Question-and-Answer SessionJohn GallagherSVP, Principal Accounting Officer & Chief Financial Officer Yes. Yes. Thank you, Craig, and thanks for having me. Yes, the -- I mean, look, the overall end market environment is subdued. We've talked about that through some of our meetings and -- and on the quarter, we talked about that, of course. But that doesn't stop us from being able to accelerate growth for the company. So you pointed out and cited what our -- what our organic growth is looking like. And we're ...

Core Insights - The overall end market environment is subdued, but the company is focused on accelerating growth despite these challenges [1] - The company has made significant investments in sales and marketing over the past couple of years to build out its commercial organization [1] - The next phase of investment includes research and development (R&D), which is expected to continue into the next year [1] - Accelerated growth has been observed from the build-out of the commercial organization, particularly reflected in results from Tier 3 customers [1]

Summary of Certara FY Conference Call - September 10, 2025 Company Overview - **Company**: Certara (NasdaqGS:CERT) - **Industry**: Health Technology and Biosimulation Key Points and Arguments Growth Strategy - Certara is focused on accelerating organic growth despite a subdued market environment, targeting mid-single-digit growth rates [4][5] - Investments in sales, marketing, and R&D are being made to enhance the commercial organization and software platforms [4][5] - New software enhancements, including Certara IQ (AI-enabled software for Quantitative Systems Pharmacology, QSP), are expected to drive growth [5][10] R&D and Product Development - Certara is addressing critical pain points in drug development, particularly the high failure rates of drug trials, by enhancing software capabilities [7] - The company has launched Certara Cloud, which has seen rapid adoption, particularly among large biopharma customers [11][12] - The tiered customer structure includes: - **Tier 1**: Large biopharma (50% of revenue) - **Tier 2**: Mid-sized companies (20% of revenue) - **Tier 3**: Biotechs (30% of revenue) [14][15] Market Dynamics - The funding environment for tier three customers remains challenging, but Certara has successfully targeted biotechs with funding potential [13][15] - The FDA's directive to shift away from animal testing is seen as a tailwind for Certara, enhancing customer discussions and driving demand for SIMCYP and QSP [24][34] Financial Performance - Certara expects an adjusted EBITDA margin of 30-32% for the year, consistent with previous performance [20] - The company is on track to meet its full-year plan despite some timing issues in software bookings for tier one customers [16][17] AI and Technology Integration - The acquisition of Vyasa has enabled Certara to integrate AI technology into its workflow and product offerings [25][26] - The co-author tool for regulatory writing has demonstrated a 40% efficiency improvement, appealing to regulatory customers [27] M&A and Strategic Review - Certara is actively engaged in a strategic review of its regulatory business, which has returned to growth with a 20-30% adjusted EBITDA margin [43][44] - The company is focused on software acquisitions to shift its revenue mix from services to software, aiming for a balanced profitability profile [45][46] Capital Allocation - Certara prioritizes R&D investments while also considering M&A opportunities and share buybacks, having authorized a $100 million share repurchase program [47][48] Additional Important Insights - Certara's longstanding relationship with the FDA provides a competitive advantage, as many FDA users are familiar with Certara's software [32][33] - The company is well-positioned to help biopharma clients find efficiencies across the drug development cycle, from discovery to submission [30][31] - The integration of Camaxon, a chem-informatics software company, is progressing well, with expectations to enhance margins and product offerings [40][41]

PresentationAll right. Hi, everyone. I'm Joe Vruwink. I cover vertical software at Baird. Our next presentation comes from Certara, the leader in biosimulation software and services, helping to revolutionize drug discovery and development. We have William Feehery, CEO; John Gallagher, CFO with us on stage. This is going to be a fireside chat. But to begin, I'll turn it over to Bill for an intro to Certara. Thanks for joining.William FeeheryCEO & Director Thanks a lot, Joe. It's great to be here. I'll just i ...

Summary of Certara Conference Call Company Overview - **Company**: Certara - **Industry**: Biosimulation software and services for drug discovery and development - **Founded**: Went public in 2020 - **Employees**: Approximately 1,500 globally - **Financials**: Profitable with a 30% EBITDA margin, revenue split approximately 50% software and 50% services - **Impact**: 90% of new drugs approved in the last decade are linked to Certara's services or software [2][3] Core Insights - **Drug Development Challenges**: Nearly 90% of new medicines in clinical trials fail, leading to high costs in the pharmaceutical industry. The failure rate in large phase III trials is historically around 30% [3][4] - **Biosimulation Platform**: Certara's platform spans the entire drug development process, from discovery to approval, focusing on optimizing drug success rates and reducing costs [4][5] - **Simcyp Discovery Simulator**: A key product that predicts drug behavior in the human body, helping to avoid unnecessary clinical trials. Over 125 approved drugs have utilized this simulator [6][7] Market Dynamics - **Total Addressable Market (TAM)**: Biosimulation spending is currently only about 1.5% of global biopharma R&D, indicating significant growth potential [10][11] - **Regulatory Changes**: The FDA's recent announcement to reduce animal testing for monoclonal antibodies is seen as a positive development for Certara, potentially increasing demand for their modeling services [12][20] Product Development and Strategy - **Quantitative Systems Pharmacology (QSP)**: Certara is expanding its QSP offerings, which have seen increased adoption, particularly in monoclonal antibodies. The company aims to standardize QSP modeling through new software [16][18] - **Certara IQ**: A new software platform launching in the fall, designed to become an industry standard for QSP modeling, incorporating AI and regulatory-grade documentation [18][19] - **AI Integration**: Certara is leveraging AI to enhance productivity and model accuracy, while also developing a data infrastructure platform to support AI applications across client organizations [28][30][35] Financial Performance - **Current Growth**: Certara is experiencing 8% to 10% revenue growth, with software growing at 6% to 8%. The company aims to return to double-digit growth through new product offerings and market normalization [37][38] - **Renewals and Expansion**: Upcoming enterprise renewals are expected to drive additional spending, with a focus on expanding existing customer relationships [39][40] Additional Considerations - **Competition**: Certara has established a strong position in the market with a first-mover advantage, making it difficult for new entrants to compete effectively [26] - **Regulatory Acceptance**: The company’s software is recognized by regulators, which enhances its credibility and market position [26] This summary encapsulates the key points discussed during the conference call, highlighting Certara's strategic direction, market opportunities, and financial outlook.

Core Insights - Certara, Inc. has launched Pinnacle 21 Enterprise Plus, a solution designed to enhance the efficiency of clinical and statistical programmers in creating and managing data specifications for CDISC SDTM and ADaM datasets, achieving a 50% reduction in time spent on drafting mapping specifications [1][2]. Company Overview - Certara is a global leader in biosimulation, providing software and services that accelerate drug discovery and development, with a client base of over 2,400 biopharmaceutical companies, academic institutions, and regulatory agencies across 70 countries [7]. Product Features - Pinnacle 21 Enterprise Plus offers a unified, collaborative workspace that addresses the limitations of traditional spreadsheet-based methods, such as errors and lack of version control [2]. - The solution is purpose-built for clinical and statistical programmers, allowing most teams to go live in less than a month [4]. - The platform supports compliance with both CDISC and company-specific standards through configurable columns, ensuring maximum flexibility [8]. - It facilitates seamless integration with downstream programming tools like SAS and R via application programming interfaces (APIs) [8]. Strategic Importance - The launch of Pinnacle 21 Enterprise Plus is seen as a significant milestone in Certara's roadmap, aimed at building a future-proof platform for end-to-end data standardization and validation [5]. - The innovations introduced are expected to shorten cycle times and accelerate regulatory submissions of new therapies, benefiting patients [3]. Market Position - Certara's Pinnacle 21 solutions are trusted by over 130 organizations globally, including leading biopharmaceutical companies and regulatory agencies like the US FDA and Japan's PMDA, reinforcing its leadership in clinical data standardization and validation [5].

Certara (CERT -3.19%), a leader in biosimulation software and Model-Informed Drug Development solutions, released its Q2 FY2025 earnings on August 6, 2025. The most notable news was a slight revenue beat, with reported GAAP revenue of $104.6 million, exceeding analyst expectations, but non-GAAP earnings per share (EPS) missed consensus by $0.03. The company delivered double-digit top-line growth, driven primarily by its software segment, but the bottom line continues to face pressure. GAAP net losses narrow ...

Group 1: Earnings Performance - Certara, Inc. reported quarterly earnings of $0.07 per share, missing the Zacks Consensus Estimate of $0.10 per share, representing an earnings surprise of -30.00% [1] - The company posted revenues of $104.57 million for the quarter ended June 2025, surpassing the Zacks Consensus Estimate by 0.98% and showing an increase from $93.31 million year-over-year [2] - Over the last four quarters, Certara has surpassed consensus EPS estimates three times and topped consensus revenue estimates three times [2] Group 2: Stock Performance and Outlook - Certara shares have lost about 7.4% since the beginning of the year, while the S&P 500 has gained 7.1% [3] - The company's earnings outlook is crucial for investors, as it includes current consensus earnings expectations for upcoming quarters and any recent changes to these expectations [4] - The current consensus EPS estimate for the coming quarter is $0.10 on revenues of $103.29 million, and for the current fiscal year, it is $0.45 on revenues of $420.92 million [7] Group 3: Industry Context - The Medical - Biomedical and Genetics industry, to which Certara belongs, is currently in the bottom 42% of over 250 Zacks industries, indicating potential challenges for stock performance [8] - Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can impact Certara's stock performance [5] - The unfavorable trend in estimate revisions prior to the earnings release has resulted in a Zacks Rank 4 (Sell) for Certara, suggesting expected underperformance in the near future [6]

Financial Data and Key Metrics Changes - Total revenue for Q2 2025 was $104.6 million, representing a 12% year-over-year growth on a reported basis and 10% on a constant currency basis [22] - Total bookings in Q2 were $112 million, an increase of 13% from the prior year period [22] - Adjusted EBITDA for Q2 was $31.9 million, up from $26.3 million in Q2 2024, with an adjusted EBITDA margin of 31% [26][27] - Net loss for Q2 2025 was $2 million, compared to a net loss of $12.6 million in Q2 2024 [27][28] Business Line Data and Key Metrics Changes - Software revenue was $46.7 million in Q2, a 22% increase over the prior year, with organic growth of 9% [23][24] - Services revenue was $57.9 million, up 5% year-over-year, with strong performance in QSP and SIMP businesses [25] - Software bookings were $46.6 million, an 11% increase from the prior year, while services bookings were $65.4 million, a 15% increase [24][25] Market Data and Key Metrics Changes - Large pharma companies are cautious due to geopolitical and macroeconomic factors, affecting decision-making timelines [8] - The biotech funding environment has slightly improved but remains below historical trends [8] - Approximately 50% of new QSP projects this year have been for monoclonal antibody therapies, indicating a shift towards non-animal testing methodologies [15] Company Strategy and Development Direction - The company is focusing on expanding its AI-enabled MIDD platform, with plans to launch Certara IQ in Q4 2025 [12][13] - Continued investment in R&D is a priority, with a focus on integrating AI with existing modeling technologies [11][12] - The company aims to solidify its leading position in model-informed drug development through strategic acquisitions and product launches [19] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the financial outlook for the remainder of the year, supported by solid bookings trends and high visibility into renewal dynamics [20] - The company is optimistic about the growing interest in model-informed drug development, which is expected to drive future growth [20] - Management acknowledged the mixed spending environment but noted persistent customer interest in biosimulation technology [8] Other Important Information - The company received EMA qualification for its SimChip modeling platform, marking a significant regulatory milestone [10][61] - A $100 million share repurchase program was authorized, with $25 million already purchased [29] Q&A Session Summary Question: Is the multibillion dollar addressable market opportunity incremental to the low single digit billion TAM for biosimulation software? - Yes, it is considered an additional opportunity [32] Question: What is the interpretation of the QSP responses in the recent webinar? - QSP is a growing area, and the company expects the ratio of users to increase over time [35][36] Question: Can you provide insights on the demand drivers for software versus services bookings? - Demand for software is driven by R&D infrastructure needs, while services have seen a resurgence due to high demand for QSP services [39][41] Question: What are the dynamics across customer tiers, particularly between tier one and tiers two and three? - Tier one experienced timing-related slowness, but there is confidence in achieving renewals in the second half of the year [42][43] Question: How should customers think about adopting the new AI MIDD platform? - The platform aims to unite various software solutions, enhancing decision-making in drug development [47][49] Question: How does the EMA qualification for SimChip differentiate the product? - It provides prequalification, enhancing consistency and reducing uncertainty in the review process [60][62] Question: What is the expected impact of FDA guidance on animal testing on new customer inquiries? - There has been an uptick in interest, particularly in QSP and CIMSIP, but it is expected to be a long-term conversion [73][74] Question: What are the factors leading to a step down in margins in the second half of the year? - Increased hiring and investments are expected to impact margins, with Q2 margins serving as a good proxy for future performance [87][90]

Financial Performance - Revenue reached $104.6 million[22], reflecting a 12% year-over-year increase[23] - Constant Currency revenue growth was 10%[23] - Net loss was ($2.0 million)[22] - Adjusted EBITDA was $31.9 million[22], a 21% increase compared to the prior year[39] - Adjusted diluted EPS was $0.07[22] Bookings and Retention - Net bookings for the quarter were $112.0 million[29] - Trailing twelve months (TTM) bookings reached $470.8 million[29] - Software Net Retention Rate (NRR) was 107.6%[35] Guidance - The company reiterated its FY 2025 revenue guidance of $415-$425 million[48] - Adjusted EBITDA margin is expected to be 30-32%[48] - Adjusted diluted EPS is projected to be $0.42-$0.46[48]