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 TFL Studio, a cloud-native module of its Phoenix Cloud solution, which enables the creation of Tables, Figures, and Listings (TFLs) 50% faster, enhancing collaboration among pharmacokinetic (PK) and pharmacodynamic (PD) scientists [1][3][4] Group 1: Product Features and Benefits - TFL Studio allows scientists to create high-quality TFLs in a user-friendly, no-code environment, significantly reducing the technical complexities involved in data handling and formatting [3][5] - The module integrates with Integral™, Certara's data repository, providing a unified source for PK/PD data, models, and visualizations [3] - A complementary module, AI PK Reports, will be released soon, utilizing GenAI to expedite the generation of draft PK reports from TFLs, reducing the time from days to minutes [3] Group 2: Market Position and Strategy - The introduction of TFL Studio is a strategic move to enhance drug discovery and development processes by leveraging AI and cloud technology, addressing inefficiencies in traditional TFL workflows [2][3] - Certara serves over 2,400 clients, including biopharmaceutical companies and regulatory agencies across 70 countries, indicating a strong market presence and demand for its innovative solutions [5]