Certara(CERT) - 2022 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Total revenue for Q4 2022 was $86.6 million, representing a year-over-year growth of 15% on a reported basis and 18% on a constant currency basis [12][73] - For the full year 2022, total revenue was$ 335.6 million, which represents a 17% growth on a reported basis and 20% growth on a constant currency basis [12][61] - Adjusted EBITDA margin was 36.8% in Q4 2022 and 35.8% for the full year 2022 [57] - Reported adjusted net income for Q4 2022 was $25.2 million compared to$ 9.8 million for Q4 2021 [57] - Bookings for the trailing 12 months ended December 31, 2022, were $408.9 million, up 20% year-over-year [12][61] Business Line Data and Key Metrics Changes - Software bookings were$ 39.5 million in Q4 2022, increasing 22% from the prior year period [8] - Services revenue was $57.5 million in Q4 2022, which increased 15% over the prior year period on a reported basis and 18% on a constant currency basis [8][62] - Biosimulation services revenue growth was strong at 20% for the year, while regulatory services were a drag on overall growth [8][62] Market Data and Key Metrics Changes - Approximately 50% of the company's business comes from the top 50 pharmaceutical companies, with both segments growing about 15% in revenue during Q4 [14] - China currently represents about 2% to 3% of total revenues, indicating significant growth potential [23] - The company has been slightly underweight in Europe but has made investments to bolster its footprint there, which has been paying off [23] Company Strategy and Development Direction - The company is focused on expanding its biosimulation technology and services, aiming to disrupt drug innovation [60] - The strategy includes small bolt-on acquisitions to acquire talent and significant acquisitions to expand its software products in biosimulation [48] - The company is optimistic about the recovery of its regulatory business and expects improved performance in 2023 [61] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's position for growth in 2023, citing strong demand for biosimulation and successful integration of Pinnacle 21 [9][61] - The company has a conservative outlook for 2023, with revenue guidance in the range of$ 370 million to $385 million, representing 10% to 15% growth compared to 2022 [64] - Management noted that the regulatory business is expected to grow in the low single digits compared to 2022, with a focus on improving performance [64] Other Important Information - The company appointed John Gallagher as the new CFO effective April 1, 2023, following Andrew Schemick's decision to pursue other career goals [60][64] - The company ended the year with$ 236.6 million in cash and cash equivalents and $297.5 million in outstanding borrowings on its term loan [57] Q&A Session Summary Question: Can you provide insights on the size, growth, and margin profile of M&A? - Management indicated that the outlook for the year does not embed any M&A contributions beyond completed deals, but it could be a source of upside [1] Question: What is the performance of the software side and sales environment? - The software side showed better-than-expected performance, with strong traction in the marketplace and execution [5] Question: How is the regulatory business performing? - The regulatory business was down 3% year-over-year, but there are signs of recovery and optimism for growth in 2023 [79] Question: What are the pricing expectations for this year? - Pricing expectations are consistent with historical trends, in the range of 3% to 5% [21] Question: How is the company addressing opportunities in China and other geographies? - The company sees China as an opportunity, currently representing 2% to 3% of revenues, and is making investments to grow its presence there [23] Question: What is the status of the partnership with Memorial Sloan Kettering? - The partnership is still a work in progress, with valuable data being utilized for biosimulation, but significant results are expected to take two to three years [40]