Core Insights - The demand environment in Q3 showed a notable difference between Tier 1 large pharma customers and Tier 3 biotech companies, with the latter experiencing strong performance, particularly in biosim services, which saw double-digit growth [1][2] Group 1: Performance Analysis - Tier 3 biotech companies were highlighted as a strong performer in Q3, driven by a focus on those with favorable funding and skill sets to collaborate with Certara [1] - The strong performance in Tier 3 partially offset weaknesses observed in Tier 1 customers, indicating a shift in demand dynamics within the industry [2]

Summary of Certara FY Conference Call (November 18, 2025) Company Overview - **Company**: Certara (NasdaqGS:CERT) - **Industry**: Biopharmaceutical services and software Key Points Demand Environment - **Tier 3 Customers**: Strong performance noted in Tier 3 (biotech companies) with double-digit growth in biosim services, driven by a focus on well-funded biotech firms [3][4] - **Tier 1 Customers**: Weakness observed in Tier 1 (large pharma) customers due to delays in decision-making and project slowdowns, particularly in regulatory and biosim services [4][12] - **Q4 Expectations**: Anticipation of a strong Q4 with expected sequential increase in bookings, although not as pronounced as in previous years due to Tier 1 customer delays [5][10] Software vs. Services - **Software Stability**: Software business remains stable with high renewal rates and organic revenue growth of 6% year-to-date [7][27] - **Service Volatility**: Services are more volatile, influenced by broader market conditions, with a noted deceleration in bookings but solid revenue conversion from backlog [8][39] Regulatory Environment - **Impact on Business**: Mixed regulatory backdrop with fewer drug approvals impacting regulatory services, but positive sentiment from FDA directives on non-animal testing methodologies providing a tailwind [13][14] Cloud Strategy - **Certara Cloud Adoption**: Strong adoption of Certara Cloud, enhancing cross-sell opportunities as customers transition from desktop to cloud versions of software [15][16] - **Phoenix Cloud Launch**: Transitioning customers to the cloud version of Phoenix, which includes AI enhancements, is expected to drive growth [17][18] Financial Performance - **EBITDA Margins**: EBITDA margins stable to improving, with year-to-date gross margins near record levels. R&D expenses increased by 24% due to software investments [41][42] - **Net Revenue Retention (NRR)**: NRR at the lower end of expectations, driven by organic software revenue growth and pricing strategies [27][28] AI Integration - **AI in Products**: Certara has embedded AI into various software offerings, including Coauthor for regulatory writing and Certara IQ for quantitative systems pharmacology [30][31] - **Monetization of AI**: AI capabilities are being monetized through new product offerings and pricing strategies, with paying customers for AI products already in place [33] Services Demand - **Growth Areas**: QSP services are a highlight, with traditional PKPD services also growing. Regulatory consulting has seen weakness due to FDA uncertainties [36][37] - **Utilization Rates**: High utilization rates in the services team are expected to continue, providing revenue visibility despite booking volatility [39] M&A and Capital Deployment - **Acquisition Strategy**: Successful integration of Comaxon and Applied BioMath, with a focus on expanding capabilities in the biosimulation space [51][52] - **Future M&A Plans**: Certara aims to continue pursuing strategic acquisitions in software, balancing between M&A and share repurchase as capital deployment strategies [48][49] Long-term Outlook - **Growth Projections**: Expectation of double-digit growth in both software and services, with potential for margin expansion as growth rates increase [46] Customer Insights - **Insourcing vs. Outsourcing**: Customers are increasingly using AI internally, which may influence their decisions on outsourcing services to Certara [56][57] This summary encapsulates the key insights and developments discussed during the Certara FY Conference Call, highlighting the company's performance, market dynamics, and strategic initiatives.

Certara (NasdaqGS:CERT) 2025 Conference November 18, 2025 05:30 AM ET Company ParticipantsDave Windley - Managing DirectorWilliam Feehery - CEODave WindleyOkay. Good morning, everybody. Thank you for being here. I'm Dave Windley with Jefferies Healthcare Equity Research in the States. Cover the pharmaceutical services supply chain, and I like to think of it as services, technology, manufacturing, you know, kind of if you sell to pharma R&D, I'm interested. So we have here with us Certara and William Feehery ...

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Core Insights - The Mont Sorcier project is progressing towards a feasibility study completion targeted for Q2 2026, focusing on high purity magnetite iron production in Quebec [1][16] Project Overview - The Mont Sorcier project can produce a premium 67% iron concentrate, classified as a Critical Mineral Project by Canadian and Quebec governments, contributing to the decarbonization of the steel industry [2][18] - The project is expected to have a long mine life of approximately 20 years, with high margins and low operating costs due to its location and existing infrastructure [3][7] Production and Development Plans - The project is being designed for an expanded production rate of 8 million tonnes per annum (MM tpa), up from the previously planned 5 MM tpa, with a phased development approach [5][16] - Phase one aims to deliver an initial 4 MM tpa of concentrate, with an additional 4 MM tpa expected to come online in the third year of operation [5] Cost and Infrastructure - Phase 1 capital costs are anticipated to increase by approximately 30-40% compared to the Preliminary Economic Assessment (PEA) due to revised designs and inflation [6] - The project benefits from existing rail and port infrastructure, which will support its development and operational efficiency [3] Resource and Environmental Considerations - The company has completed significant resource definition work, totaling 17,890 meters, to support an updated Mineral Resource Estimate [7] - Efforts are being made to optimize the site layout to minimize environmental impacts, with ongoing progress on the Environmental and Social Impact Assessment (ESIA) [8][9] Government Support and Market Demand - There is strong governmental support for developing critical mineral mines in Quebec, which aligns with the project's strategic importance [3] - The demand for high-grade Direct Reduction Iron (DRI) material is growing at approximately 10% per annum, significantly outpacing the broader iron ore market [2]

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Financial Data and Key Metrics Changes - Q3 2025 revenue was $104.6 million, reflecting a 10% year-over-year growth [4][14] - Adjusted EBITDA for Q3 was $35.2 million, with a margin of 34% [4][18] - Q3 bookings totaled $96.6 million, representing a 1% increase year-over-year [5][14] - The company narrowed its revenue guidance for 2025 to $415-$420 million, indicating 8%-9% growth compared to 2024 [5][20] Business Line Data and Key Metrics Changes - Software revenue reached $43.8 million, growing 22% year-over-year, with organic growth of 6% [10][15] - Service revenue was $60.8 million, up 3% year-over-year, driven by growth in QSP services [11][17] - Software bookings of $40.8 million increased 17%, while service bookings declined 9% [10][17] Market Data and Key Metrics Changes - Tier 1 services customers exhibited cautious spending behavior, impacting deal timelines [5][6] - The adoption of biosimulation solutions is increasing among large pharma customers, particularly in model-informed drug development [6][8] Company Strategy and Development Direction - The company is focused on investing in R&D and commercial teams, with R&D spending up 24% year-over-year [4][11] - Certara is expanding its software capabilities into discovery and preclinical phases, enhancing its product offerings [9][30] - The strategic review of the regulatory services business is nearing completion, with a definitive outcome expected by the end of 2025 [12] Management's Comments on Operating Environment and Future Outlook - Management noted a slowdown in deal completion timelines, particularly in regulatory services, due to large pharma customers adjusting their R&D focus [6][12] - There are positive leading indicators for the biosimulation market, with expectations for continued growth in 2026 [6][20] - Management expressed cautious optimism regarding macroeconomic stability and its potential positive impact on customer spending [35][46] Other Important Information - The company completed the Chemaxon acquisition, which has contributed positively to revenue and is expected to reach corporate average margins by year-end [9][19] - The company has repurchased approximately $41 million of stock as part of a $100 million share repurchase program [19] Q&A Session Summary Question: What is the dynamic regarding tier one services revenue or bookings? - Management noted delays in decision-making among tier one customers, with expectations for some deals to close in Q4 and others pushed to 2026 [23][24] Question: Can you comment on the gross profit outperformance? - Management attributed gross margin improvement to productivity gains and a favorable mix shift towards software [25][26] Question: How is the growth of QSP expected to evolve? - The company aims to standardize QSP modeling through its new software platform, Certara IQ, which is expected to drive efficiency and financial benefits [27][30] Question: What is the outlook for tier two and tier three services? - Tier two and tier three services have shown good growth, partially offsetting the headwinds faced by tier one services [64][65] Question: How does the company view the impact of AI on its business? - Management sees AI as a significant opportunity, with increased willingness among customers to adopt AI-enabled products [41][42]

Third Quarter 2025 Financial Results November 6, 2025 Disclaimer Numerical figures in the presentation have been subject to rounding adjustments. Accordingly, numerical figures shown as totals in various tables may not be arithmetic aggregations of the figures that precede them. In addition, unless otherwise indicated, references to the "Company," "Certara," "we," "us," and "our" refer to Certara, Inc. and its consolidated subsidiaries. Trademarks and Service Marks The Certara design logo, "Certara," and ou ...

Financial Performance - Revenues for Q3 2025 reached $104.6 million, a 10.5% increase from $94.8 million in Q3 2024[24] - Net income attributable to common stockholders for Q3 2025 was $1.5 million, compared to a net loss of $1.4 million in Q3 2024[24] - The company reported a comprehensive loss of $1.5 million for Q3 2025, compared to a comprehensive income of $1.9 million in Q3 2024[24] - Basic net income per share for Q3 2025 was $0.01, compared to a loss of $0.01 per share in Q3 2024[24] - Net income for the nine months ended September 30, 2025, was $4,300,000, a significant improvement from a net loss of $18,628,000 in the same period of 2024[29] - Total revenue for the nine months ended September 30, 2025, was $315,190,000, an increase from $284,787,000 for the same period in 2024[80] - Adjusted net income for the nine months ended September 30, 2025, was $56.05 million, up from $48.19 million in 2024[166] - Net income increased by $2.9 million to $1.5 million for the three months ended September 30, 2025, compared to a net loss of $1.4 million for the same period in 2024[202]. Assets and Liabilities - Total assets as of September 30, 2025, were $1.54 billion, a decrease from $1.58 billion as of December 31, 2024[21] - Total liabilities decreased to $471.0 million as of September 30, 2025, from $516.4 million as of December 31, 2024[21] - Cash and cash equivalents as of September 30, 2025, were $172.7 million, down from $179.2 million as of December 31, 2024[21] - The company’s total stockholders' equity as of September 30, 2025, was $1.06 billion, slightly up from $1.06 billion as of December 31, 2024[21] - Long-term debt as of September 30, 2025, was $293,541,000, down from $295,425,000 as of December 31, 2024[95] - Total liabilities were reported at $24,494,000, including contingent liabilities of $21,900,000 and interest rate swap liabilities of $2,594,000[50] Revenue Breakdown - Software revenues increased by $7.9 million, or 22%, to $43.8 million for the three months ended September 30, 2025, primarily driven by a business acquisition[191] - Services revenues increased by $1.9 million, or 3%, to $60.8 million for the three months ended September 30, 2025, attributed to growth in technology-enabled services[192] - Software revenues rose by $23.5 million, or 21%, to $136.9 million for the nine months ended September 30, 2025, primarily due to a business acquisition and strong demand from existing customers[204] - Services revenues increased by $6.9 million, or 4%, to $178.3 million for the nine months ended September 30, 2025, attributed to growth in technology-enabled services[205] Expenses - Operating expenses for Q3 2025 were $61.9 million, up from $55.0 million in Q3 2024, reflecting a 12.5% increase[24] - Sales and marketing expenses increased by $1.7 million, or 15%, to $13.0 million for the three months ended September 30, 2025, mainly due to headcount growth from acquisitions[194] - Research and development expenses increased by $2.0 million, or 24%, to $10.3 million for the three months ended September 30, 2025, driven by employee-related costs associated with software development investments[195] - General and administrative expenses increased by $2.6 million, or 12%, to $24.6 million for the three months ended September 30, 2025, primarily due to increased stock-based compensation costs[196] - Interest expense decreased by $0.2 million, or 3%, to $5.0 million for the three months ended September 30, 2025, primarily due to a decline in market interest rates[199] Shareholder Information - Common shares issued for employee share-based compensation totaled 1,459,757 shares, resulting in an increase of $15,000 in common stock[26] - The total number of common shares outstanding increased from 163,856,290 as of June 30, 2025, to 163,873,911 as of September 30, 2025[25] - The company repurchased 1,230,398 shares, resulting in a treasury stock amount of $(13,810,000) as of September 30, 2025[25] Strategic Initiatives - The company plans to continue investing in scientific talent, sales and marketing, and research and development to support growth[152] - AI and machine learning technologies are being integrated into the company's software and services to enhance drug development processes[144] - The company is undergoing a strategic review of its regulatory services business, which may lead to significant operational changes[157] Market and Economic Conditions - Competition in the biosimulation market is high, with key factors including model quality, regulatory acceptance, and integration capabilities[158] - Macroeconomic conditions, including inflation and interest rates, pose challenges to the business environment[159] Tax and Regulatory Environment - The global effective tax rate (ETR) for the three months ended September 30, 2025, was 671%, significantly higher than 17% for the same period in 2024[130] - The effective income tax rate for the nine months ended September 30, 2025, was 59%, compared to 4% for the same period in 2024, with tax expense increasing by $7.0 million[214] - The company is evaluating the impact of the One Big Beautiful Bill Act (OBBBA) on its operations following significant changes to U.S. tax law[131] Cash Flow and Capital Management - Net cash provided by operating activities increased to $67,508,000, compared to $31,097,000 in the prior year, reflecting a growth of approximately 116%[29] - Cash flow from operations for the nine months ended September 30, 2025, was $67.5 million, up from $31.1 million for the same period in 2024[217] - Cash balances included $71.7 million held outside of the United States as of September 30, 2025, compared to $45.8 million as of December 31, 2024[219]