Certara (NasdaqGS:CERT) Q4 2025 Earnings call February 26, 2026 08:30 AM ET Company ParticipantsDavid Deuchler - Investor RelationsJeff Garro - Managing Director, Healthcare IT Equity ResearchJohn Gallagher - CFOJohn Park - Equity Research AssociateJon Resnick - CEOThomas Keller - Interim Chief Financial OfficerConference Call ParticipantsAnna Kruszenski - Equity Research AnalystBrendan Smith - Director, Life Science & Diagnostic Tools and Biotech AnalystChristine Raines - AnalystDavid Windley - Managing Di ...

Certara (NasdaqGS:CERT) Q4 2025 Earnings call February 26, 2026 08:30 AM ET Company ParticipantsDavid Deuchler - Investor RelationsJeff Garro - Managing Director, Healthcare IT Equity ResearchJohn Gallagher - SVP and CFOJohn Park - Equity Research AssociateJon Resnick - CEOThomas Keller - Independent Executive Coach and Strategic AdvisorConference Call ParticipantsAnna Kruszenski - Equity Research AnalystBrendan Smith - Director, Life Science & Diagnostic Tools and Biotech AnalystChristine Rains - Research ...

Certara (NasdaqGS:CERT) Q4 2025 Earnings call February 26, 2026 08:30 AM ET Speaker10Good day, and thank you for standing by. Welcome to Certara fourth quarter 2025 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, ...

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.

Summary of Certara Conference Call Company Overview - **Company**: Certara - **Industry**: Pharmaceutical services supply chain, focusing on biosimulation and regulatory services Key Points Q3 Results and Market Reaction - Certara experienced a slowdown in bookings at the end of Q3, which alarmed the market [4] - The company had lower-than-expected bookings, particularly in the regulatory business, which has been volatile [5] - Despite the slowdown, Certara reported strong results with tier three biotech clients, indicating a successful strategy focusing on venture capital companies [4][6] Regulatory Business Review - The regulatory business has been under strategic review for over a year due to volatility and current disruptions at the FDA [8] - Certara expects the regulatory environment to stabilize by 2026, but the business is not considered strategically important as it once was [9][11] Biosimulation and Market Trends - Certara holds a leadership position in biosimulation, benefiting from FDA initiatives to reduce animal testing [12][15] - The company is seeing increased interest in biosimulation from clients, particularly in monoclonal antibody development [13][14] - Certara's QSP (Quantitative Systems Pharmacology) business is growing, with the launch of Certara IQ aimed at becoming a standard software product in the market [35] Service Bookings and Client Dynamics - Tier three services have been strong, while tier one clients showed a slowdown in service bookings [20] - Certara has focused on financial sponsors and larger VCs to stabilize its client base [21] - The company has a large backlog of work, indicating potential for future growth as the market recovers [22] Pricing Environment - The current pricing environment is weaker, with mid-single-digit pricing increases on software products being tempered [24] - Certara is prioritizing the growth of biosimulation usage over immediate price increases [24] Product Development and Innovation - Certara has expanded its software offerings, including new versions of Simcyp targeted at preclinical and formulation scientists [28][29] - The company is evolving its software portfolio into a cloud-based platform, with plans for further integration and AI enhancements by 2026 [39][41] Economic and Regulatory Pressures - Certara faces hesitancy from clients to spend due to uncertainties in the regulatory environment and macroeconomic factors [44] - Despite these challenges, there is a long-term trend towards increased interest in modeling as a cost-effective solution in pharma [45][46] Conclusion - Certara is navigating a complex environment with both challenges and opportunities, particularly in biosimulation and regulatory services, while maintaining a strong pipeline and backlog of work [22][23]

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]

Core Insights - Certara, Inc. has launched Certara IQ, an AI-powered Quantitative Systems Pharmacology (QSP) solution aimed at enhancing R&D productivity and reducing risks in drug development [1][3] Company Overview - Certara is a leader in model-informed drug development, providing proprietary biosimulation software and services to over 2,400 clients, including biopharmaceutical companies and regulatory agencies across 70 countries [4] Industry Trends - QSP has become essential in modern drug discovery, with FDA submissions based on QSP nearly doubling every 1.4 years since 2013, indicating a growing reliance on computational modeling in drug development [2] Product Features - Certara IQ enhances model reproducibility and reusability through an intuitive, generative-AI supported interface for building and visualizing QSP models [5] - The solution accelerates model creation with a repository of scientifically validated and pre-built QSP models, workflows, and report templates [5] - Certara IQ features a high-performance simulation engine that significantly reduces computational bottlenecks, running simulations thousands of times faster than traditional tools [5] - It empowers decision-making with a no-code interface for "what-if" analysis, allowing for quick assessments of feasibility, data gaps, and optimization of dosing and drug properties [5]

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]

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]