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]

Certara's Business and Market Position - Certara is a leader in biosimulation, using AI-enabled platforms, data, and scientific expertise to transform drug development and accelerate new medicines to patients[16, 76] - The company serves over 2,400 customers across 70 countries, including 30 of the top 30 biopharma companies[16] - Over 90% of novel drugs approved by the US FDA since 2014 were supported by Certara solutions[16] - The in silico drug development total addressable market (TAM) is $4.1 billion, representing 1.5% of the total R&D industry spend[27] Financial Performance and Growth - Certara's adjusted EBITDA margin in FY 2024 was 32%[17] - Software growth in FY 2024 was 18%[17] - The company's revenue mix is shifting towards software, with software accounting for 42% of revenue in 2024 (including pro-forma Chemaxon revenue of $22.9 million), a 1300 basis point shift since 2021[69, 70] - Certara is investing in its software business to drive sustainable growth, with continued R&D investment to support software innovation and AI integration[71, 74] Biosimulation and its Impact - Biosimulation can save approximately 10 months and $5 million per program[21] - Over 120 novel drugs and 325 label claims were approved by global regulators using Certara technology in lieu of clinical studies[17] - A 3% increase in process efficiency through biosimulation could potentially save approximately $300 million per drug[14]

Summary of Certara (CERT) FY Conference Call - June 04, 2025 Company Overview - **Company**: Certara (CERT) - **Industry**: Pharmaceutical Drug Development - **Focus**: Model-informed drug development and biosimulation to improve drug development efficiency and success rates Key Points and Arguments 1. **Drug Development Challenges**: Nearly 90% of new medicines entering clinical trials fail, with development costs ranging from $2 to $3 billion, primarily due to unsuccessful trials [3][4] 2. **Impact of Improvements**: A mere 3% improvement in drug development success rates could save approximately $300 million per approved drug [5] 3. **Biosimulation Platform**: Certara's biosimulation platform allows for modeling disease and drug interactions, helping clients save time and costs while enhancing scientific understanding [6] 4. **Client Base**: Certara serves around 2,400 customers, including all major pharmaceutical companies, with over 90% of FDA-approved drugs in the last decade utilizing their technology [7] 5. **Financial Performance**: The company operates with an EBITDA margin in the low 30s and is profitable, with ongoing investments in software growth [8] 6. **Market Potential**: Certara estimates a total addressable market (TAM) of approximately $4 billion for biosimulation services, with significant growth opportunities [16] 7. **Regulatory Support**: The FDA has increasingly recognized and approved the use of biosimulation in drug development, with a rise in guidance documents over the years [15] 8. **Shift from Animal Testing**: Recent FDA announcements to phase out animal testing, particularly for monoclonal antibodies, present a favorable environment for Certara's biosimulation models [17][19] 9. **Product Suite**: Certara's offerings include: - **SimShip Simulator**: Models drug kinetics across diverse human populations [22] - **Phoenix**: An analytics tool for fitting clinical trial data to models [28] - **Pinnacle 21**: A data standardization tool used by the FDA for clinical trial submissions [30] - **ChemAxon**: A chemical informatics platform acquired to enhance drug discovery processes [31] 10. **AI Integration**: Certara is incorporating AI into its biosimulation products, enhancing usability and productivity, with AI-related revenue already in the millions [32][33] 11. **Acquisition Strategy**: The company has made strategic acquisitions to bolster its capabilities, including Pinnacle 21, Applied Biomath, and ChemAxon [35] 12. **Growth Strategy**: Certara is focusing on increasing its software revenue, which has a high barrier to entry, while reviewing its services segment for potential restructuring [40][41] Additional Important Insights - **Clinical Trial Efficiency**: Certara's technology has enabled clients to avoid numerous costly clinical trials, demonstrating significant cost savings [26] - **Market Trends**: The increasing adoption of biosimulation in the pharmaceutical industry is reflected in the exponential growth of related publications over the past 25 years [14] - **Regulatory Landscape**: The FDA's evolving stance on biosimulation and data standardization is crucial for the future of drug development and Certara's business model [15][30] This summary encapsulates the critical insights from the conference call, highlighting Certara's role in transforming drug development through innovative technologies and strategic growth initiatives.

Summary of Certara (CERT) 2025 Conference Call Company Overview - Certara is a software and services company specializing in biosimulation and model-informed drug development, with approximately 45% of its business derived from software and the remaining from services [3][4] Key Financial Performance - The company performed in line with expectations in Q1, with software aided by the acquisition of Chemaxon in Q4 of the previous year [3][4] - The services business also met expectations, showing mid-single-digit growth, supported by a return to growth in regulatory services [3][4] Industry Dynamics - The FDA's recent announcement to reduce animal testing requirements positions Certara favorably, as it aligns with their existing products and services [5][6] - The directive is expected to drive incremental revenue, particularly in their SIMSIP and QSP product areas [6][22] Customer Engagement - Certara maintains a strong relationship with the FDA, which is a significant user of their software, and they continue to engage in constructive dialogue [8][9] - The company aims to deepen penetration within large pharmaceutical companies, focusing on expanding their footprint into the preclinical stage of drug development [10][11] Challenges and Opportunities - Tier three customers (biotechs) are facing a challenging funding environment, which could impact growth despite strong Q1 performance [13][14] - Certara is investing in R&D and enhancing AI capabilities to improve their software offerings, including the recent launch of Co Author for regulatory writing [16][19] Product Development - The Non-Animal Navigator was launched in response to the FDA's directive, aimed at helping customers transition away from animal testing [21][23] - The integration of Chemaxon is expected to expand Certara's capabilities into the discovery phase of drug development, enhancing their overall service offerings [27][28] Market Outlook - The company anticipates continued challenges in the end market environment, particularly with tier one customers, but remains optimistic about growth opportunities stemming from the FDA directive [52][53] - Certara's capital allocation strategy includes a focus on M&A to enhance their software capabilities, with a goal to increase the software revenue mix from 45% to 50% by year-end [48][49] Conclusion - Certara is well-positioned to capitalize on regulatory changes and expand its market presence through strategic investments and product development, despite facing headwinds in the biotech funding environment [52][53]

Financial Performance - Q1 2025 - Revenue reached $106 million, a 10% increase year-over-year on a constant currency basis[22, 26] - Net income was $4.7 million[22] - Adjusted EBITDA was $34.8 million, representing a 20% increase compared to the prior year period[22, 39] - Diluted EPS stood at $0.03, while adjusted diluted EPS reached $0.14[22] Bookings and Retention - Q1 Reported Net Bookings totaled $118.2 million[29] - Trailing twelve months (TTM) Reported Net Bookings reached $457.7 million[29] - The book-to-bill ratio was 1.16x[32] - The software net retention rate (NRR) was 102.4%[35] Growth Drivers - Organic software revenue grew by 4%, with Chemaxon contributing approximately 1410 basis points[40] - Organic services revenue grew by 3%, with Chemaxon contributing approximately 50 basis points[41] - Organic total revenue grew by 4%, with Chemaxon contributing approximately 610 basis points[42] - Organic software bookings grew by 9%, with Chemaxon contributing approximately 1340 basis points[40] - Organic services bookings grew by 6%, with Chemaxon contributing approximately 60 basis points[41] - Organic total bookings grew by 7%, with Chemaxon contributing approximately 460 basis points[42] 2025 Outlook - The company reiterated its full-year 2025 revenue guidance of $415-$425 million, representing an 8-10% growth[48] - Adjusted EBITDA margin is expected to be 30-32%[48] - Adjusted diluted EPS is projected to be $0.42-$0.46[48] - Chemaxon revenue is expected to be $23-$25 million[51]