the statutory income tax rate and the effective income tax rate for the years ended December 31, 2025, 2024, and 2023 are as follows:
| Years ended December 31, | ||||||||||||||||||||||||||
| 2025 | 2024 | 2023 | ||||||||||||||||||||||||
| Book Income | $ | 171,763 | $ | (22,545) | $ | (63,834) | ||||||||||||||||||||
| U.S. Federal Tax At Statutory Rate | 36,071 | 21 | % | (4,735) | 21 | % | (13,309) | 21 | % | |||||||||||||||||
| State & local income tax, net of federal tax effect (a) | 11,459 | 7 | % | 2,836 | (13) | % | 2,893 | (5) | % | |||||||||||||||||
| Effects of changes in tax laws | — | 0 | % | — | 0 | % | — | 0 | % | |||||||||||||||||
| Tax Credits | ||||||||||||||||||||||||||
| Purchased Tax Credits | (976) | (1) | % | — | 0 | % | — | 0 | % | |||||||||||||||||
| Research and development tax credit | (1,711) | (1) | % | (2,108) | 9 | % | (1,885) | 3 | % | |||||||||||||||||
| Nontaxable or nondeductible items | ||||||||||||||||||||||||||
| Stock based compensation | 8,214 | 5 | % | (942) | 4 | % | — | 0 | % | |||||||||||||||||
| Nondeductible compensation | 4,663 | 3 | % | — | 0 | % | — | 0 | % | |||||||||||||||||
| Transaction Costs | 1,561 | 1 | % | — | 0 | % | — | 0 | % | |||||||||||||||||
| Change in Uncertain Tax Liability | (279) | 0 | % | 1,241 | (6) | % | 281 | 0 | % | |||||||||||||||||
| Other, net | 672 | 0 | % | 288 | (1) | % | (480) | 1 | % | |||||||||||||||||
| Effective Tax Rate | $ | 59,674 | 35 | % | $ | (3,420) | 15 | % | $ | (12,500) | 20 | % | ||||||||||||||
(a) During the year ended December 31, 2025, local taxes in Louisville, KY and state taxes in Pennsylvania, Tennessee, California, Minnesota, and New York comprised greater than 50% of the effect in this category.
The tax effects of temporary differences that gave rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31, 2025 and 2024 are as follows (in thousands):
| December 31, | ||||||||||||||
| 2025 | 2024 | |||||||||||||
| Deferred tax assets: | ||||||||||||||
| State tax credits | $ | 827 | $ | 827 | ||||||||||
| Federal tax credits | 4,176 | — | ||||||||||||
| Accrued bonus | 7,985 | 5,148 | ||||||||||||
| Stock based compensation | 16,538 | 30,022 | ||||||||||||
| Accrued revenue, expenses, deferrals and other | 3,614 | 2,607 | ||||||||||||
| Deferred revenue | 3,857 | 2,129 | ||||||||||||
| Interest Expense | 105,123 | 105,353 | ||||||||||||
| Interest Rate Swap | 186 | — | ||||||||||||
| Other | 19 | 4 | ||||||||||||
| Capitalized Research and Development Expenditures | 6,171 | 20,557 | ||||||||||||
| Right-of-use Liability | 4,484 | 4,703 | ||||||||||||
| Depreciation of property and equipment | — | 1,755 | ||||||||||||
| Net operating loss | 18,603 | 15,599 | ||||||||||||
| Valuation Allowance | (2,610) | (1,056) | ||||||||||||
| Total deferred tax assets | $ | 168,973 | $ | 187,648 | ||||||||||
| Deferred tax liabilities: | ||||||||||||||
| Depreciation of property and equipment | 4,493 | — | ||||||||||||
| Transaction Costs | 36 | 26 | ||||||||||||
| Amortization | 346,194 | 262,026 | ||||||||||||
| Other prepaid expenses | 2,920 | 2,270 | ||||||||||||
| Right-of-use Asset | 3,230 | 2,717 | ||||||||||||
| Interest Rate Swap | — | 283 | ||||||||||||
| Deferred costs | 23,420 | 20,849 | ||||||||||||
| Total deferred liabilities | 380,293 | 288,171 | ||||||||||||
| Net deferred tax liability | $ | (211,320) | $ | (100,523) | ||||||||||
The following is a reconciliation of beginning and ending unrecognized tax benefits, including associated interest and penalties for the years ended December 31, 2025 and 2024 (in thousands):
| December 31, | ||||||||||||||
| 2025 | 2024 | |||||||||||||
| Beginning balance | $ | 4,335 | $ | 3,094 | ||||||||||
| Additions based on tax positions related to the current year | — | 1,265 | ||||||||||||
| Reductions based on tax positions related to the current year | — | (24) | ||||||||||||
| Reductions for tax positions in prior years | (279) | — | ||||||||||||
| Ending balance | $ | 4,056 | $ | 4,335 | ||||||||||
The following presents the cash paid for income taxes for the years ended December 31, 2025, 2024, and 2023 (in thousands):
| Years ended December 31, | ||||||||||||||||||||||||||
| 2025 | 2024 | 2023 | ||||||||||||||||||||||||
| Federal (a) | $ | 18,971 | $ | 41,500 | $ | 34,095 | ||||||||||||||||||||
| Aggregated state and local jurisdictions | 9,352 | 8,997 | 12,555 | |||||||||||||||||||||||
| Disaggregated state and local jurisdictions | ||||||||||||||||||||||||||
| California | 1,820 | — | (b) | — | (b) | |||||||||||||||||||||
| Louisville, KY | 1,579 | — | (b) | 3,460 | ||||||||||||||||||||||
| Net cash paid for income taxes | $ | 31,721 | $ | 50,497 | $ | 50,110 | ||||||||||||||||||||
(a) Includes amounts paid to purchase transferable tax credits of $15 million during the year ended December 31, 2025
(b) Jurisdiction below the threshold for the period presented
As of December 31, 2025 and 2024, the amount of unrecognized tax benefits that would impact the effective tax rate if recognized was $4.0 million and $4.3 million, respectively. During the years ended December 31, 2025, 2024, and 2023, we recognized $0.4 million, $0.2 million, and $0 million expense for interest and penalties related to unrecognized tax benefits. The above unrecognized tax benefits are recorded as an increase in the deferred tax liability in the accompanying balance sheet. Years 2021 to 2024 remain open to examination by federal, state, or local tax authorities.
As of December 31, 2025, we had net operating loss (“NOL”) carryforwards, consisting of approximately $4.3 million of tax effected Federal NOLs that expire beginning in 2032 and $14.4 million of tax effected state NOLs net of federal benefit that expire beginning in 2029, limited under provisions of Internal Revenue Code Section 382.
The following table details the changes in the valuation allowance for the years ended December 31, 2025 and 2024 (in thousands):
| Valuation Allowance | ||||||||
| December 31, 2025 | ||||||||
| Beginning balance | $ | 1,056 | ||||||
| Increase/(decrease) | 130 | |||||||
| Acquisitions | 1,424 | |||||||
| Ending balance | 2,610 | |||||||
| December 31, 2024 | ||||||||
| Beginning balance | $ | 197 | ||||||
| Increase/(decrease) | 859 | |||||||
| Ending balance | $ | 1,056 | ||||||
As of December 31, 2025, we have a partial valuation allowance on our state credits of $0.2 million as well as a partial valuation allowance on certain state net operating loss carryforwards of $1.0 million. As part of the Iodine acquisition, we recorded a partial valuation allowance on federal credits of $1.4 million.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 17, 2026 | Showing above |
| 2024 | Feb 18, 2025 | |
About Income Taxes Disclosures
The income tax disclosure reveals how much a company actually pays in taxes versus what the statutory rate would predict. Analysts focus on the effective tax rate (ETR) reconciliation, which breaks down every item driving the gap between the 21% federal rate and the company's reported ETR — including R&D credits, foreign rate differentials, and state taxes. Deferred tax assets (DTAs) and their valuation allowances signal management's confidence in future profitability: a rising allowance suggests the company doubts it can use accumulated tax benefits. Uncertain tax benefit (UTB) reserves quantify exposure to IRS challenges on aggressive positions.
Key signals to watch: sudden ETR drops without clear operational reasons, large increases in valuation allowances, growing UTB balances, and significant unremitted foreign earnings. Post-TCJA, pay attention to GILTI and BEAT provisions that affect multinational tax structures. Compare the cash taxes paid (from the cash flow statement) against the income tax provision to gauge earnings quality.