Waystar Holding Corp.WAY
Waystar Holding Corp. Stock Compensation Disclosure
Stock-based Compensation
Equity incentive plans
On October 22, 2019, the Board of Directors approved the Waystar Holding Corp. 2019 Stock Incentive Plan. Under this plan, we can issue up to 9.9 million options or other equity awards. The granted awards contain service criteria, performance criteria, market conditions, or a combination thereof for vesting and have a 10-year contractual term. Options with a service condition generally vest over 5 years with 20% vesting in equal vesting installments. Options with a performance condition and a market condition vest based upon a change in control, initial public offering, or a sponsor distribution or deemed return if the investors have achieved specified levels of return on investment. In addition, as part of a change in control in 2019, 2.2 million fully vested rollover options remain outstanding.
The Board of Directors approved the Waystar Holding Corp. 2024 Equity Incentive Plan (the “2024 Equity Incentive Plan”), effective as of June 6, 2024, the date of pricing of our IPO. Under this plan, we can issue non-qualified stock options, incentive stock options, stock appreciation rights, restricted shares of our Common Stock, restricted stock units, performance based stock units, and other equity-based awards tied to the value of our shares. Under this plan, we can issue up to 10 million options and other equity awards, subject to annual increases as outlined under the plan. The number of shares available to be issued automatically increases on the first day of each fiscal year beginning in 2025 by a number of shares equal to the lesser of the positive difference, if any, between 5% of the outstanding common stock on the last day of the immediately preceding fiscal year, minus the plan share reserve on the last day of the immediately preceding fiscal year or such lesser number of shares as may be determined by the Board of Directors. Options with a service condition generally vest over 5 years with 20% vesting in equal vesting installments. The restricted stock units (“RSUs”) under the 2024 Equity Incentive Plan generally vest over 4 or 5 years with 25% or 20% vesting, respectively, in equal vesting installments. The performance-based stock units (“PSUs”) under the 2024 Equity Incentive Plan vest between 0% and 200% based on our total shareholder return (“TSR”) relative to a designated peer group as defined in the respective agreement over a four-year performance period. As of December 31, 2025, 5.2 million shares were available for future grants under this plan.
The Board of Directors approved the Waystar Holding Corp. 2024 Employee Stock Purchase Plan (the “ESPP”), effective as of June 6, 2024, the date of pricing of our IPO. A total of 3,250,000 shares of common stock are initially reserved for the ESPP. The number of shares available to be issued for the ESPP will automatically increase each fiscal year beginning in 2025 by a number of shares equal to the lesser of the positive difference, if any, between 1% of the outstanding common stock on the last day of the immediately preceding fiscal year and the number of shares of common stock available for the issuance of shares pursuant to the plan on the last day of the immediately preceding fiscal year or such lesser number of shares as may be determined by the Board of Directors. The number of shares available to be issued for the ESPP will not exceed 27,000,000 as outlined in the plan agreement. Our employees contribute funds via payroll deductions during the offering periods, which are used to buy Waystar common shares at a discount of up to 15% of the purchase price at the purchase date. Offerings to purchase shares are granted twice annually on or about June 30 and December 31. During the year ended December 31, 2025, 37,323 of common shares have been issued as part of the ESPP. For the year ended December 31, 2025 expense of $0.5 million has been recorded which represents the 15% discount given to the employees under the ESPP. Zero expense was recorded in connection with the ESPP for the years ended December 31, 2024 and 2023.
Stock Options
We utilize the Black-Scholes option pricing model to estimate the fair value of the service condition options under all plans and the Monte Carlo pricing model to estimate the fair value of the performance condition options under the 2019 Waystar Holding Corp. Plan. We value both types of options at the grant date using the following assumptions:
•Risk-free interest rate—reflects the average rate on the United States Treasury bond with maturity equal to the expected term of the option;
•Expected dividend yield—as we do not currently pay dividends or expect to pay dividends in the near future, the expected dividend yield is zero;
•Expected term of stock award—under the 2024 Equity Incentive Plan, we utilized the simplified method due to the lack of historical experience activity for our Company. The simplified method calculates the expected term as the mid-point between the vesting date and the contractual expiration date of the award. Under the 2019 Waystar Holding Corp. Plan, it is based on historical experience that is modified based on expected future changes; and
•Expected volatility in stock price—reflects the historical volatility of comparable public companies over the expected term of the stock option.
The weighted average grant date fair value of options granted during the years ended December 31, 2025, 2024, and 2023 was $18.69, $12.89, and $19.66 per share, respectively. As of December 31, 2025, we had 6.6 million fully vested options with a weighted average exercise price of $15.06 per share, an aggregate intrinsic value of $117.9 million and an average remaining contractual term of 4.0 years. The total fair value of options vested for the years ended December 31, 2025, 2024, and 2023 were $17.7 million, $9.5 million, and $8.5 million, respectively.
In June 2024, we determined the vesting of all our performance condition options became probable as a result of the IPO (see Note 1). Therefore, we recognized an additional $33.1 million of stock-based compensation for the year ended December 31, 2024 as the implicit service period for the awards established at the grant date had elapsed. As of December 31, 2025, there is no remaining unrecognized compensation expense related to the performance condition options issued under the 2019 Waystar Holding Corp. Plan.
Information pertaining to option activity under all plans (including rollover options) during the years ending December 31, 2025, 2024, and 2023 is as follows:
| Number of options | Weighted average exercise price per share | Weighted average remaining contractual life | |||||||||||||||
| Outstanding December 31, 2024 | 16,511,128 | $ | 17.57 | 5.8 | |||||||||||||
| Granted | 132,065 | 36.94 | |||||||||||||||
| Exercised | (2,317,930) | 10.63 | |||||||||||||||
| Forfeited | (333,090) | 25.95 | |||||||||||||||
| Outstanding December 31, 2025 | 13,992,173 | 18.71 | 5.1 | ||||||||||||||
| Number of options | Weighted average exercise price per share | Weighted average remaining contractual life | ||||||||||||||||||
| Outstanding December 31, 2023 | 13,032,541 | $ | 15.20 | 5.7 | ||||||||||||||||
| Granted | 4,003,703 | 24.20 | ||||||||||||||||||
| Exercised | (392,016) | 4.53 | ||||||||||||||||||
| Forfeited | (133,100) | 22.28 | ||||||||||||||||||
| Outstanding December 31, 2024 | 16,511,128 | 17.57 | 5.8 | |||||||||||||||||
| Number of options | Weighted average exercise price per share | Weighted average remaining contractual life | ||||||||||||||||||
| Outstanding December 31, 2022 | 13,123,170 | $ | 15.10 | 6.6 | ||||||||||||||||
| Granted | 208,725 | 37.20 | ||||||||||||||||||
| Exercised | (39,204) | 21.51 | ||||||||||||||||||
| Forfeited | (260,150) | 23.70 | ||||||||||||||||||
| Outstanding December 31, 2023 | 13,032,541 | 15.20 | 5.7 | |||||||||||||||||
The following is a summary of the significant assumptions used in estimating the fair value of options granted the years ended December 31, 2025, 2024, and 2023:
| Years ended December 31, | ||||||||||||||||||||
| 2025 | 2024 | 2023 | ||||||||||||||||||
| Risk free interest rate | 3.95 | % | 3.76%–4.59% | 3.51%–4.55% | ||||||||||||||||
| Expected dividend yield | — | % | — | % | — | % | ||||||||||||||
| Expected term of stock award | 6.2 | 5.0–6.5 | 1.2–5.0 | |||||||||||||||||
| Expected volatility in stock price | 46.24 | % | 49.62%–51.89% | 51.64%–55.00% | ||||||||||||||||
The aggregate intrinsic value of options exercised (the difference between the fair market value of our stock on the date of exercise and the exercise price) was approximately $66.1 million, $7.3 million and $0.4 million for the years ended December 31, 2025, 2024, and 2023, respectively.
We expect to incur compensation expense of approximately $35.2 million over a weighted average of 3.1 years for all unvested time-based awards outstanding as of December 31, 2025.
RSUs
The RSUs granted on June 10, 2024 in conjunction with the IPO were valued at the IPO price. Subsequent RSU grants are valued using our common stock price as of the grant date based on the publicly traded value per NASDAQ, and are expensed on a straight-line basis over the applicable vesting period. All vesting is contingent on continued service.
The following tables summarize RSU activity during the years ended December 31, 2025 and 2024, respectively. There was no RSU activity prior to the initial grant of RSUs on June 10, 2024.
| Number of shares | Weighted average grant date fair value | ||||||||||
| Outstanding December 31, 2024 | 2,089,241 | $21.91 | |||||||||
| Granted | 2,698,171 | 37.43 | |||||||||
| Vested | (483,491) | 21.92 | |||||||||
| Forfeited | (83,763) | 30.67 | |||||||||
| Outstanding December 31, 2025 | 4,220,158 | 31.65 | |||||||||
| Number of shares | Weighted average grant date fair value | |||||||||||||
| Outstanding December 31, 2023 | — | $ | — | |||||||||||
| Granted | 2,107,499 | 21.90 | ||||||||||||
| Vested | — | — | ||||||||||||
| Forfeited | (18,258) | 21.50 | ||||||||||||
| Outstanding December 31, 2024 | 2,089,241 | 21.91 | ||||||||||||
We expect to incur compensation expense of $117.0 million over a weighted average of 4.3 years for all unvested RSUs outstanding on December 31, 2025.
PSUs
We utilize the Monte Carlo pricing model to estimate the fair value of the market-based condition PSUs at the grant date under the 2024 Equity Incentive Plan. The Monte Carlo model incorporates assumptions regarding expected volatility, correlation between performance of our stock price and that of publicly traded peer companies, expected dividend yields and the risk-free interest rate. The Monte Carlo pricing model simulates potential future stock price paths yielding a grant date fair value that reflects the likelihood of varying outcomes. These awards are expensed on a straight-line basis over the applicable vesting period utilizing the fair value at the grant date.
The following is a summary of the significant assumptions used in estimating the fair value of PSUs granted during the year ended December 31, 2025. There were no PSU activity prior to the initial grant of PSUs on June 10, 2024.
| Years ended December 31, | ||||||||||||||||||||
| 2025 | 2024 | 2023 | ||||||||||||||||||
| Risk free interest rate | 3.92 | % | N/A | N/A | ||||||||||||||||
| Expected dividend yield | 0 | % | N/A | N/A | ||||||||||||||||
| Expected term of stock award | 4.0 | N/A | N/A | |||||||||||||||||
| Expected volatility in stock price | 40.00 | % | N/A | N/A | ||||||||||||||||
The following table summarizes PSU activity during the year ended December 31, 2025.
| Number of shares | Weighted average grant date fair value | ||||||||||
| Outstanding December 31, 2024 | — | $ | — | ||||||||
| Granted | 396,197 | 61.67 | |||||||||
| Vested | — | — | |||||||||
| Forfeited | — | — | |||||||||
| Outstanding December 31, 2025 | 396,197 | 61.67 | |||||||||
Stock-based Compensation
We recorded stock-based compensation expense of $42.1 million, $54.4 million, and $8.8 million for the years ended December 31, 2025, 2024, and 2023, respectively.
Stock-based compensation expense was recorded in the following cost and expense categories in the consolidated statements of operations:
| Years ended December 31, | ||||||||||||||||||||
| 2025 | 2024 | 2023 | ||||||||||||||||||
| Cost of revenue | $ | 1,514 | $ | 2,403 | $ | 645 | ||||||||||||||
| General and administrative | 25,678 | 31,288 | 5,034 | |||||||||||||||||
| Sales and marketing | 8,562 | 12,440 | 1,866 | |||||||||||||||||
| Research and development | 6,315 | 8,306 | 1,303 | |||||||||||||||||
| Total | 42,069 | 54,437 | 8,848 | |||||||||||||||||
About Stock Compensation Disclosures
Stock-based compensation disclosures detail the equity awards granted to employees and executives — including stock options, restricted stock units (RSUs), and performance shares — along with the valuation methods and assumptions used to expense them. This section reveals the true cost of talent retention and the alignment between management incentives and shareholder interests.
Key signals: total unrecognized compensation expense and its expected recognition period signal future earnings headwinds from already-granted awards. For stock options, examine Black-Scholes assumptions — expected volatility, risk-free rate, and expected term — as understating any of these reduces reported compensation expense. Compare stock compensation expense as a percentage of revenue against peers to assess dilution cost. Watch vesting schedules for acceleration clauses tied to change-of-control events. Performance-based awards with undemanding targets may indicate weak governance. Add back stock compensation to operating cash flow to calculate a more conservative free cash flow figure.