Provides Update to Full Year 2023 Financial Guidance
PRINCETON, N.J.— August 9, 2023– Certara, Inc. （纳斯达克股票代码：CERT), a global leader in biosimulation, today reported its financial results for the second quarter of fiscal year 2023.
Second Quarter Highlights:
- Revenue was $90.5 million, compared to $82.8 million in the second quarter of 2022, representing growth of 9% over the second quarter of 2022 on a reported basis and 10% at constant currency.
- Net income was $4.7 million, compared to a net loss of $0.6 million in the second quarter of 2022.
- Adjusted EBITDA was $32.4 million, compared to $28.0 million in the second quarter of 2022.
“During the second quarter our software business performed well, but we experienced lower growth than expected in our services business due to cautious spending among smaller biotech customers, as well as a slow recovery in our regulatory business. While we are not satisfied with this quarter’s results and they have led us to restate our outlook for 2023 based on current market dynamics, we believe the fundamental health of the drug development market and the increasing acceptance and adoption of biosimulation technology provide an excellent opportunity for us to continue to invest in the growth of Certara,” said William F. Feehery, Chief Executive Officer. “We believe continued strength in software sales reflects a healthy market for technology that accelerates new medicine development and anticipate demand improvement in the services business as we move into 2024.”
Second Quarter 2023 Results
“Certara’s second quarter performance reflects strong software revenue and bookings performance, each growing 17%, while services revenue grew 5% and services bookings declined, as compared to the same period a year ago. The software business continues to perform well, delivering a strong renewal rate of 93% in the quarter, with customers continuing to recognize the unique value proposition of the Certara platform. The weakness in our services bookings was a result of more cautious spending among our customers. Notably, adjusted EBITDA margins remained in line with our expectations during the quarter,” said John Gallagher, Chief Financial Officer.
Total revenue for the second quarter of 2023 was $90.5 million, representing growth of 9% over the second quarter of 2022. The overall increase in revenues was primarily due to growth in our technology-driven services and software product offerings from strong renewal rates, client expansions, and new customers.
On a constant currency basis, total revenue for the second quarter of 2023 was $90.6 million, representing growth of 10% over the second quarter of 2022. Please see note (1) in the section A Note on Non-GAAP Financial Measures below for more information on constant currency revenue.
Total cost of revenue for the second quarter of 2023 was $36.2 million, an increase of $1.0 million from $35.2 million in the second quarter of 2022, primarily due to a $0.6 million increase in employee-related costs resulting from billable head count growth, a $0.4 million increase in stock-based compensation costs, a $0.2 million increase in intangible assets amortization, a $0.1 million increase in equipment, and a $0.1 million increase in travel expenses, partially offset by a $0.5 million decrease in professional and consulting costs.
Total operating expenses for the second quarter of 2023 were $41.2 million, which decreased by $2.2 million from $43.4 million in the second quarter of 2022, primarily due to a $6.3 million decrease in stock-based compensation cost, partially offset by a $2.9 million increase in employee-related costs, a $1.3 million increase in expense from remeasuring fair value of contingent consideration related to the Vyasa business acquisition.
Net income for the second quarter of 2023 was $4.7 million, compared to a net loss of $0.6 million in the second quarter of 2022. The $5.3 million increase in net income was primarily due to a $8.9 million increase in operating income, as explained above, offset by a $3.6 million increase in other expenses and taxes,
Diluted earnings per share for the second quarter 2023 was $0.03, as compared to $0.00 in the second quarter of 2022.
Adjusted EBITDA for the second quarter of 2023 was $32.4 million compared to $28.0 million for the second quarter of 2022, representing 16% growth. See note (2) in the section A Note on Non-GAAP Financial Measures below for more information on adjusted EBITDA.
Adjusted net income for the second quarter of 2023 was $18.4 million compared to $14.6 million for the second quarter of 2022, representing 26% growth. Adjusted diluted earnings per share for the second quarter 2023 was $0.12 compared to $0.09 for the second quarter of 2022. See note (3) in the section A Note on Non-GAAP Financial Measures below for more information on adjusted net income and adjusted diluted earnings per share.
2023 Financial Outlook
Certara is updating its previously reported guidance for full year 2023. We expect the following:
Full year 2023 revenue to be in the range of $345 million to $360 million.
Full year 2023 adjusted EBITDA to be in the range of $120 million to $128 million.
Full year adjusted diluted earnings per share to be in the range of $0.44 – $0.48.
Fully diluted shares to be in the range of 159 million to 162 million.
Webcast and Conference Call Details
Certara will host a conference call today, August 9, 2023, at 5:00 p.m. ET to discuss its second quarter 2023 financial results. Investors interested in listening to the conference call are required to register online in advance of the call. A live and archived webcast of the event will be available on the “Investors” section of the Certara website at https://ir.certara.com.
关于Certara
Certara accelerates medicines using proprietary biosimulation software, technology and services to transform traditional drug discovery and development. 其客户包括超 2,300 家生物制药公司、学术机构和来自 70 个国家的监管机构。
Please visit our website at www.certara.com. We intend to use our website as a means of disclosing material, non-public information and for complying with our disclosure obligations under Regulation FD.
Such disclosures will be included in the Investor Relations section of our website at https://ir.certara.com. Accordingly, investors should monitor such portion of our website, in addition to following our press releases, Securities and Exchange Commission filings and public conference calls and webcasts.
Forward-Looking Statements
This press release contains certain statements that constitute forward-looking statements within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, with respect to the Company’s future business and financial performance, revenue, margin, and bookings. These statements typically contain words such as “believe,” “may,” “potential,” “will,” “plan,” “could,” “estimate,” “expects” and “anticipates” or the negative of these words or other similar terms or expressions. Any statement in this press release that is not a statement of historical fact is a forward-looking statement and involves significant risks and uncertainties. Although we believe that the expectations reflected in these forward-looking statements are reasonable, we cannot provide any assurance that these expectations will prove to be correct. You should not rely upon forward-looking statements as predictions of future events and actual results, events, or circumstances. Actual results may differ materially from those described in the forward-looking statements and are subject to a variety of assumptions, uncertainties, risks and factors that are beyond our control, including the Company’s ability to compete within its market; any deceleration in, or resistance to, the acceptance of model-informed biopharmaceutical discovery; changes or delays in relevant government regulation; increasing competition, regulation and other cost pressures within the pharmaceutical and biotechnology industries; economic conditions, including inflation, recession, currency exchange fluctuation and adverse developments in the financial services industry; trends in research and development (R&D) spending; delays or cancellations in projects due to supply chain interruptions or disruptions or delays to pipeline development and clinical trials experienced by our customers; consolidation within the biopharmaceutical industry; reduction in the use of the Company’s products by academic institutions; pricing pressures; the Company’s ability to successfully enter new markets, increase its customer base and expand its relationships with existing customers; the impact of acquisitions and our ability to successfully integrate such acquisitions; the occurrence of natural disasters and epidemic diseases; any delays or defects in the release of new or enhanced software or other biosimulation tools; failure of our existing customers to renew their software licenses or any delays or terminations of contracts or reductions in scope of work by its existing customers; our ability to accurately estimate costs associated with its fixed-fee contracts; our ability to retain key personnel or recruit additional qualified personnel; lower utilization rates by our employees as a result of natural disasters and epidemic diseases; risks related to our contracts with government customers; our ability to sustain recent growth rates; our ability to successfully operate a global business; our ability to comply with applicable laws and regulations; risks related to litigation; the adequacy of its insurance coverage and ability to obtain adequate insurance coverage in the future; our ability to perform in accordance with contractual requirements, regulatory standards and ethical considerations; the loss of more than one of our major customers; future capital needs; the ability of our bookings to accurately predict future revenue and our ability to realize revenue on bookings; disruptions in the operations of the third-party providers who host our software solutions or any limitations on their capacity; our ability to reliably meet data storage and management requirements, or the experience of any failures or interruptions in the delivery of our services over the internet; our ability to comply with the terms of any licenses governing use of third-party open source software; any breach of its security measures or unauthorized access to customer data; our ability to adequately enforce or defend ownership and use of our intellectual property and other proprietary rights; any allegations of infringement, misappropriation or violations of a third party’s intellectual property rights; our ability to meet obligations under indebtedness and have sufficient capital to operate our business; any limitations on our ability to pursue business strategies due to restrictions under our current or future indebtedness; any impairment of goodwill or other intangible assets; our ability to use our net operating losses and R&D tax credit carryforwards; the accuracy of management’s estimates and judgments relating to critical accounting policies and changes in financial reporting standards or interpretations; any inability to design, implement, and maintain effective internal controls or inability to remediate any internal controls deemed ineffective; the costs and management time associated with operating as a publicly traded company; and the other factors detailed under the captions “Risk Factors” and “Special Note Regarding Forward-Looking Statements” and elsewhere in our Securities and Exchange Commission (“SEC”) filings, and reports, including the Form 10-K filed by the Company with the Securities and Exchange Commission on 2023 年 3 月 1 日, and subsequent reports filed with the SEC. Any forward-looking statements speak only as of the date of this release and, except to the extent required by applicable securities laws, we expressly disclaim any obligation to update or revise any of them to reflect actual results, any changes in expectations or any change in events. Factors that may materially affect our results and those risks listed in filings with the SEC.
A Note on Non-GAAP Financial Measures
This press release contains “non-GAAP measures” which are financial measures that either exclude or include amounts that are not excluded or included in the most directly comparable measures calculated and presented in accordance with U.S. generally accepted accounting principles (“GAAP”). Specifically, the Company makes use of the non-GAAP financial measures adjusted EBITDA, adjusted net income (loss), adjusted diluted earnings per share, and constant currency (“CC”) revenue, which are not recognized terms under GAAP. These measures should not be considered as alternatives to net income (loss) or GAAP diluted earnings per share or revenue as measures of financial performance or any other performance measure derived in accordance with GAAP and should not be considered a measure of discretionary cash available to the Company to invest in the growth of its business. The presentation of these measures has limitations as an analytical tool and should not be considered in isolation, or as a substitute for the Company’s results as reported under GAAP. Because not all companies use identical calculations, the presentations of these measures may not be comparable to other similarly titled measures of other companies and can differ significantly from company to company.
You should refer to the footnotes below as well as the “Non-GAAP Financial Measures” section in this press release below for a further explanation of these measures and reconciliations of these non-GAAP measures in specific periods to their most directly comparable financial measure calculated and presented in accordance with GAAP for those periods.
Management uses various financial metrics, including total revenues, income (loss) from operations, net income (loss), and certain non-GAAP measures, including those discussed above, to measure and assess the performance of the Company’s business, to evaluate the effectiveness of its business strategies, to make budgeting decisions, to make certain compensation decisions, and to compare the Company’s performance against that of other peer companies using similar measures. In addition, management believes these metrics provide useful measures for period-to-period comparisons of the Company’s business, as they remove the effect of certain non-cash expenses and other items not indicative of its ongoing operating performance.
Management believes that adjusted EBITDA, adjusted net income (loss), adjusted diluted earnings per share, and CC revenue are helpful to investors, analysts, and other interested parties because they can assist in providing a more consistent and comparable overview of our operations across our historical periods. In addition, each of these measures is frequently used by analysts, investors, and other interested parties to evaluate and assess performance. Furthermore, our business has operations outside the United States that are conducted in local currencies. As a result, the comparability of the financial results reported in U.S. dollars is affected by changes in foreign currency exchange rates. We adjust revenues for constant currency to provide a framework for assessing how our business performed excluding the effect of foreign currency rate fluctuations and we believe it is helpful for investors to present operating results on a comparable basis period over period to evaluate its underlying performance.
Please note that the Company has not reconciled the adjusted EBITDA or adjusted diluted earnings per share forward-looking guidance included in this press release to the most directly comparable GAAP measures because this cannot be done without unreasonable effort due to the variability and low visibility with respect to costs related to acquisitions, financings, and employee stock compensation programs, which are potential adjustments to future earnings. We expect the variability of these items to have a potentially unpredictable, and a potentially significant, impact on our future GAAP financial results.
(1) CC revenue excludes the effects of foreign currency exchange rate fluctuations by assuming constant foreign currency exchange rates used for translation. Current periods revenue reported in currencies other than U.S. Dollars are converted into U.S. Dollars at the average exchange rates in effect for the comparable prior periods.
(2) Adjusted EBITDA represents net income excluding interest expense, provision (benefit) for income taxes, depreciation and amortization expense, intangible asset amortization, equity-based compensation expense, change in fair value of contingent consideration, acquisition and integration expense and other items not indicative of our ongoing operating performance.
(3) Adjusted net income and adjusted diluted earnings per share exclude the effect of equity-based compensation expense, amortization of acquisition-related intangible assets, change in fair value of contingent consideration, acquisition and integration expense, and other items not indicative of our ongoing operating performance as well as income tax provision adjustment for such charges.
In evaluating adjusted EBITDA, adjusted net income, and adjusted diluted earnings per share, you should be aware that in the future the Company may incur expenses similar to those eliminated in this presentation and this presentation should not be construed as an inference that future results will be unaffected by unusual items.
Contacts:
Investor Relations Contact:
David Deuchler
Gilmartin Group
ir@certara.com
媒体联系人：
Daniel Yunger
Kekst CNC
daniel.yunger@kekstcnc.com
全球生物模拟科技行业巨头 CERTARA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
全球生物模拟科技行业巨头 CERTARA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
全球生物模拟科技行业巨头 CERTARA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
NON-GAAP FINANCIAL MEASURES
The following table reconciles net income to adjusted EBITDA:
The following table reconciles net income to adjusted net income:
The following tables reconciles diluted earnings per share to adjusted diluted earnings per share:
The following tables reconcile revenues to the revenues adjusted for constant currency:
(a) Represents amounts as determined under GAAP.
(b) Represents expense related to equity-based compensation. Equity-based compensation has been, and will continue to be for the foreseeable future, a recurring expense in our business and an important part of our compensation strategy.
(c) Represents amortization costs associated with acquired intangible assets in connection with business acquisitions.
(d) Represents expense associated with remeasuring fair value of contingent consideration of business acquisition.
(e) Represents costs associated with mergers and acquisitions and any retention bonuses pursuant to the acquisitions.
(f) Represents integration costs related to post – acquisition integration activities.
(g) Represents costs associated with our public offerings that are not capitalized.
(h) Represents the gain/loss related to disposal of fixed assets.
(i) Represents recruiting and relocation expenses related to hiring senior executives.
(j) Represents the first-year Sarbanes-Oxley costs for accounting and consulting fees related to the Company’s preparation to comply with Section 404 of the Sarbanes-Oxley Act, as well as implementation cost of adopting ASC 842.
(k) Represents the income tax effect of the non-GAAP adjustments calculated using the applicable statutory rate by jurisdiction.
(l) Represents potentially dilutive shares that were included from our GAAP diluted weighted average common shares outstanding.
