Certara, Inc. Q1 FY2025 earnings call

• Certara is pleased with its start to the year, driven by strong commercial execution across software and services. • Headwinds include IRA price controls, biotech capital raising challenges, and potential new healthcare policies; tailwinds include FDA phasing out animal testing, expanded modeling use in pharmaceutical development, and increasing AI spending by customers. • Commercially, software had healthy bookings from Tier 1 and 3 customers with high renewal rates and cross-selling from Chemaxon; services had stable demand with biosimulation softness in Tier 1 offset by growth in Tiers 2 and 3, and regulatory services saw year-over-year revenue bookings growth. • R&D progress: Launched the 24th version of Simcyp Simulator with new features. • Hosted the second annual Certainty Conference, welcomed new leadership in services group, and announced a $100 million share repurchase authorization.

Certara reported revenue of $106 million for the first quarter of 2025, representing a 10% year-over-year growth. Bookings were $118.2 million, up 12% from the prior year period. Software revenue was $46.4 million, a 18% increase year-over-year (19% on constant currency basis), with software bookings at $40.8 million, up 23% year-over-year. Chemaxon contributed $5.9 million to revenue and $4.9 million to bookings in the quarter. Services revenue was $59.6 million, up 4% year-over-year. Trailing 12-month bookings were $457.7 million, up 16% on a reported basis. Excluding Chemaxon, total company organic bookings growth was 7% compared to the first quarter of the previous year.

• Total revenue is expected to be in the range of $415 million to $425 million, representing 8% to 10% growth compared to 2024. • Chemaxon is expected to contribute software revenue of $23 million to $25 million. • Adjusted EBITDA margins are expected to be between 30% to 32%. • Adjusted EPS is expected to be in the range of $0.42 to $0.46 per share, with fully diluted shares in the range of 162 million to 164 million and a tax rate of 25% to 30%.

• Continued headwinds such as the downstream effects of IRA price controls, an erratic capital raising environment for biotechs, and potential new trade and healthcare policies from the current administration.

Q: On the inbound interest for non-animal Navigator and Certara's position in the business environment?

A: William Feehery mentioned there was tremendous interest from customers, with questions around FDA's plans, technology readiness, and animal usage replacement. John Gallagher discussed the software net retention ratio being 102% lower than typical, driven by expected timing of software revenue achievement and increasing ratable software portion.

Q: On tariffs and FDA phase-out of animal models?

A: William Feehery said the interest in using technology to eliminate animal models was broad, including biotechs, large pharma, and government agencies. John Gallagher noted Tier 1 customer tariffs led to slowness in decision-making seen in Tier 1 biosim services but no specific new customer behavior called out yet Q: On additional plant investments and non-animal Navigator?

A: William Feehery stated Certara has been aggressively investing in QSP group and technology, with Non-animal Navigator being a combination of existing software, QSP technology, and drug development strategists to explain new customers the new regulatory landscape Q: On Certara Cloud and Phoenix?

A: William Feehery said take rate on Certara Cloud is positive as part of software updates, and they're expecting increased take rate on shifting Phoenix to hosted solution with upcoming enhancements