Certara(CERT) - 2025 Q1 - Quarterly Report

PART I – FINANCIAL INFORMATION Financial Statements (Unaudited) Unaudited Q1 2025 financial statements reflect a significant turnaround with net income, increased operating cash flow, and improved stockholders' equity Condensed Consolidated Balance Sheets As of March 31, 2025, total assets slightly decreased, liabilities reduced, and stockholders' equity increased to $1.08 billion Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total Current Assets | $300,175 | $310,852 | | Goodwill | $764,338 | $757,038 | | Intangible assets, net | $475,405 | $485,214 | | Total Assets | $1,561,011 | $1,575,104 | | Total Current Liabilities | $108,079 | $146,088 | | Long-term debt, net | $291,798 | $292,425 | | Total Liabilities | $476,732 | $516,448 | | Total Stockholders' Equity | $1,084,279 | $1,058,656 | Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) Q1 2025 revenues increased 9.7% to $106.0 million, resulting in $7.6 million income from operations and $4.7 million net income Q1 2025 vs Q1 2024 Statement of Operations (in thousands, except per share data) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Revenues | $106,004 | $96,654 | | Cost of revenues | $41,521 | $39,255 | | Total operating expenses | $56,860 | $58,686 | | Income (loss) from operations | $7,623 | ($1,287) | | Net income (loss) | $4,743 | ($4,683) | | Diluted EPS | $0.03 | ($0.03) | Condensed Consolidated Statements of Stockholders' Equity Total stockholders' equity increased to $1.084 billion, driven by net income and positive foreign currency translation adjustments - Total stockholders' equity grew from $1,058.7 million at Dec 31, 2024, to $1,084.3 million at March 31, 2025[26] - Key drivers for the equity increase in Q1 2025 were net income of $4.7 million and a positive foreign currency translation adjustment of $8.7 million[26] Condensed Consolidated Statements of Cash Flows Net cash from operations significantly increased to $17.4 million in Q1 2025, while investing and financing cash outflows also rose Q1 2025 vs Q1 2024 Cash Flow Summary (in thousands) | Cash Flow Activity | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $17,352 | $4,296 | | Net cash used in investing activities | ($5,774) | ($3,578) | | Net cash used in financing activities | ($13,996) | ($10,347) | | Net decrease in cash and cash equivalents | ($97) | ($10,175) | | Cash and cash equivalents at end of period | $179,086 | $224,776 | Notes to Condensed Consolidated Financial Statements Notes detail accounting policies, the Chemaxon acquisition, revenue obligations, debt structure, and a $100 million share repurchase program - The company acquired Chemaxon on October 1, 2024, for $96.4 million; in Q1 2025, a $2.9 million adjustment was made to goodwill and deferred taxes related to the purchase price allocation[83][84] - As of March 31, 2025, total unsatisfied performance obligations were $139.2 million, with 82.8% ($115.3 million) expected to be recognized as revenue over the next 12 months[72] - On April 14, 2025, the Board of Directors approved a $100 million share repurchase program for the company's common stock[130] Revenue by Geographic Area (in thousands) | Region | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Americas | $71,953 | $69,165 | | EMEA | $25,790 | $20,843 | | Asia Pacific | $8,261 | $6,646 | | Total | $106,004 | $96,654 | Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes 10% revenue growth to strong software and services performance, with Adjusted EBITDA increasing and strong liquidity Executive Overview Certara is a global leader in biosimulation and Model-Informed Drug Development, integrating AI to enhance predictive models for life sciences - Certara is a global leader in biosimulation and Model-Informed Drug Development (MIDD), aiming to improve drug development productivity and reduce costs[135] - The company is incorporating AI and machine learning to automate biosimulation and aid in drafting regulatory documents[140] - Customers leveraging Certara's solutions have received 90% or more of all new drug approvals by the FDA since 2014[142] Key Factors Affecting Our Performance Performance is driven by customer retention and bookings, influenced by growth investments, regulatory environment, competition, and a strategic review of regulatory services Key Performance Indicators | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Bookings (in millions) | $118.2 | $105.8 | | Net Retention Rates | 102.4% | 114.1% | - The company plans to continue investing in scientific talent, sales and marketing, R&D, and complementary businesses to support growth[148] - In 2024, the company began a strategic review of its regulatory services business, which could significantly impact operations[151] Non-GAAP Measures Certara uses non-GAAP metrics, reporting Q1 2025 Adjusted EBITDA of $34.8 million, Adjusted Net Income of $22.2 million, and Adjusted Diluted EPS of $0.14 Reconciliation of Net Income (Loss) to Adjusted EBITDA (in thousands) | Line Item | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net income (loss) | $4,743 | ($4,683) | | Adjustments... | ... | ... | | Adjusted EBITDA | $34,843 | $29,143 | Reconciliation of Net Income (Loss) to Adjusted Net Income (in thousands) | Line Item | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net income (loss) | $4,743 | ($4,683) | | Adjustments... | ... | ... | | Adjusted net income | $22,247 | $16,548 | Reconciliation of Diluted EPS to Adjusted Diluted EPS | Line Item | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Diluted earnings per share | $0.03 | ($0.03) | | Adjustments... | ... | ... | | Adjusted diluted earnings per share | $0.14 | $0.10 | Results of Operations Q1 2025 total revenues increased 10% to $106.0 million, driven by software and services growth, leading to a net income of $4.7 million Revenue Breakdown (in thousands) | Revenue Type | Q1 2025 | Q1 2024 | Change $ | Change % | | :--- | :--- | :--- | :--- | :--- | | Software | $46,369 | $39,307 | $7,062 | 18% | | Services | $59,635 | $57,347 | $2,288 | 4% | | Total revenues | $106,004 | $96,654 | $9,350 | 10% | - The overall revenue growth of $9.4 million was driven by a $5.9 million increase from business acquisitions, strong demand from existing customers, and new customer acquisition[176] - General and Administrative expenses decreased by $3.3 million (14%), primarily due to a $3.1 million decrease related to remeasurement changes in the fair value of contingent consideration[183] - The company shifted from a net loss of $4.7 million in Q1 2024 to a net income of $4.7 million in Q1 2025, an increase of $9.4 million[189] Liquidity and Capital Resources Certara maintains strong liquidity with $179.1 million cash, $100 million revolving credit, and increased operating cash flow of $17.4 million - The company generated $17.4 million in cash from operations in Q1 2025, a significant increase from $4.3 million in Q1 2024[191][199] Liquidity Summary (as of March 31, 2025, in thousands) | Source | Amount | | :--- | :--- | | Cash and cash equivalents | $179,086 | | Term loan credit facilities | $297,750 | | Gross revolving line of credit | $100,000 | - As of March 31, 2025, the company had $297.8 million of outstanding borrowings on its term loan and $100.0 million of availability under its revolving credit facility[205] Quantitative and Qualitative Disclosures About Market Risk No material changes to the company's market risk exposure occurred during Q1 2025 compared to the 2024 Annual Report - There were no material changes to the Company's market risk exposure during the first quarter of 2025[219] Controls and Procedures Management concluded disclosure controls and procedures were effective as of March 31, 2025, with no material changes to internal controls - The Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective at a reasonable assurance level as of March 31, 2025[221] - There were no material changes in the company's internal control over financial reporting during the first quarter of 2025[222] PART II – OTHER INFORMATION Legal Proceedings No material changes to the company's legal proceedings were reported since the 2024 Annual Report - There have been no material changes to the company's legal proceedings since the 2024 Annual Report[225] Risk Factors No material changes from the risk factors previously disclosed in the 2024 Annual Report were reported - There are no material changes from the risk factors previously disclosed in the 2024 Annual Report[226] Unregistered Sales of Equity Securities and Use of Proceeds During Q1 2025, the company repurchased 1,493 shares at $11.04 each, primarily for employee tax obligations on RSU vesting Equity Security Repurchases (Q1 2025) | Period | Total Shares Purchased | Weighted Average Price Paid per Share | | :--- | :--- | :--- | | 1/1/2025 to 1/31/2025 | — | $ — | | 2/1/2025 to 2/28/2025 | — | $ — | | 3/1/2025 to 3/31/2025 | 1,493 | $11.04 | | Total | 1,493 | $11.04 | - The shares were purchased from employees to cover tax liabilities from the vesting of RSUs, not under a formal repurchase program[228] Other Information On March 5, 2025, the President and CCO adopted a Rule 10b5-1 trading plan for potential sale of up to 51,224 shares - On March 5, 2025, Leif Pedersen, President and Chief Commercial Officer, adopted a Rule 10b5-1 trading plan for the potential sale of up to 51,224 shares of common stock in September 2025[232]