Financial Data and Key Metrics Changes - Revenue for fiscal year 2025 increased by 13% to $79.2 million, while total revenue for the fourth quarter decreased by 6% to $17.5 million [4][10] - Adjusted EBITDA grew by 8%, and adjusted EPS also increased by 8% for the fiscal year [4] - Total gross margin for the fiscal year was 58%, down from 62% in the prior year, with software gross margin at 79% and services gross margin at 30% [13][15] Business Line Data and Key Metrics Changes - Software revenue decreased by 9% in Q4, representing 52% of total revenue, while services revenue decreased by 3%, representing 48% [10] - For the fiscal year, software revenue increased by 12%, accounting for 58% of total revenue, and services revenue increased by 15%, representing 42% [10] - Specific product performance: ADMET Predictor declined by 10% in Q4 but grew by 5% for the fiscal year; GastroPlus declined by 3% in Q4 but grew by 1% for the fiscal year; MonolixSuite grew by 3% in Q4 and 14% for the fiscal year [11] Market Data and Key Metrics Changes - The external environment remained challenging, with client budgets pressured by pharmaceutical headwinds, including tariffs and pricing implementations [4] - Early signs of stabilization were noted as large pharma gained clearer visibility into pricing frameworks and biotech funding improved modestly [5][6] Company Strategy and Development Direction - The company completed a strategic reset, transitioning to a unified operating model to enhance client focus and operational efficiency [4] - The strategy includes building an integrated product ecosystem that combines validated science, cloud-scale performance, and AI capabilities [8][9] - The company aims to support clients through the entire drug development process, from discovery to commercialization, leveraging advancements in AI and cloud computing [6][8] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism about the upcoming fiscal year, noting positive discussions with clients regarding budgeting and proposal activity [21] - The company anticipates that the overall market conditions will resemble those at the end of fiscal year 2025, with potential upside if biotech funding continues to improve [16][43] Other Important Information - The company ended the fiscal year with $32.4 million in cash and short-term investments, remaining well-capitalized with no debt [15][16] - Guidance for fiscal year 2026 includes total revenue between $79 million and $82 million, with year-over-year growth expected between 0% and 4% [16] Q&A Session Summary Question: Update on demand environment and trends - Management noted an uptick in biotech funding and positive budgeting activity for the upcoming year, although caution remains due to potential market surprises [21][22] Question: Feedback on GastroPlus release with AI capabilities - Initial responses to the AI-infused GastroPlus have been positive, with clients eager to leverage new functionalities [24][25] Question: Factors affecting large pharma spending - Management highlighted that large pharma's budgeting cycle is in place, with a cautiously optimistic outlook for increased spending in 2026 [31][32] Question: Guidance assumptions and renewal rates - The guidance assumes continued low to mid-80% renewal rates due to client consolidations and scrutiny of software configurations [70] Question: Pro-ficiency asset performance - Pro-ficiency software revenue declined by 63% in Q4, while service revenue from the acquisition grew by 70% [62][63]

Financial Data and Key Metrics Changes - Revenue for fiscal year 2025 increased by 13% to $79.2 million, while total revenue for Q4 decreased by 6% to $17.5 million [10][11] - Adjusted EBITDA grew by 8%, and adjusted EPS also increased by 8% for the fiscal year [4] - Total gross margin for the fiscal year was 58%, down from 62% in the prior year, with software gross margin decreasing from 84% to 79% [14][16] Business Line Data and Key Metrics Changes - Software revenue for Q4 decreased by 9%, representing 52% of total revenue, while services revenue decreased by 3%, representing 48% of total revenue [10] - For the fiscal year, software revenue increased by 12%, representing 58% of total revenue, and services revenue increased by 15%, representing 42% of total revenue [10] - Discovery products contributed 18% to Q4 software revenue, while development products contributed 77% [10] Market Data and Key Metrics Changes - The company noted early signs of stabilization in the market, with large pharma gaining clearer visibility into pricing frameworks and biotech funding improving modestly [5] - Proposal activity and conference engagement have strengthened, indicating a more confident budgeting cycle among clients [5] Company Strategy and Development Direction - The company completed a strategic reset in 2025, transitioning to a unified operating model that aligns product and technology with client-focused services [4] - The focus is on building an integrated product ecosystem that combines validated science, cloud-scale performance, and AI capabilities [8][9] - The company aims to support clients through the entire drug development process, from discovery to commercialization, leveraging advancements in AI and cloud computing [6][18] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism about the future, noting that while uncertainty persists, there are positive trends in biotech funding and client budgeting [5][18] - The company anticipates a stable operating environment for fiscal year 2026, with revenue guidance set between $79 million and $82 million [17] Other Important Information - The company ended the fiscal year with $32.4 million in cash and short-term investments, remaining well-capitalized with no debt [16] - The effective tax rate for the fiscal year was 7%, with expectations for 12%-14% in fiscal 2026 [16] Q&A Session Summary Question: Update on demand environment and trends affecting bookings and revenue - Management noted an uptick in biotech funding and positive discussions with clients regarding proposals and budgeting for the next year [21][23] Question: Feedback on the AI-infused GastroPlus release - Initial responses have been positive, with clients excited about the new capabilities and how they fit into their internal IT infrastructure [25][26] Question: Factors affecting large pharma spending and potential caution - Management highlighted that each client has unique challenges, but overall budgeting for 2026 appears positive [29][31] Question: Guidance details and underlying assumptions - No significant changes have occurred since the guidance was provided in October, with expectations for a stable revenue flow [36][38] Question: Renewal rates and factors affecting them - Renewal rates have been impacted by client consolidations and budget scrutiny, but management expects improvement as clients have already reviewed their needs [48][50] Question: Proficiency asset performance and revenue contributions - Proficiency software revenue was down 63% in Q4, while services revenue grew 70%, indicating a slowdown in clinical trial starts [55][56] Question: Cash flow outlook and acquisition interest - Cash flow remains robust, and the company is actively looking for acquisition opportunities in biosimulation and clinical operations [62][64] Question: Pricing flexibility and plans for the upcoming year - The company plans to implement more aggressive pricing due to new AI capabilities, but service side pricing will remain competitive [66][68]

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]

Financial Data and Key Metrics Changes - Third quarter revenue increased by 10% to $20.4 million, including a $2.4 million contribution from the Proficiency acquisition, while organic revenue declined by 4% due to lower software and biosimulation services revenue [5][21] - Diluted EPS loss was $3.35, including a non-cash impairment expense of $77.2 million, compared to a profit of $0.15 last year; adjusted diluted EPS was $0.45 compared to $0.27 last year [6][27] - Adjusted EBITDA was $7.4 million, or 37% of revenue, compared to $5.6 million, or 30% of revenue last year [6][27] Business Line Data and Key Metrics Changes - Software revenue grew by 6%, representing 62% of total revenue, while services revenue increased by 17%, representing 38% of total revenue [21] - The ADMET Predictor platform grew by 8% year over year, while the QSV QST biosimulation platform declined by 39% year over year [12][14] - Proficiency contributed $400,000 in revenue for the quarter and $4.4 million on a trailing twelve-month basis [15] Market Data and Key Metrics Changes - The clinical operations space is facing headwinds due to market disruptions affecting clinical trial initiations and commercialization budgets, impacting revenue outlook for fiscal year 2025 and into 2026 [7][10] - The biopharma market has been challenging, with large pharma facing patent expirations and pricing pressures, while biotech companies are experiencing a pullback in available capital [10] Company Strategy and Development Direction - The company is committed to its clinical operations and medical communications businesses, focusing on leveraging AI technologies to improve clinical operational efficiencies [8][9] - A strategic reorganization was implemented to transition to a functionally driven operating model, aimed at enhancing client engagement and streamlining operations [18][20] - The company plans to roll out new AI-driven initiatives across its product suite, including enhancements to the GastroPlus platform [31][35] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about long-term prospects for biosimulation growth and the use of AI in clinical operations, despite current market headwinds [29][30] - The company anticipates modest improvement in fiscal year 2026 compared to fiscal year 2025, with expectations of flat organic revenue growth [31] - Management highlighted the importance of adapting to client needs and market conditions to optimize performance [51] Other Important Information - The company ended the quarter with $28.5 million in cash and short-term investments, remaining well-capitalized with no debt [28] - The total gross margin for the quarter was 64%, down from 71% in the prior year, primarily due to increased costs of revenues [24] Q&A Session Summary Question: What is driving the margin erosion next quarter? - Management indicated that the reorganization and expense structure changes will impact future margins, with a revenue step down affecting fourth quarter margins [38][40] Question: Can you provide more color on the renewal rates drop? - Management noted that renewal rates were impacted by client consolidations and site closures, but historically, renewal rates have been maintained in the 90% to 95% range [41][43] Question: Are clients becoming more comfortable with the new FDA guidance? - Management stated that while the FDA's announcement is significant, it will take time for clients to translate this into actionable steps, and the environment remains cautious [46][48] Question: What has been the biggest headwind recently? - Management highlighted that multiple uncertainties are causing clients to be cautious in their spending decisions, rather than a single factor [50] Question: What are the expectations for R&D investment moving forward? - Management indicated a commitment to balancing R&D investment with the goal of improving EBITDA, with opportunities for increased spending in AI development [82] Question: Will product development pacing change with AI initiatives? - Management confirmed that while there will be more frequent updates, the regulatory environment may limit how often clients can adopt new features [90]