Certara(CERT) - 2025 Q2 - Quarterly Report

PART I – FINANCIAL INFORMATION Financial Statements The company's H1 2025 financial statements reflect a significant turnaround to net income and increased operating cash flow, despite minor balance sheet adjustments Condensed Consolidated Balance Sheet (Unaudited) | (IN THOUSANDS) | JUNE 30, 2025 | DECEMBER 31, 2024 | | :--- | :--- | :--- | | Total current assets | $281,393 | $310,852 | | Total assets | $1,543,446 | $1,575,104 | | Total current liabilities | $130,436 | $146,088 | | Total liabilities | $472,867 | $516,448 | | Total stockholders' equity | $1,070,579 | $1,058,656 | Condensed Consolidated Statements of Operations (Unaudited) | (IN THOUSANDS) | SIX MONTHS ENDED JUNE 30, 2025 | SIX MONTHS ENDED JUNE 30, 2024 | | :--- | :--- | :--- | | Revenues | $210,574 | $189,967 | | Income (loss) from operations | $17,175 | $(10,328) | | Net income (loss) | $2,775 | $(17,257) | | Diluted EPS | $0.02 | $(0.11) | Condensed Consolidated Statements of Cash Flows (Unaudited) | (IN THOUSANDS) | SIX MONTHS ENDED JUNE 30, 2025 | SIX MONTHS ENDED JUNE 30, 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $35,194 | $14,110 | | Net cash used in investing activities | $(12,735) | $(9,697) | | Net cash used in financing activities | $(44,690) | $(14,102) | | Net decrease in cash and cash equivalents | $(16,917) | $(10,352) | Notes to Condensed Consolidated Financial Statements - The company delivers biosimulation software products and technology-driven services for drug discovery, research, regulatory submissions, and market access, operating globally in numerous countries including the US, UK, Japan, and China[30][31] - On October 1, 2024, the Company acquired Chemaxon, a cheminformatics company, for an estimated consideration of $96.4 million, strengthening its position in the drug discovery biosimulation market, with goodwill from the acquisition not expected to be tax-deductible[83][84] - On June 26, 2024, the Company amended its Credit Agreement, setting the term loan principal at $300 million with maturity in June 2031 and extending the $100 million revolving credit facility to June 2029[88] Equity-Based Compensation Expense | (In thousands) | THREE MONTHS ENDED JUNE 30, 2025 | THREE MONTHS ENDED JUNE 30, 2024 | SIX MONTHS ENDED JUNE 30, 2025 | SIX MONTHS ENDED JUNE 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Total | $8,245 | $9,783 | $15,315 | $18,856 | - The company operates as a single reportable segment, with the CEO acting as the Chief Operating Decision Maker (CODM)[120] Revenue by Geographic Area | (In thousands) | SIX MONTHS ENDED JUNE 30, 2025 | SIX MONTHS ENDED JUNE 30, 2024 | | :--- | :--- | :--- | | Americas | $144,948 | $138,784 | | EMEA | $49,152 | $38,088 | | Asia Pacific | $16,474 | $13,095 | | Total | $210,574 | $189,967 | Management's Discussion and Analysis of Financial Condition and Results of Operations Management reports strong H1 2025 revenue growth, driven by software and acquisitions, leading to a net income turnaround and robust operating cash flow Key Factors Affecting Our Performance Quarterly Bookings and Net Software Retention Rate | (in millions except percentage) | Q2 2025 | Q1 2025 | Q2 2024 | Q1 2024 | | :--- | :--- | :--- | :--- | :--- | | Bookings | $112.0 | $118.2 | $98.9 | $105.8 | | Net Retention Rates | 107.6% | 102.4% | 108.0% | 114.1% | - The company continues to invest in scientific talent, sales and marketing, R&D, and complementary business acquisitions to drive growth[150] - Regulatory acceptance of model-informed drug development (MIDD) is critical for demand, and the company is conducting a strategic review of its regulatory services business, which could significantly impact operations[151][153] Non-GAAP Measures Reconciliation of Net Income (Loss) to Adjusted EBITDA | (in thousands) | SIX MONTHS ENDED JUNE 30, 2025 | SIX MONTHS ENDED JUNE 30, 2024 | | :--- | :--- | :--- | | Net income (loss) | $2,775 | $(17,257) | | Adjustments | $63,003 | $72,718 | | Adjusted EBITDA | $66,778 | $55,461 | Reconciliation of Net Income (Loss) to Adjusted Net Income | (in thousands) | SIX MONTHS ENDED JUNE 30, 2025 | SIX MONTHS ENDED JUNE 30, 2024 | | :--- | :--- | :--- | | Net income (loss) | $2,775 | $(17,257) | | Adjustments | $31,031 | $45,198 | | Adjusted net income | $33,806 | $27,941 | Reconciliation of Diluted EPS to Adjusted Diluted EPS | | SIX MONTHS ENDED JUNE 30, 2025 | SIX MONTHS ENDED JUNE 30, 2024 | | :--- | :--- | :--- | | Diluted EPS | $0.02 | $(0.11) | | Adjustments | $0.19 | $0.28 | | Adjusted diluted EPS | $0.21 | $0.17 | Results of Operations Revenue Comparison (Q2 2025 vs Q2 2024) | (in thousands) | Q2 2025 | Q2 2024 | Change $ | Change % | | :--- | :--- | :--- | :--- | :--- | | Software | $46,695 | $38,207 | $8,488 | 22% | | Services | $57,875 | $55,106 | $2,769 | 5% | | Total revenues | $104,570 | $93,313 | $11,257 | 12% | - Q2 2025 General and Administrative expenses decreased by $10.9 million (39%) YoY, primarily due to an $8.5 million reduction from remeasurement changes in the fair value of contingent consideration[192] - For Q2 2025, the company reported a net loss of $2.0 million, a significant improvement from a net loss of $12.6 million in Q2 2024, driven by higher revenue and lower operating expenses[199] Revenue Comparison (Six Months Ended June 30) | (in thousands) | 2025 | 2024 | Change $ | Change % | | :--- | :--- | :--- | :--- | :--- | | Software | $93,064 | $77,514 | $15,550 | 20% | | Services | $117,510 | $112,453 | $5,057 | 4% | | Total revenues | $210,574 | $189,967 | $20,607 | 11% | - For the six months ended June 30, 2025, the company reported net income of $2.8 million, compared to a net loss of $17.3 million in the prior year period, with the $20.0 million improvement driven by a $20.6 million increase in revenue and a $10.1 million decrease in operating expenses[212] Liquidity and Capital Resources - The company generated $35.2 million in cash from operations in the first six months of 2025, a significant increase from $14.1 million in the same period of 2024[214][222] - On April 11, 2025, the Board approved a $100.0 million stock repurchase program, and as of June 30, 2025, the company had repurchased $25.0 million worth of common stock, with $75.0 million remaining available[217] Cash Flow Summary (Six Months Ended June 30) | (in thousands) | 2025 | 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $35,194 | $14,110 | | Net cash used in investing activities | $(12,735) | $(9,697) | | Net cash used in financing activities | $(44,690) | $(14,102) | | Net (decrease) in cash | $(16,917) | $(10,352) | - As of June 30, 2025, the company had $297.0 million of outstanding borrowings on its term loan and $100.0 million of availability under its revolving credit facility[229] Quantitative and Qualitative Disclosures About Market Risk The company states that there have been no material changes to its market risk exposure during the six months ended June 30, 2025, as compared to the disclosures in its 2024 Annual Report - There were no material changes to the Company's market risk exposure during the six months ended June 30, 2025[243] Controls and Procedures Management, including the CEO and CFO, evaluated the company's disclosure controls and procedures and concluded they were effective at a reasonable assurance level as of June 30, 2025, with no material changes in internal control over financial reporting during the quarter - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of June 30, 2025[245] - No changes in internal control over financial reporting occurred during the quarter that materially affected, or are reasonably likely to materially affect, the company's internal controls[246] PART II – OTHER INFORMATION Legal Proceedings There have been no material changes to the company's legal proceedings as disclosed in the 2024 Annual Report - No material changes to legal proceedings have occurred since the 2024 Annual Report[248] Risk Factors There are no material changes from the risk factors previously disclosed in the company's 2024 Annual Report - No material changes to risk factors have occurred since the 2024 Annual Report[249] Unregistered Sales of Equity Securities and Use of Proceeds During Q2 2025, the company repurchased a significant number of shares under its $100 million stock repurchase program, with substantial funds remaining Equity Security Repurchases (Q2 2025) | Period | Total Shares Purchased | Average Price Paid per Share | Shares Purchased as Part of Program | Value Remaining in Program | | :--- | :--- | :--- | :--- | :--- | | Total Q2 2025 | 2,290,209 | $13.06 | 1,793,279 | $75 Million | - The Board of Directors approved a $100 million stock repurchase program on April 11, 2025, and during Q2 2025, 1,793,279 shares were repurchased at an average price of $13.92 per share[254] Other Information On August 5, 2025, the Board approved amended bylaws to incorporate Universal Proxy Rule requirements and align with recent Delaware law developments - No directors or officers adopted or terminated a Rule 10b5-1 trading plan during the three months ended June 30, 2025[256] - On August 5, 2025, the Board of Directors approved amended and restated bylaws to incorporate requirements for the Universal Proxy Rule and align with recent Delaware law changes[257][258][259]