UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

For the quarterly period ended September 30, ~~2021~~2022

☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-39799

Certara, Inc.

(Exact name of registrant as specified in its charter)


Delaware	82-2180925

(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)

100 Overlook Center

Suite 101

Princeton, New Jersey 08540

(Address of Principal Executive Offices)

(609) 716-7900

(Registrant’s telephone number)

Securities registered pursuant to Section 12(b) of the Act:


Title of Each Class	Trading symbol	Name of Exchange on which registered
Common stock, par value $0.01 per share	CERT	The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☐⌧	Accelerated filer	☐

Non-accelerated filer	☒☐	Smaller reporting company	☐	Emerging growth company	☒☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of November ~~2, 2021,~~01, 2022, the registrant ~~had~~ ha~~159,679,485~~d 159,672,997 shares of common stock, par value $0.01 per share, outstanding.

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Certara, Inc.

Unless otherwise indicated, references to the “Company,” “Certara,” “we,” ~~“us”~~“us,” and “our” refer to Certara, Inc. and its consolidated subsidiaries.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q (this “Quarterly Report”) contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which are subject to the “safe harbor” created by those sections. All statements (other than statements of historical facts) in this Quarterly Report regarding the prospects of the industry and our prospects, plans, financial position and business strategy may constitute forward-looking statements. In addition, forward-looking statements generally can be identified by the use of forward-looking terminology such as “may,” “should,” “expect,” “might,” “intend,” “will,” “estimate,” “anticipate,” “plan,” “believe,” “predict,” “potential,” “continue,” “suggest,” “project” or “target” or the negatives of these terms or variations of them or similar terminology. 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. Such statements reflect the current views of our management with respect to our operations, results of operations and future financial performance. The following factors are among those that may cause actual results to differ materially from the forward-looking statements:

●•

our ability to compete within our market;

●•

any deceleration in, or resistance to, the acceptance of model-informed biopharmaceutical discovery;

●•

~~changes~~our ability to retain key personnel or ~~delays in government regulation relating to the biopharmaceutical industry;~~recruit additional qualified personnel

●

~~increasing competition, regulation and other cost pressures within the pharmaceutical and biotechnology industries;~~

●

~~trends in research and development (“R&D”) spending, the use of third parties by biopharmaceutical companies and a shift toward more R&D occurring at smaller biotechnology companies;~~

●

~~consolidation within the biopharmaceutical industry;~~

●

~~reduction in the use of our products by academic institutions;~~

●

~~pricing pressures due to increased customer utilization of our products;~~

●•

our ability to successfully enter new markets, increase our customer base and expand our relationships with existing customers;

●•

the occurrence of natural disasters and epidemic diseases, ~~such as~~including the ~~recent COVID-19 pandemic;~~ongoing COVID 19 pandemic, which may result in delays or cancellations of customer contracts or decreased utilization by our employees;

●•

changes or delays in government regulation relating to the biopharmaceutical industry;

•

increasing competition, regulation and other cost pressures within the pharmaceutical and biotechnology industries;

•

trends in research and development (“R&D”) spending and the use of third parties by biopharmaceutical companies;

•

the impact of macroeconomic trends including inflation and foreign currency exchange volatility;

•

consolidation within the biopharmaceutical industry;

•

reduction in the use of our products by academic institutions;

•

pricing pressures due to increased customer utilization of our products;

•

any delays or defects in our 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 our existing customers;

●•

our ability to accurately estimate costs associated with our fixed-fee contracts;

●

~~our ability to retain key personnel or recruit additional qualified personnel;~~

●•

risks related to our contracts with government customers, including the ability of third parties to challenge our receipt of such contracts;

●•

our ability to sustain recent growth rates;

●•

the loss of more than one of our major customers;

•

any future acquisitions and our ability to successfully integrate such acquisitions;

●•

the accuracy of our addressable market estimates;

●•

the length and unpredictability of our software and service sales cycles;

●•

our ability to successfully operate a global business;

●•

our ability to comply with applicable anti-corruption, trade compliance and economic sanctions laws and regulations;

●•

risks related to litigation against us;

●•

the adequacy of our insurance coverage and our ability to obtain adequate insurance coverage in the future;

●•

our ability to perform our services in accordance with contractual requirements, regulatory standards and ethical considerations;

~~Table of Contents~~

●

~~the loss of more than one of our major customers;~~

●

~~our future capital needs;~~

●•

the ability or inability of our bookings to accurately predict our future revenue and our ability to realize the anticipated revenue reflected in our backlog;

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●•

any disruption in the operations of the third-party providers who host our software solutions or any limitations on their capacity or interference with our use;

●•

our ability to reliably meet our 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 our use of third-party open source software utilized in our software solutions;

●•

any breach of our security measures or unauthorized access to customer data;

●•

our ability to comply with applicable privacy and data security laws;

●•

our future capital needs;

•

our ability to adequately enforce or defend our ownership and use of our intellectual property and other proprietary rights;

●•

any allegations that we are infringing, misappropriating or otherwise violating a third party’s intellectual property rights;

●•

our ability to meet the obligations under our current or future indebtedness as they become due and have sufficient capital to operate our business and react to changes in the economy or industry;

●•

any limitations on our ability to pursue our business strategies due to restrictions under our current or future indebtedness or inability to comply with any restrictions under such indebtedness;

●•

any impairment of goodwill or other intangible assets;

●•

our ability to use our net operating ~~losses~~loss (“NOLs”) and R&D tax credit carryforwards to offset future taxable income;

●•

the accuracy of our estimates and judgments relating to our critical accounting policies and any changes in financial reporting standards or interpretations;

●•

any inability to design, implement, and maintain effective internal controls when required by ~~law;~~

●

~~the costs and management time associated with operating as a publicly traded company;~~law, or inability to timely remediate internal controls that are deemed ineffective ; and

●•

the other factors described elsewhere in this Quarterly Report, ~~on Form 10-Q or as described~~ in our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2020, or as described~~2021 (“2021 Annual Report”), and in the other documents and reports we file with the Securities and Exchange Commission (the “SEC”).

You should not rely upon forward-looking statements as predictions of future events. The forward-looking statements in this Quarterly Report are based on our beliefs, assumptions and expectations of future performance, taking into account the information currently available to us. These statements are only predictions based upon our current expectations and projections about future events. There are important factors, including those described in the section titled “Risk Factors” and elsewhere in this Quarterly Report and in our 2021 Annual Report, ~~on Form 10-K,~~ that could cause our actual results, level of activity, performance or achievements to differ materially from the results, level of activity, performance or achievements expressed or implied by the forward-looking statements. Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time and it is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make in this Quarterly Report. Such risk factors may be updated from time to time in our periodic filings with the SEC. Our periodic filings are accessible on the SEC’s website at www.sec.gov.

Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee that the future results, levels of activity, performance and events and circumstances reflected in the forward-looking statements will be achieved or occur. The forward-looking statements made in this Quarterly Report relate only to events as of the date on which the statements are made. Except as required by law, we undertake no obligation to update publicly any forward-looking statements for any reason after the date of this Quarterly Report to conform these statements to actual results or to changes in our expectations.

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In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this Quarterly Report, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements.

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Channels for Disclosure of Information

Investors and others should note that we may announce material information to the public through filings with the SEC, our Investors Relations website (https://ir.certara.com), press releases, public conference calls and public webcasts. We use these channels to communicate with the public about the Company, our products, our services and other matters. We encourage our investors, the media and others to review the information disclosed through ~~such~~these channels as such information could be deemed to be material information. The information on such channels, including on our website, is not incorporated by reference in this Quarterly Report and shall not be deemed to be incorporated by reference into any other filing under the Securities Act or the Exchange Act, except as expressly set forth by specific reference in such a filing. Please note that this list of disclosure channels may be updated from time to time.

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CERTARA, INC. AND SUBSIDIARIES

FORM 10-Q

TABLE OF CONTENTS

Item			Page			Page
		PART I – FINANCIAL INFORMATION			PART I – FINANCIAL INFORMATION

1.		Financial Statements (Unaudited)	6		Financial Statements (Unaudited)	6

		Condensed Consolidated Balance Sheets as of September 30, 2021 and December 31, 2020	6		Condensed Consolidated Balance Sheets as of September 30, 2022 and December 31, 2021	6

		Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income for the three and nine months ended September 30, 2021 and 2020	7		Condensed Consolidated Statements of Operations and Comprehensive Loss for the three and nine months ended September 30, 2022 and 2021	7

		Condensed Consolidated Statements of Stockholders’ Equity for the three and nine months ended September 30, 2021 and 2020	8		Condensed Consolidated Statements of Stockholders’ Equity for the three and nine months ended September 30, 2022 and 2021	8

		Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2021 and 2020	10		Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2022 and 2021	10

		Notes to Condensed Consolidated Financial Statements	11		Notes to Condensed Consolidated Financial Statements	11

2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations	24		Management’s Discussion and Analysis of Financial Condition and Results of Operations	27

3.		Quantitative and Qualitative Disclosures About Market Risk	42		Quantitative and Qualitative Disclosures About Market Risk	46

4.		Controls and Procedures	42		Controls and Procedures	46


		PART II – OTHER INFORMATION			PART II – OTHER INFORMATION

1.		Legal Proceedings	43		Legal Proceedings	47

1A.		Risk Factors	44		Risk Factors	47

2.		Unregistered Sales of Equity Securities and Use of Proceeds	44		Unregistered Sales of Equity Securities and Use of Proceeds	47

3.		Defaults Upon Senior Securities	44		Defaults Upon Senior Securities	47

4.		Mine Safety Disclosures	44		Mine Safety Disclosures	47

5.		Other Information	44		Other Information	47

6.		Exhibits	44		Exhibits	47

SIGNATURES	SIGNATURES		46	SIGNATURES		48

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PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

CERTARA, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)


	SEPTEMBER 30,		DECEMBER 31,		SEPTEMBER 30,		DECEMBER 31,
(IN THOUSANDS, EXCEPT PER SHARE AND SHARE DATA)	2021		2020		2022		2021
Assets
Current assets:
Cash and cash equivalents	$	416,850	$	271,382	$	210,509	$	185,797
Accounts receivable, net of allowance for doubtful accounts of $170 and $132, respectively		62,859		54,091
Accounts receivable, net of allowance for credit losses of $692 and $262, respectively						74,806		69,555
Restricted cash		1,108		1,909		3,274		827
Prepaid expenses and other current assets		24,032		19,202		16,503		18,548
Total current assets		504,849		346,584		305,092		274,727
Other assets:
Property and equipment, net		3,005		3,872		2,609		2,935
Long-term deposits		1,145		1,163
Operating lease right-of-use assets						11,481		12,634
Goodwill		522,814		518,592		696,921		703,371
Intangible assets, net of accumulated amortization of $156,870 and $127,172, respectively		378,985		396,445
Intangible assets, net of accumulated amortization of $202,901 and $169,329, respectively						481,536		511,823
Deferred income taxes						4,158		4,073
Other long-term assets		1,075		—		6,896		2,167
Deferred income taxes		2,916		2,744
Total assets	$	1,414,789	$	1,269,400	$	1,508,693	$	1,511,730
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	11,260	$	6,394	$	3,002	$	7,458
Accrued expenses		25,266		30,729		26,552		29,830
Current portion of deferred revenue		27,987		30,662		40,434		45,496
Current portion of interest rate swap liability		1,813		2,605
Current portion of long-term debt		3,020		4,680		3,020		3,020
Current portion of capital lease obligations		288		275
Current operating lease liabilities						3,422		5,040
Other current liabilities						100		1,381
Total current liabilities		69,634		75,345		76,530		92,225
Long-term liabilities:
Capital lease obligations, net of current portion		100		318
Deferred revenue, net of current portion		1,233		545		1,884		1,531
Deferred income taxes		79,633		75,894		75,522		76,098
Long-term portion of interest rate swap liability		—		1,066
Operating lease liabilities, net of current portion						8,509		8,256
Long-term debt, net of current portion and debt discount		292,183		294,100		290,428		291,746
Other long-term liabilities		686		—		1,422		25
Total liabilities		443,469		447,268		454,295		469,881
Commitments and contingencies
Stockholders' equity:
Preferred shares, $0.01 par value, 50,000,000 shares authorized, 0 shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively		—		—
Common shares, $0.01 par value, 600,000,000 shares authorized, 157,353,191 and 152,979,479 shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively		1,574		1,529
Preferred shares, $0.01 par value, 50,000,000 shares authorized, no shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively						—		—
Common shares, $0.01 par value, 600,000,000 shares authorized, 159,921,814 and 159,660,048 shares issued as of September 30, 2022 and December 31, 2021, respectively; 159,781,270 and 159,658,948 shares outstanding as of September 30, 2022 and December 31, 2021, respectively						1,599		1,596
Additional paid-in capital		1,038,581		884,528		1,143,638		1,119,821
Accumulated deficit		(65,905)		(62,338)		(70,047)		(75,604)
Accumulated other comprehensive loss		(2,930)		(1,587)		(17,928)		(3,926)
Treasury stock at cost, 140,544 and 1,100 shares at September 30, 2022 and December 31, 2021, respectively						(2,864)		(38)
Total stockholders’ equity		971,320		822,132		1,054,398		1,041,849
Total liabilities and stockholders’ equity	$	1,414,789	$	1,269,400	$	1,508,693	$	1,511,730

The accompanying notes are an integral part of the condensed consolidated financial statements

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CERTARA, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE

~~(LOSS) INCOME~~ LOSS

(UNAUDITED)


	THREE MONTHS ENDED SEPTEMBER 30,				NINE MONTHS ENDED SEPTEMBER 30,				THREE MONTHS ENDED SEPTEMBER 30,				NINE MONTHS ENDED SEPTEMBER 30,
(IN THOUSANDS, EXCEPT PER SHARE AND SHARE DATA)	2021		2020		2021		2020		2022		2021		2022		2021
Revenues	$	73,944	$	60,317	$	210,758	$	178,889	$	84,700	$	73,944	$	249,011	$	210,758
Cost of revenues		28,769		23,030		82,327		65,860		32,812		28,769		100,795		82,327
Operating expenses:
Sales and marketing		5,082		3,106		13,423		8,773		6,376		5,082		19,608		13,423
Research and development		4,530		3,295		13,862		9,139		6,318		4,530		21,607		13,862
General and administrative		26,199		13,403		60,795		36,125		17,327		26,199		53,444		60,795
Intangible asset amortization		9,592		9,374		28,527		28,056		10,591		9,592		31,095		28,527
Depreciation and amortization expense		533		614		1,687		1,836		417		533		1,321		1,687
Total operating expenses		45,936		29,792		118,294		83,929		41,029		45,936		127,075		118,294
(Loss) income from operations		(761)		7,495		10,137		29,100
Income (loss) from operations										10,859		(761)		21,141		10,137
Other income (expenses):
Interest expense		(3,289)		(5,929)		(13,549)		(19,810)		(5,221)		(3,289)		(12,328)		(13,549)
Miscellaneous, net		657		11		194		456
Total other (expenses)		(2,632)		(5,918)		(13,355)		(19,354)
(Loss) income before income taxes		(3,393)		1,577		(3,218)		9,746
(Benefit) provision of income taxes		(1,631)		350		349		4,696
Net (loss) income		(1,762)		1,227		(3,567)		5,050
Other comprehensive (loss) income:
Other, net										2,855		657		6,217		194
Total other expenses										(2,366)		(2,632)		(6,111)		(13,355)
Income (loss) before income taxes										8,493		(3,393)		15,030		(3,218)
Provision for (benefit from) income taxes										4,557		(1,631)		9,473		349
Net income (loss)										3,936		(1,762)		5,557		(3,567)
Other comprehensive loss:
Foreign currency translation adjustment		(2,798)		3,403		(4,041)		513		(9,489)		(2,798)		(20,193)		(4,041)
Change in fair value of interest rate swap, net of tax $(16), $97, $145, and $(488)		(47)		311		430		(1,530)
Reclassification of fair value of interest rate swap, net of tax of $0, $0, $(765), and $0		—		—		2,268		—
Total other comprehensive (loss) income		(2,845)		3,714		(1,343)		(1,017)
Comprehensive (loss) income	$	(4,607)	$	4,941	$	(4,910)	$	4,033
Change in fair value from interest rate swap, net of tax of $1,716, $(16), $2,137, $145, respectively										5,279		(47)		6,191		430
Reclassification of fair value of interest rate swap, net of tax of $0,$0,0,$(765)										—		—		—		2,268
Total other comprehensive loss										(4,210)		(2,845)		(14,002)		(1,343)
Comprehensive loss									$	(274)	$	(4,607)	$	(8,445)	$	(4,910)

Net (loss) income per share attributable to common stockholders:
Net income (loss) per share attributable to common stockholders:
Basic	$	(0.01)	$	0.01	$	(0.02)	$	0.04	$	0.03	$	(0.01)	$	0.04	$	(0.02)
Diluted	$	(0.01)	$	0.01	$	(0.02)	$	0.04	$	0.02	$	(0.01)	$	0.03	$	(0.02)
Weighted average common shares outstanding:
Basic		149,016,609		132,407,786		147,894,227		132,407,786		157,140,166		149,016,609		156,523,022		147,894,227
Diluted		149,016,609		132,407,786		147,894,227		132,407,786		159,587,645		149,016,609		159,392,534		147,894,227

The accompanying notes are an integral part of the condensed consolidated financial statements

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CERTARA, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(UNAUDITED)


								ACCUMULATED
				ADDITIONAL				OTHER					TOTAL
(IN THOUSANDS,	COMMON STOCK			PAID-IN		ACCUMULATED		COMPREHENSIVE		TREASURY STOCK			STOCKHOLDERS'
EXCEPT SHARE DATA)	SHARES	AMOUNT		CAPITAL		DEFICIT		LOSS		SHARES	AMOUNT		EQUITY
Balance as of June 30, 2021	152,864,921	$	1,529	$	897,209	$	(64,143)	$	(85)	—	$	—	$	834,510
Equity-based compensation expense	—		—		8,165		—		—	—		—		8,165
Common stock offerings	4,500,000		45		133,306		—		—	—		—		133,351
Restricted stock forfeiture	(11,730)		—		—		—		—	—		—		—
Restricted stock withheld for tax liability	—		—		(99)		—		—	—		—		(99)
Change in fair value from interest rate swap, net of tax	—		—		—		—		(47)	—		—		(47)
Net loss	—		—		—		(1,762)		—	—		—		(1,762)
Foreign currency translation adjustment	—		—		—		—		(2,798)	—		—		(2,798)
Balance as of September 30, 2021	157,353,191	$	1,574	$	1,038,581	$	(65,905)	$	(2,930)	—	$	—	$	971,320

Balance as of December 31, 2020	152,979,479	$	1,529	$	884,528	$	(62,338)	$	(1,587)	—	$	—	$	822,132
Equity-based compensation expense	—		—		20,846		—		—	—		—		20,846
Common stock offerings	4,500,000		45		133,306		—		—	—				133,351
Common shares issued for employee share-based compensation	14,769		—		—		—		—	—		—		—
Restricted stock forfeiture	(141,057)		—		—		—		—	—		—		—
Restricted stock withheld for tax liability	—		—		(99)		—		—	—				(99)
Change in fair value from interest rate swap, net of tax	—		—		—		—		430	—		—		430
Reclassification of fair value of interest rate swap, net of tax	—		—		—		—		2,268	—		—		2,268
Net loss	—		—		—		(3,567)		—	—		—		(3,567)
Foreign currency translation adjustment	—		—		—		—		(4,041)	—		—		(4,041)
Balance as of September 30, 2021	157,353,191	$	1,574	$	1,038,581	$	(65,905)	$	(2,930)	—	$	—	$	971,320

The accompanying notes are an integral part of the condensed consolidated financial statements

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CERTARA, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(UNAUDITED)

ACCUMULATED

OTHER

TOTAL
(IN THOUSANDS,

COMMON STOCK

ADDITIONAL

ACCUMULATED

COMPREHENSIVE

STOCKHOLDERS'
EXCEPT SHARE DATA)

SHARES

AMOUNT

PAID-IN CAPITAL

DEFICIT

LOSS

EQUITY
Balance as of June 30, 2021

152,864,921

$
1,529

$
897,209

$
(64,143)

$
(85)

$
834,510
Equity compensation

—

—

8,165

—

—

8,165
Stock offerings

4,500,000

45

133,306

—

—

133,351
Restricted stock forfeiture

(11,730)

—

—

—

—

—
Restricted stock unit shares withheld for employee taxes

—

—

(99)

—

—

(99)
Change in fair value from interest rate swap, net of tax

—

—

—

—

(47)

(47)
Net loss

—

—

—

(1,762)

—

(1,762)
Foreign currency translation adjustment

—

—

—

—

(2,798)

(2,798)
Balance as of September 30, 2021

157,353,191

$
1,574

$
1,038,581

$
(65,905)

$
(2,930)

$
971,320

Balance as of December 31, 2020

152,979,479

$
1,529

$
884,528

$
(62,338)

$
(1,587)

$
822,132
Equity compensation

—

—

20,846

—

—

20,846
Stock offerings

4,500,000

45

133,306

—

—

133,351
Shares issued for employee share-based compensation awards

14,769

—

—

—

—

—
Restricted stock forfeiture

(141,057)

—

—

—

—

—
Restricted stock unit shares withheld for employee taxes

—

—

(99)

—

—

(99)
Change in fair value from interest rate swap, net of tax

—

—

—

—

430

430
Reclassification of fair value of interest rate swap, net of tax

—

—

—

—

2,268

2,268
Net loss

—

—

—

(3,567)

—

(3,567)
Foreign currency translation adjustment

—

—

—

—

(4,041)

(4,041)
Balance as of September 30, 2021

157,353,191

$
1,574

$
1,038,581

$
(65,905)

$
(2,930)

$
971,320

~~The accompanying notes are an integral part of the condensed consolidated financial statements~~

~~Table of Contents~~

~~CERTARA, INC. AND SUBSIDIARIES~~

~~CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY~~

~~(UNAUDITED)~~

ACCUMULATED

OTHER

TOTAL
(IN THOUSANDS,

COMMON STOCK

ADDITIONAL

ACCUMULATED

COMPREHENSIVE

STOCKHOLDERS'
EXCEPT SHARE DATA)

SHARES

AMOUNT

PAID-IN CAPITAL

DEFICIT

LOSS

EQUITY
Balance as of June 30, 2020

132,407,786

$
1,324

$
510,212

$
(9,118)

$
(10,228)

$
492,190
Equity compensation

—

—

1,181

—

—

1,181
Repurchase of Parent Class B units

—

—

(1,024)

—

—

(1,024)
Capital contribution

—

—

250

—

—

250
Change in fair value of interest rate swap, net of tax

—

—

—

—

311

311
Net income

—

—

—
��

1,227

—

1,227
Foreign currency translation adjustment

—

—

—

—

3,403

3,403
Balance as of September 30, 2020

132,407,786

$
1,324

$
510,619

$
(7,891)

$
(6,514)

497,538

Balance as of December 31, 2019

132,407,786

$
1,324

$
509,162

$
(12,941)

$
(5,497)

$
492,048
Equity compensation

—

—

2,286

—

—

2,286
Repurchase of Parent Class B units

—

—

(1,079)

—

—

(1,079)
Capital contribution

—

—

250

—

—

250
Change in fair value of interest rate swap, net of tax

—

—

—

—

(1,530)

(1,530)
Net income

—

—

—

5,050

—

5,050
Foreign currency translation adjustment

—

—

—

—

513

513
Balance as of September 30, 2020

132,407,786

$
1,324

$
510,619

$
(7,891)

$
(6,514)

$
497,538


								ACCUMULATED
				ADDITIONAL				OTHER					TOTAL
(IN THOUSANDS,	COMMON STOCK			PAID-IN		ACCUMULATED		COMPREHENSIVE		TREASURY STOCK			STOCKHOLDERS'
EXCEPT SHARE DATA)	SHARES	AMOUNT		CAPITAL		DEFICIT		LOSS		SHARES	AMOUNT		EQUITY
Balance as of June 30, 2022	159,991,357	$	1,600	$	1,136,831	$	(73,983)	$	(13,718)	108,995	$	(2,349)	$	1,048,381
Equity-based compensation expense	—		—		6,804		—		—	—		—		6,804
Restricted stock units withheld for tax liability	—		—		1		—		—	29,845		(481)		(480)
Common shares issued for employee share-based compensation	94,091		—		—		—		—	—		—		—
Restricted stock withheld for tax liability	—		—		—		—		—	1,704		(34)		(34)
Restricted stock forfeiture	(163,634)		(1)		2		—		—	—		—		1
Change in fair value from interest rate swap, net of tax	—		—		—		—		5,279	—		—		5,279
Net income	—		—		—		3,936		—	—		—		3,936
Foreign currency translation adjustment, net of tax	—		—		—		—		(9,489)	—		—		(9,489)
Balance as of September 30, 2022	159,921,814	$	1,599	$	1,143,638	$	(70,047)	$	(17,928)	140,544	$	(2,864)	$	1,054,398

Balance as of December 31, 2021	159,660,048	$	1,596	$	1,119,821	$	(75,604)	$	(3,926)	1,100	$	(38)	$	1,041,849
Equity-based compensation expense	—		—		23,818		—		—	—		—		23,818
Restricted stock units withheld for tax liability	—		—		1		—		—	134,262		(2,710)		(2,709)
Common shares issued for employee share-based compensation	425,400		4		(4)		—		—	—		—		—
Restricted stock withheld for tax liability	—		—		—		—		—	5,182		(116)		(116)
Restricted stock forfeiture	(163,634)		(1)		2		—		—	—		—		1
Change in fair value from interest rate swap, net of tax	—		—		—		—		6,191	—		—		6,191
Net income	—		—		—		5,557		—	—		—		5,557
Foreign currency translation adjustment, net of tax	—		—		—		—		(20,193)	—		—		(20,193)
Balance as of September 30, 2022	159,921,814	$	1,599	$	1,143,638	$	(70,047)	$	(17,928)	140,544	$	(2,864)	$	1,054,398

The accompanying notes are an integral part of the condensed consolidated financial statements

Table of Contents

CERTARA, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)


	NINE MONTHS ENDED SEPTEMBER 30,				NINE MONTHS ENDED SEPTEMBER 30,
(IN THOUSANDS)	2021		2020		2022		2021
Cash flows from operating activities:
Net (loss) income	$	(3,567)	$	5,050
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Net income (loss)					$	5,557	$	(3,567)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization of property and equipment		1,687		1,836		1,321		1,687
Amortization of intangible assets		30,435		29,804		38,007		30,435
Amortization of debt issuance costs		1,144		1,142		1,156		1,144
Provision for doubtful accounts		39		31
Provision for credit losses						468		39
Loss on retirement of assets		304		9		56		304
Equity-based compensation expense		20,846		2,286		23,818		20,846
Unrealized loss on interest rate swap		1,750		—		—		1,750
Deferred income taxes		1,796		1,263		(3,209)		1,796
Changes in assets and liabilities, net of acquisitions:
Changes in assets and liabilities
Accounts receivable		(6,148)		1,565		(7,895)		(6,148)
Prepaid expenses and other assets		(5,504)		(8,610)		4,209		(5,504)
Accounts payable and other liabilities		(1,650)		(1,658)		(3,404)		(1,650)
Deferred revenues		(1,575)		(589)
Deferred revenue						(1,727)		(1,575)
Other current liabilities						(1,088)		216
Changes in operating lease assets and liabilities, net						(211)		(216)
Net cash provided by operating activities		39,557		32,129		57,058		39,557
Cash flows from investing activities:
Capital expenditures		(995)		(782)		(1,249)		(995)
Capitalized development costs		(5,490)		(5,752)		(8,106)		(5,490)
Business acquisitions, net of cash acquired		(14,114)		(675)		(5,883)		(14,114)
Net cash used in investing activities		(20,599)		(7,209)		(15,238)		(20,599)
Cash flows from financing activities:
Capital contributions		—		250
Unit repurchase		—		(1,079)
Net proceeds from public offering of common stock		133,351		—		—		133,351
Proceeds from borrowings on long-term debt		89		—		—		89
Payments on long-term debt and capital lease obligations		(3,147)		(23,511)
Payments on long-term debt and finance lease obligations						(2,483)		(3,147)
Payment of debt issuance costs						—		(2,942)
Payments on financing component of interest rate swap		(216)		—		(1,085)		(216)
Proceeds from line of credit		—		19,880
Payment of taxes on shares withheld for employee taxes		(100)		—		(2,827)		(100)
Payment of debt issuance costs		(2,942)		—
Proceeds from borrowings from affiliate		—		237
Payments on line of credit		—		(19,880)
Net cash provided by (used in) financing activities		127,035		(24,103)
Net cash (used) provided by financing activities						(6,395)		127,035
Effect of foreign exchange rate changes on cash and cash equivalents, and restricted cash		(1,326)		1,170		(8,266)		(1,326)
Net increase in cash and cash equivalents, and restricted cash		144,667		1,987		27,159		144,667
Cash and cash equivalents, and restricted cash, at beginning of period		273,291		29,762		186,624		273,291
Cash and cash equivalents, and restricted cash, at end of period	$	417,958	$	31,749	$	213,783	$	417,958
Supplemental disclosures of cash flow information
Cash paid for interest	$	10,671	$	21,077	$	12,310	$	10,671
Cash paid for taxes	$	6,744	$	6,675	$	7,784	$	6,744
Supplemental schedule of non-cash investing and financing activities
Liabilities assumed in connection with business acquisition	$	1,912	$	—	$	—	$	1,912
Capital lease	$	—	$	831
Deferred offering costs, accrued but not paid	$	—	$	1,430

The accompanying notes are an integral part of the condensed consolidated financial statements

Table of Contents

CERTARA, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

(UNAUDITED)

1.	Description of Business

Certara, Inc. and its ~~wholly owned~~wholly-owned subsidiaries (together, the “Company”) deliver software products and ~~technology-enabled~~technology-driven services to customers to efficiently carry out and realize the full benefits of biosimulation in drug discovery, preclinical and clinical research, regulatory submissions and market access. The Company is a global leader in ~~biosimulation, and the~~biosimulation. The Company’s biosimulation software and ~~technology-enabled~~technology-driven services help optimize, streamline, or even waive certain clinical trials to accelerate programs, reduce costs, and increase the probability of success. The Company’s ~~software and services for~~ regulatory science and ~~submissions~~market access software and ~~market access~~services are underpinned by technologies such as regulatory submissions software, natural language processing, and Bayesian analytics. When combined, these solutions allow the Company to offer customers end-to-end support across the entire product life cycle. ~~On October 1, 2020, the Company amended the certificate of incorporation of EQT Avatar Topco, Inc. to change the name of the Company to Certara, Inc.~~

The Company has operations in the United States, Canada, Spain, Luxembourg, Portugal, United Kingdom, Germany, France, Netherlands, Denmark, Switzerland, Italy, Poland, Japan, Philippines, India, Australia and China.

2.	Summary of Significant Accounting Policies

There have been no changes other than what is discussed herein to the Company’s significant accounting policies as compared to the significant accounting policies described in Note 2 to the Company’s audited consolidated financial statements included in ~~its~~our 2021 Annual ~~Report on Form 10-K for the year ended December 31, 2020.~~Report. These unaudited ~~condensed~~ consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes as of and for the year ended December 31, ~~2020.~~2021.

(a)	Basis of Presentation and Use of Estimates

We prepared our condensed consolidated financial statements in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”). We have eliminated intercompany accounts and transactions. We have also reclassified certain prior year amounts to conform to the current period presentation, which did not have a material impact on our consolidated financial condition or results of operations. The preparation of condensed consolidated financial statements in conformity with U.S. ~~GAAP~~generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates include, among other estimates, assumptions used in the allocation of the transaction price to separate performance obligations, estimates towards the measure of progress of completion on fixed-price service contracts, the determination of fair values and useful lives of long-lived assets as well as intangible assets, goodwill, allowance for ~~doubtful~~credit losses for accounts receivable, recoverability of deferred tax assets, recognition of deferred revenue, ~~(including at the date of business combinations),~~ value of interest rate ~~swap agreements,~~swaps, determination of fair value of equity-based awards and assumptions used in testing for impairment of long-lived assets. Actual results could differ from those estimates, and such differences may be material to the condensed consolidated financial statements.

The Company is an Emerging Growth Company, as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). Under the JOBS Act, Emerging Growth Companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until those standards apply to private companies. The Company has elected to use this extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date that it (i) is no longer an Emerging Growth Company or (ii) it affirmatively and irrevocably opts out of the extended transition period provided in the JOBS Act. As a result, these condensed consolidated financial statements may not be comparable to companies that comply with the new or revised accounting pronouncements as of public company effective dates. The adoption dates discussed below reflect

11(b)

~~Table of Contents~~

this election. As of June 30, 2021, the last business day of the Company’s second fiscal quarter, the Company had a public float above the threshold to be deemed to be a large accelerated filer. In addition, the Company will have been a public company for at least 12 months subject to the reporting requirements of Section 13(a) or 15(d) of the Exchange Act at December 31, 2021. Therefore, the Company expects to cease to be an Emerging Growth Company as of December 31, 2021. As a result, as of December 31, 2021 the Company will no longer qualify for the extended tranition period for adoption of new or revised accounting standards discussed above, will be subject to shortened filing timelines, and required to include an attestation of the Company’s internal control over financial reporting by its independent auditors in its Annual Report on Form 10-K.

~~(b)~~ Unaudited Interim Financial Statements

The accompanying condensed consolidated balance sheet as of September 30, ~~2021,~~2022, the condensed consolidated statements of operations and comprehensive ~~(loss) income~~loss for the three and nine months ended September 30, ~~2021~~2022 and ~~2020,~~2021, the condensed consolidated statements of stockholders’ equity for the three and nine months ended September 30, ~~2021~~2022 and ~~2020,~~2021, the condensed consolidated statements of cash flows for the nine months ended September 30, ~~2021~~2022 and ~~2020,~~2021, and the related interim disclosures are unaudited.

Table of Contents

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. GAAP. ~~Certain information and note disclosures normally included in annual financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to those guidance.~~ These unaudited condensed consolidated financial statements include all adjustments necessary ~~consisting of only normal recurring adjustments,~~ to fairly state the financial position and the results of the Company’s operations and cash flows for interim periods in accordance with U.S. GAAP. Certain amounts reported in prior periods have been reclassified to conform with the current presentation. Interim period results are not necessarily indicative of results of operations or cash flows for a full year or any subsequent interim period. The accompanying condensed consolidated financial statements should be read in conjunction with the Company’s ~~2020~~2021 audited consolidated financial statements and notes thereto. The information as of December 31, ~~2020~~2021 in the Company’s condensed consolidated balance sheet included herein is derived from the Company’s audited consolidated financial statements included in the ~~2020~~Company’s 2021 Annual ~~Report on Form 10-K.~~Report.

(c)	~~Recently Adopted~~ Accounting Pronouncements Not Yet Adopted

In ~~March 2020,~~November 2021, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) ~~2020-04, “Reference Rate Reform~~2021-10, “Government Assistance (Topic ~~848),” which contains practical expedients for reference rate reform related activities~~832): Disclosures by Business Entities about Government Assistance”. The ASU requires that impact debt, leases, derivatives and other contracts. In January 2021, FASB issued ASU 2021-01, “Reference Rate Reform (Topic 848),” which clarifies that certain optional expedients and exceptions in Accounting Standards Codification ("ASC") Topic 848 for contract modifications and hedgeentities increase disclosures about government assistance received relating to accounting ~~apply to derivatives that are affected by~~policy, nature of the discounting transition. Guidance in these ASUs is optional and is effective as of March 12, 2020 through December 31, 2022. The Company adopted the ASUs upon issuance and elected to apply the hedge accounting expedients related to probabilityassistance, and the ~~assessments~~effect of ~~effectiveness for future LIBOR-indexed cash flows to assume that~~ the ~~index upon which future hedged transactions will be based matches the index~~assistance on the ~~corresponding derivatives. Application of these expedients preserves the presentation of derivatives consistent with past presentation.~~financial statements. The ~~adoption of the ASUs did not have a material impact to the Company’s condensed consolidated financial statements.~~

~~In August 2018, the FASB issued~~ ASU 2018-15, “Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract”, which included updated guidance on ASC 350-40, “Intangibles — Goodwill and Other — Internal-Use Software”. The new guidance requires a customer in a cloud computing arrangement that is a service contract to follow the internal-use software guidance in ASC 350-40 to determine which implementation costs to capitalize as assets or expense as incurred. ASU 2018-15 is effective for calendar-year public business entities in 2020. For all other calendar-year entities, it is effective for annual periods beginning ~~in 2021 and interim periods in 2022.~~after December 15, 2021. Early ~~adoption~~application of the ASU is permitted. The Company ~~has adopted ASU 2018-15 during the year beginning January 1, 2020. The adoption of ASU 2018-15 did not materially impact the condensed consolidated financial statements.~~

~~Table of Contents~~

In August 2018, the FASB issued ASU 2018-13, “Changes to Disclosure Requirements for Fair Value Measurements (Topic 820)”, which improved the effectiveness of disclosure requirements for recurring and nonrecurring fair value measurements. The standard removes, modifies, and adds certain disclosure requirements. The amendments in this update are effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Early adoption is permitted. The Company has adopted ASU 2018-13 during the year beginning January 1, 2020. The adoption of ASU 2018-13 did not materially impact the condensed consolidated financial statements.

In December 2019, the FASB issued ASU 2019-12, “Simplifying the Accounting for Income Taxes”, which removes certain exceptions related to the approach for calculating income taxes in an interim period and to the recognition of deferred tax liabilities for outside basis differences for certain investments. The Company adopted this guidance on January 1, 2021 on a prospective basis. The adoption of this guidance did not have an impact on the Company's condensed consolidated financial statements.

~~(d)~~

~~Accounting Pronouncements Not Yet Adopted~~

In February 2016, the FASB issued ASU 2016-02, “Leases”. ASU 2016-02 establishes a right-of-use (“ROU”) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. In its April 2020 meeting, the FASB deferred the effective date for ASC 842 for private companies to fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022. Upon losing EGC status as of December 31, 2021, the Company will adopt this guidance and is currently evaluating the impact of ~~this ASU~~these amendments on its condensed consolidated financial statements.

In June 2016, the FASB issued ASU 2016-13, “Financial Instruments — Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments”. ASU 2016-13 changes the impairment model for most financial assets and certain other instruments. For trade and other receivables, held-to-maturity debt securities, loans, and other instruments, entities will be required to use a new forward-looking “expected loss” model that generally will result in the earlier recognition of allowances for losses. The guidance also requires increased disclosures. Per ASU 2019-10 issued in November 2019, ASU 2016-13 is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years for private companies. Early adoption is permitted. Upon losing EGC status as of December 31, 2021, the Company will adopt this guidance and is currently evaluating the impact of adopting this guidance on its condensed consolidated financial statements.

In January 2017, the FASB issued ASU 2017-04, “Intangibles — Goodwill and Other (Topic 350): Simplifying the Accounting for Goodwill Impairment”. ASU 2017-04 removes Step 2 of the goodwill impairment test, which requires a hypothetical purchase price allocation. A goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value. This standard will be effective for a private company (and thus, for those adopting exemption for Emerging Growth Companies) beginning in the first quarter of fiscal year 2022 and is required to be applied prospectively. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. Upon losing EGC status as of December 31, 2021, the Company will adopt this guidance and is currently evaluating the impact of adopting this guidance on its condensed consolidated financial statements.

~~(e)~~(d) Principles of Consolidation

The accompanying condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

~~(f)~~(e)

Cash and Cash Equivalents, and Restricted Cash

Cash equivalents include highly liquid investments with maturities of three months or less from the date purchased.

Restricted cash represents cash that is reserved to provide for a Company credit card program and unexpended restricted grant funds. The restricted cash balance was $3,274 and $827 at September 30, 2022 and December 31, 2021, respectively.

The following table provides a reconciliation of cash and cash equivalents and restricted cash to the amounts presented in the condensed consolidated statements of cash flows:


	SEPTEMBER 30,		DECEMBER 31,
	2022		2021
Cash and cash equivalents	$	210,509	$	185,797
Restricted cash, current		3,274		827
Total cash and cash equivalents and restricted cash	$	213,783	$	186,624

(f)	Derivative Instruments

Effective May 31, 2022, the Company has a pay-fixed, receive-variable interest rate swap agreement to modify the interest rate characteristics of term loan debt from variable to fixed in order to reduce the impact of changes in future cash flows due to market interest rate changes. The swap agreement has a notional amount of $230,000, a fixed rate of 2.8% and a termination date of August 31, 2025. At September 30, 2022, the interest swap had a fair value of $8,385 and the fair value recognized in accumulated other comprehensive income was $8,385. During the three and nine months ended September 30, 2022, the amounts recognized as interest expense on the condensed consolidated statements of operations and comprehensive loss on the derivative were $355 and $700.

Table of Contents

Restricted cash represents cash that is reserved to support a financing program. The restricted cash balance was $1,108, $1,909, and $1,812 at September 30, 2021, December 31, 2020, and September 30, 2020, respectively.

~~The following table provides a reconciliation of cash and cash equivalents and restricted cash to the amounts presented in the condensed consolidated statements of cash flows:~~

SEPTEMBER 30,

DECEMBER 31,

SEPTEMBER 30,


           2021

           2020

           2020
Cash and cash equivalents

$
416,850

$
271,382

$
29,937
Restricted cash, current

1,108

1,909

1,812
Total cash and cash equivalents and restricted cash

$
417,958

$
273,291

$
31,749

~~(g)~~

~~Derivative Instruments~~

The Company ~~has~~also had an interest rate swap agreement ~~that was designated as a cash flow hedge of interest rate risk~~ for a notional amount of $230,000 that fixed the interest rate at ~~2.1284%~~2.1%, non-inclusive of the fixed credit spread through May 31, 2022. In the second quarter of 2021, the Company determined that the hedge has not been highly effective from April 2018 and did not qualify for hedge accounting. As a result, the Company performed an analysis of the materiality of the out of period error correction in accordance with ASC 250, “Accounting Changes and Error Corrections”, both quantitively and qualitatively, and concluded that the error correction was immaterial to all periods. The Company reclassified $3,033 of accumulated comprehensive loss to interest ~~expense~~ in the condensed consolidated statements of comprehensive (loss) income in the second quarter of 2021. Changes in the fair value of the interest rate swap recognized in interest expense excluding the relcassfication discussed previously for the nine months ended September 30, 2021 amounted to $638.

On August 31, 2021, the Company entered into an amendment to the interest rate swap agreement. The amended interest rate swap agreement does not in its entirety meet the definition of a derivative instrument because of its off market fixed rate at inception and is deemed to be a hybrid instrument with a financing component and an embedded at-the-market derivative. Such embedded derivative is bifurcated and accounted for separately. At inception, the financing component of $1,966 was recorded at amortized cost. The embedded at-the-market derivative was designated and qualified as a cash flow hedge of interest rate risk for a notional amount of $230,000 that fixed the interest rate at 1.2757%, non-inclusive of the fixed credit spread through May 31, 2022. The fair value of the embedded at-the-market derivative is recognized in the condensed consolidated balance sheets and the changes in the fair value of the embedded at-the-market derivative is recognized in other comprehensive loss. At September 30, 2021, the financing component is recorded in current portion of interest rate swap liability in the amount of $1,750.spread. Due to an other-than-insignificant financing element on a portion of such hybrid instrument, the cash flows associated with this hybrid instrument ~~are~~were classified as financing activities in the condensed consolidated statements of cash flows. The interest rate swap matured on May 31, 2022. At September 30, ~~2021,~~2022, the Company ~~recorded~~did not record any amounts for the financing component and fair value of the interest rate swap in the condensed consolidated balance sheets. The Company reclassified $3,033 of accumulated comprehensive loss to interest expense in the condensed consolidated statements of comprehensive loss in the second quarter of 2021 due to hedge ineffectiveness. Excluding the amount reclassified, the interest expense recognized on the derivative was $0, $29, $(179), $690 for the three and nine months ended September 30, 2022 and 2021, respectively.

The Company uses derivatives to manage certain interest exposures and designated all the derivatives as cash flow hedges. The Company records derivatives at fair value on its condensed consolidated balance sheets. Changes in the fair value of ~~the embedded at-the-market derivative in current portion~~derivatives designated as cash flow hedges are recorded as a component of accumulated other comprehensive income (loss). Those amounts are reclassified into interest ~~rate swap liability~~expenses in the ~~amount of $63.~~same period during which the hedged transactions impact earnings.

The following table sets forth the ~~liability~~assets that isare measured at fair value on a recurring basis by the levels in the fair value hierarchy at September 30, ~~2021:~~2022:


	LEVEL 1		LEVEL 2		LEVEL 3		TOTAL		LEVEL 1		LEVEL 2		LEVEL 3		TOTAL
Liability
Interest rate swap liability	$	—	$	63	$	—	$	63
Asset
Interest rate swap asset									$	—	$	8,385	$	—	$	8,385
Total	$	—	$	63	$	—	$	63	$	—	$	8,385	$	—	$	8,385

The following table sets forth the ~~liability~~assets that iswere measured at fair value on a recurring and non-recurring basis by ~~the~~their levels in the fair value hierarchy at December 31, ~~2020:~~2021:


	LEVEL 1		LEVEL 2		LEVEL 3		TOTAL
Asset
Interest rate swap asset	$	—	$	57	$	—	$	57
Total	$	—	$	57	$	—	$	57

~~LEVEL 1~~

~~LEVEL 2~~

~~LEVEL 3~~

~~TOTAL~~

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Liability








Interest rate swap liability

$
—

$
3,671

$
—

$
3,671
Total

$
—

$
3,671

$
—

$
3,671

The net amount of deferred ~~losses~~gains related to derivative instruments designated as cash flow hedges that is expected to be reclassified from ~~Accumulated~~accumulated other comprehensive ~~loss~~gains into earnings over the next twelve months is ~~insignificant.~~$3,448.

For more information regarding fair value measurement and fair value hierarchy, see Note 2. “Summary of Significant Accounting Policies” in the notes to the condensed consolidated Financial Statements in the Company’s 2021 Annual Report.

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~~(h)~~(g)

Revenue Recognition ~~ASC 606~~

In accordance with Accounting Standards Codification Topic 606 ("ASC Topic 606"), “Revenue from Contracts with Customers”, the Company determines revenue recognition through the following steps:

i.Identification of the contract, or contracts, with a customer

ii.Identification of the performance obligations in the contract

iii.Determination of the transaction price

iv.Allocation of the transaction price to the performance obligations in the contract

v.Recognition of revenue when, or as, the Company satisfies a performance obligation

The Company’s revenue consists of fees for perpetual and term licenses for its software products, post- contract customer support (referred to as maintenance), software as a service (“SaaS”), and professional services including training and other revenue. Revenue is recognized upon transfer of control of promised products or services to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for promised goods or services.

The ~~Company’s revenue consists~~following describes the nature of ~~fees for perpetual and term licenses for~~ the Company’s ~~software products, post-contract customer support (referred~~primary types of revenues and the revenue recognition policies as they pertain to ~~as maintenance), software as a service (“SaaS”) and professional services including training and other revenue.~~ the types of transactions the Company enters into with its customers.

Arrangements with Multiple Performance Obligations

For contracts with multiple performance obligations, such as a software license plus software training, implementation, and/or maintenance/support, or in contracts where there are multiple software licenses, the Company determines if the products or services are distinct and allocates the ~~transaction price of the contract~~consideration to each distinct performance obligation on a relative standalone selling price ~~basis.~~basis (“SSP”). When products and services are not distinct, the Company determines an appropriate measure of progress based on the nature of its overall promise for the single performance obligation. The delivery of a particular type of software and each of the user licenses would be one performance obligation. However, any training, implementation, or support and maintenance promises as part of the software license agreement would be considered separate performance obligations, as those promises are distinct and separately identifiable from the software licenses. The payment terms in these arrangements are ~~sufficiently short~~less than one year such that there is no significant financing component to the transaction.

~~The Company typically recognizes~~

Software Licenses

License revenue includes perpetual license ~~revenue~~fees and term license fees, which provide customers with the same functionality and differ mainly in the duration over which the customer benefits from the use of software. Both revenues from perpetual license and term license performance obligations are generally recognized upfront at athe point in time ~~upon delivering~~when the ~~applicable license. The revenue related~~software license has been delivered.

Software Services

Maintenance services agreements consist of fees for providing software updates and for providing technical support for software products for a specified term. Revenue allocated to maintenance services is recognized ratably over the ~~support and maintenance performance obligation will be recognized~~contract term beginning on ~~an over time basis using time elapsed methodology. The revenue related to~~the delivery date of each offering. Maintenance contracts generally have a term of one year. While transfer of control of the software training and ~~software~~ implementation performance ~~will be recognized~~obligations are over time, the services are typically started and completed within a few days. Due to the quick nature of the performance obligation from start to finish and the insignificant amounts, the Company recognizes any software training or implementation revenue at the completion of the service. Any unrecognized portion of amounts paid in advance for licenses and services is recorded as deferred revenue. The Company’s software contracts do not typically include discounts, variable consideration, or options for future purchases that would not be similar to the original goods.

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Software as a Service SaaS Revenues

SaaS revenues consists of subscription fees for access to, and related support for, the Company’s cloud-based solutions. The Company typically invoices subscription fees in advance in annual installments and recognizes subscription revenue ratably over the term of the applicable agreement, usually one to three years which is initially deferred and recognized ratably over the life of the contract.

Services and Other Revenues

The Company’s primary professional services offering includes consulting services, which may be either strategic consulting services, reporting and analysis services, regulatory writing services, or any combination of the three. Strategic consulting services consists of consulting, training, and process redesign that enables customers to identify which uncertainties are greatest and matter most and then to design development programs, trial sequences, and individual trials in such a way that those trials systematically reduce the identified uncertainties in the most rapid and cost-effective manner possible.

The Company’s professional services ~~offerings primarily include consulting services. The service~~ contracts are either time-and-materials or fixed ~~fee or prepaid. The~~fee. Services revenues are generally recognized over time as the services are performed. Generally, these services are delivered to customers electronically. Revenue from time-and-material contracts is recognized on an output basis as labor hours are delivered and/or direct expenses are incurred. Revenues for fixed price services are generally recognized over time applying input methods to estimate progress to completion. Accordingly, the number of resources being paid for and varying lengths of time they are being paid for, determine the measure of progress. Training revenues are recognized as the services are performed over time. However, due to the short period over which the transfer of control occurs for a classroom or on-site training course, the revenue related to these performance obligations is recognized at the completion of the course for administrative feasibility purposes.

Contract Balances

The timing of revenue recognition, billings and cash collections results in billed accounts receivable, unbilled receivables (contract assets), and customer advances and deposits (deferred ~~revenue)~~revenue, contract liabilities) on the condensed consolidated balance sheets. Amounts are billed as work progresses in accordance with agreed-upon contractual terms, either at periodic intervals (e.g., quarterly or monthly) or upon achievement of contractual milestones.

Contract assets relate to the Company’s rights to consideration for performance obligations satisfied but not billed at the reporting date on contracts (i.e., unbilled revenue, a component of accounts receivable in the condensed consolidated balance sheets). Contract assets are billed and transferred to customer accounts receivable when the rights become unconditional. The Company typically invoices customers for term licenses, subscriptions, maintenance and support fees in advance with payment due before the start of the subscription term, ranging from one to three years. The Company records the amounts collected in advance of the satisfaction of performance obligations, usually over time, as a contract liability or deferred revenue. ~~Invoice~~Invoiced amounts for non-cancelable services starting in future periods are included in contract assets and deferred revenue. The portion of deferred revenue that will be recognized within 12 months is recorded as current deferred revenue, and the remaining portion is recorded as non-current deferred revenue in the condensed consolidated balance sheets.

The unsatisfied performance obligations as of September 30, ~~2021~~2022 were approximately ~~$93,837.~~$119,255.

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Deferred Contract Acquisition Costs

The Company recognizes an asset for the incremental costs of obtaining a contract with a customer if the Company expects the benefit of those costs to be longer than one year. The Company has determined that certain sales incentive programs meet the requirements to be capitalized. The costs capitalized are primarily sales commissions for our sales force personnel. Capitalized costs to obtain a contract are amortized on a straight line basis over the expected period of benefit. Amortization of capitalized costs are included in sales and marketing expense in our condensed consolidated statements of operations and comprehensive loss. Capitalized contract acquisition cost was $631 as of September 30, 2022 and was included in prepaid expenses and other current assets in the condensed consolidated balance sheets.

Grant Revenue

The Company receives grant funding for certain specific projects from time to time. These grants specify the funds provided are to be used exclusively to satisfy the deliverables outlined in the grant agreements. In these agreements, both involved parties receive and sacrifice approximately commensurate value so these are accounted for as exchange transactions and revenue is recognized according to ASC Topic 606. The grant funding is generally provided near contract inception so a contract liability is initially recorded and revenue is recognized as the performance obligations are satisfied over time.

Sources and Timing of Revenue

The Company’s performance obligations are satisfied either over time or at a point in time. The following table presents the Company’s revenue by timing of revenue recognition to understand the risks of timing of transfer of control and cash flows:



	THREE MONTHS ENDED SEPTEMBER 30,				NINE MONTHS ENDED SEPTEMBER 30,				THREE MONTHS ENDED SEPTEMBER 30,				NINE MONTHS ENDED SEPTEMBER 30,
	2021		2020		2021		2020		2022		2021		2022		2021
Software licenses transferred at a point in time	$	8,665	$	8,274	$	30,719	$	28,652	$	10,851	$	8,665	$	36,434	$	30,719
Software licenses transferred over time		10,603		9,443		30,565		27,273		17,541		10,603		49,875		30,565
Service revenues earned over time		54,676		42,600		149,474		122,964		56,308		54,676		162,702		149,474
Total	$	73,944	$	60,317	$	210,758	$	178,889	$	84,700	$	73,944	$	249,011	$	210,758

~~(i)~~(h)

Earnings per Share

Basic earnings per common share is computed by dividing the net income that is attributable to common stockholders by the weighted-average number of common shares outstanding during the reporting period, without consideration for potentially dilutive securities. The dilutive effect of potentially dilutive securities is excluded from basic earnings per share and is included in the calculation of diluted earnings per share. Restricted stock and restricted stock units granted by the Company are treated as potential common shares outstanding in computing diluted earnings per share.

Diluted earnings per share is computed by dividing the earnings attributable to stockholders by the weighted-average number of shares and potentially dilutive securities outstanding during the period.

~~(j)~~(i)

COVID-19

Since the first quarter of 2020, the COVID-19 pandemic has posed a significant threat to public health as well as the global and U.S. economies. The continued spread of variants of COVID-19 may adversely impact our business, financial condition or results of operations as a result of increased costs, negative impacts to ~~our~~the Company’s workforce, delay or cancellation of projects due to disruption of clinical trials, or a sustained economic downturn. ~~Although the economy has rebounded in many areas, the outlook for containing the outbreak is still highly uncertain.~~ Given its ongoing and dynamic nature, it is difficult to predict the full impact of the COVID-19 outbreak on the global and US economy and ~~our~~the Company’s business.

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3. Public Offerings

On December 15, 2020, the Company completed its initial public offering (“IPO”), pursuant to which the Company issued and sold 14,630,000 shares of common stock and certain selling stockholders, including our former controlling shareholders, an affiliate of EQT AB (“EQT”), sold 18,783,250 shares of our common stock (representing the full exercise of the underwriters’ option to purchase additional shares), at a public offering price of $23.00 per share. The Company received net proceeds of $316,301, after deducting underwriters' discounts and commissions. In addition, $4,408 of legal, accounting and other offering costs, net of the tax effect of $259, incurred in connection with the sale of the Company's common stock in the IPO, were capitalized and offset against the proceeds received in the IPO.

The Company is party to a registration rights agreement with EQT AB and its affiliates (“EQT”), Arsenal Capital Partners, and certain other stockholders ~~(“Institutional~~(collectively, the “Institutional Investors”). ~~The registration rights agreement was amended and restated in connection with the IPO.~~ It contains provisions that entitle EQT and the other Institutional Investors thereto to certain rights to have their securities registered by the Company under the Securities Act. EQT is entitled to an unlimited number of “demand” registrations, subject to certain

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limitations. Every Institutional Investor that holds registration rights is also be entitled to customary “piggyback” registration rights. In addition, the amended and restated registration rights agreement provides that the Company will pay certain expenses of the Institutional Investors relating to such registrations and indemnify them against certain liabilities ~~which~~that may arise under the Securities ~~Act.~~Act of 1933.

The registration rights agreement will terminate (i) with the prior written consent of the Institutional Investors in connection with a change of control; (ii) for those holders (other than the Institutional Investors) that beneficially own less than 5% of the Company’s outstanding shares, if all of the registrable securities then owned by such holder could be sold in any 90-day period pursuant to Rule 144; (iii) as to any holder, if all of the registrable securities held by such holder have been sold or otherwise transferred in a registration pursuant to the Securities Act or pursuant to an exemption therefrom; or (iv) with respect to any holder that is an officer, director, employee or consultant of the Company on the date that is 90 days after the date on which such holder ceases to be an employee, director or consultant (as applicable) of the Company. The rights and obligations do not transfer without the written consent of the Company and the Institutional Investors.

On March 29, 2021, the Company completed an underwritten secondary public offering in which certain selling stockholders, including EQT, sold ~~10,000,000~~11,500,000 shares of the Company’s common stock, including ~~an additional~~ 1,500,000 shares of common stock pursuant to the full exercise of the underwriters’ option to purchase additional shares. The Company did 0tnot offer any common stock in this transaction and did 0tnot receive any proceeds from the sale of the shares of common stock by the selling stockholders. The Company incurred costs of $1,100, recorded in general and administrative expenses, in relation to the secondary public offering.

On September 13, 2021, the Company completed another public offering, at a public offering price of $31.00 per share, pursuant to which the Company sold 4,500,000 shares of its common stock, and certain selling stockholders sold 18,500,000 shares of the Company’s common stock, including ~~an additional~~ 3,000,000 shares of common stock pursuant to the full exercise of the underwriters’ option to purchase additional shares. The Company received net proceeds of $134,096, after deducting underwriters' discounts and commissions. In addition,~~$745~~ $745 of legal, accounting and other offering costs incurred in connection with the sale of the Company's common stock in the public offering, were capitalized and offset against the proceeds received.

On November 22, 2021, the Company completed another secondary public offering in which certain selling stockholders, including EQT, sold 10,000,000 shares of the Company’s common stock. The Company did not offer any common stock in this transaction and did not receive any proceeds from the sale of the shares of common stock by the selling stockholders. The Company incurred costs of $644, recorded in general and administrative expenses, in relation to the secondary public offering.

On August 11, 2022, the Company completed another secondary public offering in which certain selling stockholders, including EQT, sold 7,000,000 shares of the Company’s common stock. The Company did not offer any common stock in this transaction and did not receive any proceeds form the sale of the shares of common stock by the selling stockholders. The Company incurred costs of $596, recorded in general and administrative expenses, in relation to the secondary public offering.

4.	Concentrations of Credit Risk

Financial instruments that potentially subject the Company to concentrations of credit risk have consisted principally of cash and cash equivalent investments and trade receivables. The Company invests available cash in bank deposits, investment-grade securities, and short-term interest-producing investments, including government obligations and other

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money market instruments. At September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, the investments were bank deposits and overnight sweep accounts. The Company has adopted credit policies and standards to evaluate the risk associated with sales that require collateral, such as letters of credit or bank guarantees, whenever deemed necessary. Management believes that any risk of loss is significantly reduced due to the nature of the customers ~~and distributors~~ with which the Company does business.

As of September 30, 2022 and December 31, 2021, ~~there was 1~~no single customer ~~that~~ accounted for more than 10% of the Company’s accounts ~~receivable and no customer~~receivable. No single customers accounted for more than 10% of the Company’s revenues during the ~~three and~~ nine months ~~presented for~~ended September 30, 2022 and 2021. ~~No customers accounted for more than 10% of the Company’s accounts receivable or revenues as of December 31, 2020 or during the periods presented.~~

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5.	Acquisitions

Acquisitions have been accounted for using the acquisition method of accounting pursuant to FASB ASC 805, “Business Combinations.” Amounts allocated to the purchased assets and liabilities are based upon the total purchase price and the estimated fair values of such assets and liabilities on the effective date of the purchase as determined by an independent third party. The results of operations have been included in the Company’s results of operations prospectively from the date of acquisition.

Author! B.V.

On March 2, 2021, the Company completed a transaction ~~which~~that qualified as a business ~~combination.~~combination for a total consideration of $2,667. The business combination was not ~~material~~significant to our condensed consolidated financial statements. Based on the Company’s ~~preliminary~~ purchase price allocation, approximately $1,200, $100 and ~~$1,100~~$1,200 of the purchase price was assigned to customer relationships, non-compete agreements and goodwill, respectively.

Insight Medical Writing Limited

On June 7, 2021, the Company completed a transaction ~~which~~that qualified as a business ~~combination.~~combination for a total consideration of $15,197. The business combination was not ~~material~~significant to our condensed consolidated financial statements. Based on the Company’s ~~preliminary~~ purchase price allocation, approximately $7,400 and $4,700 of the purchase price was assigned to customer relationships and goodwill, respectively.

Pinnacle 21, LLC

On October 1, 2021, the Company acquired 100% of the equity of Pinnacle 21, LLC (“Pinnacle”). Pinnacle provides software and services for preparing clinical trial data for regulatory submission. The acquisition executed on the Company’s strategy to invest in innovation to increase the use cases of biosimulation and grow adoption of Certara’s end-to-end platform.

The acquisition of Pinnacle was treated as a purchase in accordance with ASC 805, “Business Combinations”, which requires allocation of the purchase price to the estimated fair values of assets and liabilities acquired in the transaction.

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The following table summarizes the fair value of the consideration paid as well as the fair values of the assets acquired and liabilities assumed as of the date of the acquisition:


Fair value of consideration:	Pinnacle
Cash paid to sellers	$	249,115
Cash paid to others and escrow		17,200
Unregistered shares of Certara, Inc. (2,239,717 shares)		72,760
Total consideration	$	339,075

Assets acquired and liabilities assumed:
Cash and cash equivalents	$	19,409
Accounts receivable		2,925
Other current assets		619
Property and equipment		258
Deferred tax assets		2,907
Identifiable intangible assets:
Trademark		15,800
Acquired software		103,000
Customer relationships		24,600
Goodwill		180,947
Long-term deposits		34
Current liabilities		(794)
Current portion of deferred revenue		(10,630)
Net assets acquired	$	339,075

The fair value of the unregistered shares given as part of the purchase consideration was determined based on the market price of Certara common stock on the closing date less a 7% discount for lack of marketability.

The acquisition was structured as an asset acquisition for income tax purposes; therefore, the Company’s tax basis in Pinnacle’s identifiable assets reflects the fair value of consideration paid. However, the Company did not recognize tax basis in certain liabilities assumed on the acquisition date; resulting in deferred income taxes being recorded in purchase accounting.

The fair value of the intangible assets is based on significant inputs that are not observable in the market and, therefore, represent Level 3 measurements within the fair value measurement hierarchy. The fair value of the customer relationships (Distributor method), trademarks (Relief from Royalty method) and developed technology (Multi-Period Excess Earnings Method) was determined under the income approach.

Goodwill of $180,947 was recorded to reflect the excess of the purchase price over the estimated fair value of the net identifiable assets acquired, which is generally deductible for income tax purposes. The excess of the purchase prices over the fair values of the acquired business's net assets represent cost and revenue synergies specific to the Company, as well as non-capitalizable intangible assets, such as the employee workforces acquired, and has been allocated to goodwill.

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Integrated Nonclinical Development Solutions, Inc.

On January 3, 2022, the Company completed the acquisition of Integrated Nonclinical Development Solutions, Inc. (“INDS”), a company that provides the SEND Explorer software and drug development consulting for a total consideration of $8,048. The business combination was not significant to the Company’s condensed consolidated financial statements. Based on the Company’s purchase price allocation, approximately $2,380, $1,040, $100, and $2,910 of the purchase price was assigned to customer relationships, developed technology, non-compete agreements, and goodwill, respectively.

The condensed consolidated financial statements include the operating results of each acquisition from the date of acquisition. Pro forma results of operations and the revenue and net income subsequent to the acquisition date for the acquisitions completed nine months ended September 30, 2021 have not been presented because the effects

6.	Prepaid Expenses and Other Current Assets and Other Long-Term Assets


	SEPTEMBER 30,		DECEMBER 31,
	2022		2021
Prepaid expenses	$	6,313	$	8,973
Income tax receivable		2,446		4,800
Research and development tax credit receivable		3,295		3,951
Current portion of interest rate swap asset		3,429		57
Other current assets		1,020		767
Prepaid expenses and other current assets	$	16,503	$	18,548

Other long-term assets consisted of the ~~acquisitions, individually and in the aggregate, were not material to our financial results.~~following:


	SEPTEMBER 30,		DECEMBER 31,
	2022		2021
Long-term deposits	$	1,143	$	1,160
Interest rate swap asset - long-term		4,956		—
Deferred financing cost		797		1,007
Total other long-term assets	$	6,896	$	2,167

6.7.	Long-Term Debt and Revolving Line of Credit

Effective August 14, 2017, the Company entered into a credit agreement with lenders for a $250,000 term loan (“Credit Agreement”). The Credit Agreement is a syndicated arrangement with various lenders providing the financing. The $250,000 term loan is due to mature on August 14, 2024. The Company also entered into a $20,000 revolving line of credit with lenders with a sub-commitment for issuance of letters of credit of $10,000.

The Company and lenders entered into Amendment No. 1 to the Credit Agreement on January 25, 2018, where an additional tranche of $25,000 was added to the term loan. The amortization schedule of the new tranche was made coterminous with the rest of the term loan. There were no other changes to the terms of the Credit Agreement.

The Company and lenders entered into Amendment No. 2 to the Credit Agreement on April 3, 2018, where an additional tranche of $40,000 was added to the term loan. The amortization schedule of the new tranche was made coterminous with the rest of the term loan. There were no other changes to the terms of the Credit Agreement.

The Company and lenders entered into a third amended and restated loan agreement on June 17, 2021 (“Third Amendment”), which provides for, among other things, (i) the extension of the termination date applicable to the revolving credit commitments under the Credit Agreement to August 2025, (ii) the extension of the maturity date applicable to the term loans under the Credit Agreement to August 2026, and (iii) an increase of approximately $80,000 in commitments available under the revolving line of credit (resulting in an aggregate amount of commitments of $100,000). The term

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loan under the Third Amendment has substantially the same terms as the existing term loans and revolving credit commitments. The Credit Agreement (as amended) is collateralized by substantially all U.S. assets and stock pledges for the non-U.S. subsidiaries and contain various financial and nonfinancial covenants.

As of September 30, 2022 and December 31, 2021, available borrowings under the revolving lines of credits were $100,000. Available borrowings under the revolving lines of credits as of ~~$20,000 at~~September 30, 2022 and December 31, ~~2020~~2021 were reduced by $120 and $239 standby letters of credit issued to a landlord in lieu of a security deposit in addition to any outstanding borrowings.

~~The Company was in compliance with all financial covenants as of September 30, 2021 and December 31, 2020.~~ Borrowings under the Credit Agreement are subject to a variable interest rate at LIBOR plus a margin. The applicable margins are based on achieving certain levels of compliance with financial covenants.

The effective interest rate was ~~3.68%~~4.60% and ~~4.48%~~3.68% for the nine months ended September 30, ~~2021~~2022 and ~~the year ended December 31, 2020~~2021 for the term loan debt, respectively. As discussed previously, the Company entered into interest rate swap agreements to mitigate the interest risk.

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Interest incurred on the Credit Agreement with respect to the term loan amounted to $4,366, $2,773, ~~$8,444, $2,974,~~$10,344, and ~~$11,047~~$8,444 for the three and nine months ended September 30, ~~2021~~2022 and ~~2020,~~2021, respectively. Accrued interest payable on the Credit Agreement with respect to the term loan amounted to ~~$30~~$55 and ~~$32~~$30 at September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, respectively, and is included in accrued expenses. Interest ~~paid~~incurred on the Credit Agreement with respect to the revolving line of credit was ~~$93~~$65, $65, $193 and ~~$457~~$98 for the three and nine months ended September 30, ~~2021~~2022 and ~~2020,~~2021, respectively. There was ~~less than $1accrued interest payable~~$2 and 0$66 accrued interest payable on the revolving line of credit at September 30, ~~2021~~2022 and December 31, ~~2020.~~

Effective August 14, 2017, the Company entered into an unsecured credit agreement with another lender for a $100,000 term loan (“Loan Agreement”). The loan bears interest at 8.25% which is payable in semi-annual installments on January 15 and July 15 through August 14, 2025, at which time all outstanding principal and interest are due. Under the Loan Agreement, the Company could voluntarily repay outstanding loans without premium or penalty. On July 15, 2020, the Company made a $20,000 prepayment on the loan, which reduced the amount outstanding to $80,000. On December 28, 2020, the Company repaid the $80,000 aggregate principal amount owed under the Loan Agreement, including $3,000 of accrued interest using a portion of the proceeds from the IPO. The Company's obligations under the Loan Agreement were discharged on that date. Interest paid on the loan amounted to $0 and $8,388 for the nine months ended September 30, 2021, ~~and 2020,~~ respectively.

Long-term debt consists of the following:


	SEPTEMBER 30,		DECEMBER 31,		SEPTEMBER 30,		DECEMBER 31,
	2021		2020		2022		2021
Term loans	$	301,245	$	304,099	$	298,225	$	300,490
Revolving line of credit						—		—
Less: debt issuance costs		(6,042)		(5,319)		(4,777)		(5,724)
Total		295,203		298,780		293,448		294,766
Current portion of long-term debt		(3,020)		(4,680)		(3,020)		(3,020)
Long-term debt, net of current portion and debt issuance costs	$	292,183	$	294,100	$	290,428	$	291,746

The principal amount of long-term debt outstanding as of September 30, ~~2021~~2022 matures in the following years:


	2021		2022		2023		2024		2025		Thereafter		TOTAL		Remainder of 2022		2023		2024		2025		2026		TOTAL
Maturities	$	755	$	3,020	$	3,020	$	3,020		3,020	$	288,410	$	301,245	$	755	$	3,020	$	3,020	$	3,020	$	288,410	$	298,225

The Credit Agreement requires the Company to make an annual mandatory prepayment as it relates to the Company’s Excess Cash Flow calculation. For the year ended December 31, ~~2020,~~2021, the Company was not required to make a mandatory prepayment on the term ~~loan of approximately $1,527 on or before April 30, 2021. The prepayment was included in the current portion of long-term debt on the condensed consolidated balance sheets.~~loan. For the ~~credit agreement,~~Credit Agreement, the Company is required to make a quarterly principal payment of $755 on the term loan each quarter starting from ~~the end of~~ September 30, 2021.

The fair values of the Company’s variable interest term loan and revolving line of credit are not significantly different than their carrying value because the interest rates on these instruments are subject to change with market interest rates.

7.	~~Commitments and Contingencies~~

~~Leases~~

~~The Company leases certain office facilities and equipment under non-cancelable operating and capital leases with remaining terms from~~ ~~one~~ to eight years. The gross amounts of assets under capital leases were $1,498 and $1,501 at September 30, 2021 and December 31, 2020, respectively. The total accumulated amortization associated with equipment under capital leases was $1,158 and $946 at September 30, 2021 and December 31, 2020, respectively. The related

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~~amortization expense is included in depreciation expense. Rent expense under the operating leases was $4,796 and $4,929 for the nine months ended September 30, 2021 and 2020, respectively.~~

~~Non-cancelable future minimum lease commitments as of September 30, 2021 are as follows:~~

OPERATING

CAPITAL

LEASES

LEASES
Remainder of 2021

$
1,847

$
76
2022

5,121

304
2023

3,367

25
2024

2,647

—
2025

2,093

—
Thereafter

2,366

—
Non-cancelable future minimum lease payments

17,441

405
Less amount representing interest

—

(17)
Net non-cancelable future minimum lease payments

$
17,441

388
Current portion of net non-cancelable future minimum lease payments

288
Net long-term non-cancelable future minimum lease payments

$
100

8.	~~Equity-Based Compensation~~

~~Class B Incentive Units~~

The Company’s management, through the Company’s affiliation with its shareholder and former parent, EQT, participated in a 2017 Class B Profits Interest Unit Incentive Plan (the “Class B Plan”), whereby EQT was authorized to issue a total of 6,366,891 Profit Interest Units (“Class B Units”), representing the right to share a portion of the value appreciation in EQT.

The majority of the employee grant agreements for the Class B Units were comprised of 50% time-based vesting units (“Time-based Units”) and 50% performance-based vesting units (“Performance-based Units”). The Time-based Units generally vest over a five-year period; the Performance-based Units would vest if EQT achieved specified levels of return on investment at the time of (i) a change in control, (ii) a reduction in holdings of the Company by EQT to 10% or less following an IPO or (iii) certain distributions to EQT. There were also certain grant agreements for the Class B Units that were entirely comprised of Time-based Units. Upon vesting, the holder of Class B Units received a right to a fractional portion of the profits and distributions of the parent in excess of a “participation threshold” determined in accordance with the EQT limited partnership agreement.

In addition to the performance conditions above, the Chief Executive Officer’s performance-based Class B Units also vested if the aggregate value attributable to the IPO equaled or exceeded an amount equivalent to the return on investment performance targets.

As of September 30, 2020, 6,328,153 Class B Units were issued and outstanding to Company employees. The Company granted 1,357,404 units and recorded actual forfeitures of 377,626 units during the nine months ended September 30, 2020.

The fair value of the Time-based Units that vested solely upon continued employment was measured at the grant date and was recognized as cost over the employee’s requisite service period, which was generally five years. The expense related to the vesting of the Time-based Units was recorded on the Company’s books because the Company directly benefited from the services provided by Class B Unit holders. The Company recorded compensation expense related to the Class B Units of $1,181 and $2,286 for the three and nine months ended September 30, 2020.

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Leases

The Company leases certain office facilities and equipment under non-cancelable operating and finance leases with remaining terms from one to six years.

Operating lease right of use assets are included in the “other assets” section while finance lease right of use assets are included in "property and equipment, net" in the condensed consolidated balance sheets. With respect to operating lease liabilities, current lease liabilities and non-current operating lease liabilities are included in “current operating lease liabilities” and "operating lease liabilities, net of current portion”. Current finance lease liabilities and non-current finance lease liabilities are included in "other current liabilities" and "non-current finance lease liabilities" in the condensed consolidated balance sheets. At September 30, 2022, the weighted average remaining lease terms were 3.33 years and 0.33 year for operating and finance leases, respectively; the weighted average discount rate was 4.11% and 6.19% for operating and finance leases, respectively. For additional information on the Company's leases, see Note 14 to the condensed consolidated financial statements included the Company’s 2021Annual Report.

The following table summarizes the lease-related assets and liabilities recorded in the condensed consolidated balance sheets at September 30, 2022 and December 31, 2021:



Lease Position	Balance Sheet Classification		SEPTEMBER 30, 2022		DECEMBER 31, 2021

Assets
Operating lease assets	Operating lease right-of-use assets	$	11,481	$	12,634
Finance lease assets	Property and equipment, net		63		271
Total lease assets		$	11,544	$	12,905

Liabilities
Current
Operating	Current operating lease liabilities	$	3,422	$	5,040
Finance	Other current liabilities		100		293

Noncurrent
Operating	Operating lease liabilities, net of current portion		8,509		8,256
Finance	Non-current finance lease liabilities		—		25
Total lease liabilities		$	12,031	$	13,614

The following table summarizes by year the maturities of our minimum lease payments as of September 30, 2022.


	OPERATING		FINANCE
	LEASES		LEASES

Remainder of 2022	$	1,265	$	76
2023		4,110		25
2024		3,212		—
2025		2,466		—
2026		1,344		—
Thereafter		130		—
Total future lease payments		12,527		101
Less: imputed interest		(596)		(1)
Total	$	11,931	$	100

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9.	Accrued Expenses and Other Current Liabilities

Accrued expenses consist of the following:


		SEPTEMBER 30,		DECEMBER 31,
	2022		2021
Accrued compensation	$	22,497	$	24,848
Legal and professional accruals		865		2,477
Local sales and VAT taxes		44		—
Interest payable		55		96
Income taxes payable		1,797		1,398
Accrued business acquisition liabilities		700		—
Other		594		1,011
Total accrued expenses	$	26,552	$	29,830

10.	Equity-Based Compensation

Restricted Stock

~~Effective as~~The majority of the Company’s restricted stock awarded to its employees was originally issued in December ~~10,~~ 2020 ~~all vested~~to exchange the Class B Profits Interest Unit (the “Class B Units”) of EQT.

Modification accounting was not required for the time-based vesting Class B Units ~~were exchanged by EQT~~ for ~~shares of common stock~~which the vesting conditions, classification and fair market value did not change as a result of the ~~Company held by EQT, and unvested Class B Units were exchanged for~~ shares of restricted common stock ofthat replaced them. The original grant date fair value will continue to be recognized on a straight-line basis. Modification accounting was required for the ~~Company. Based on the IPO price of $23.00 per share, the Company issued 5,941,693 shares of~~performance-based vesting Class B Units that were exchanged for time-based vesting restricted common stock, ~~to holders of unvested Class B Units in exchange for such unvested Class B Units.~~given the vesting conditions were changed.

Share-based compensation for the restricted stock exchanged for the ~~Time-based~~time-based Class B Units is recognized on a straight-line basis over the requisite service period of the award, which is generally five years. Share-based compensation for the restricted stock exchanged for the ~~Performance-based~~performance-based Class B Units is recognized using the accelerated attribution approach. ~~A summary~~

In 2021, the Company granted 87,127 replacement shares of restricted stock in connection with the Pinnacle acquisition under which equity-based awards are outstanding. The fair value of the restricted stock ~~is shown below:~~awarded was initially based on the fair value of our common stock on the date of grant, then adjusted for time restrictions due to unregistered shares and lack of marketability. Total grant date fair value was $2,762. The restricted stock issued in 2021 generally has a three-year vesting period except for one holder whose shares vests equally on a monthly basis for two years.


		WEIGHTED-			WEIGHTED-
		AVERAGE			AVERAGE
		GRANT DATE			GRANT DATE
	SHARES	FAIR VALUE		SHARES	FAIR VALUE
Non-vested restricted stock as of December 31, 2020	5,941,693	$	23.00
Non-vested restricted stock as of December 31, 2021				3,910,722	$	23.18
Granted	—		—	66,220		17.07
Vested	(1,724,979)		23.00	(1,772,239)		22.87
Forfeited	(141,057)		23.00	(229,854)		23.00
Non-vested restricted stock as of September 30, 2021	4,075,657	$	23.00
Cancelled				(66,220)		23.00
Non-vested restricted stock as of September 30, 2022				1,908,629	$	23.28

The Company did 0tnot legally authorize or issue any restricted stock during the nine-month period ended September 30, ~~2021.~~2022. During the third quarter of 2022, the Company modified an award for a recipient that resulted in 66,220 shares each

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assumed cancelled, granted, and forfeited. The shares of restricted stock vested includes 5,182 shares of common stock that were withheld on behalf of employees to satisfy the statutory tax withholding requirements.

Equity-based compensation ~~expense~~expenses (income) related to the restricted stock exchanged for ~~Performance-based~~performance-based Class B Units ~~was $3,120~~were $(319) and ~~$10,144~~$3,758 for the three and nine months ended September 30, ~~2021,~~2022, respectively. At September 30, ~~2021,~~2022, the total unrecognized equity-based compensation expense related to outstanding restricted stock recognized using the accelerated attribution approach was ~~$14,072,~~$5,039, which is expected to be recognized over a weighted-average period of 2622.5 months.

Equity-based compensation ~~expense~~expenses related to the restricted stock exchanged for ~~Time-based~~time-based Class B Units were ~~$767~~$1,174 and ~~$2,298~~$2,705 for the three and nine months ended September 30, ~~2021~~2022, respectively. At September 30, ~~2021,~~2022, the total unrecognized equity-based compensation expense related to outstanding restricted stock recognized using the straight-line attribution approach was ~~$7,230,~~$3,821, which is expected to be recognized over a weighted-average period of ~~35.2~~28.0 months.

~~Restricted Stock Units~~Equity-based employee compensation expense related to the time-based restricted stock for the Pinnacle acquisition was $292 and $877 for the three and nine months ended September 30, 2022. At September 30, 2022, the total unrecognized equity-based compensation expenses related to outstanding restricted stock recognized using the straight-line attribution approach was $1,593, which is expected to be recognized over a weighted-average period of 18.4 months.

~~Restricted~~2020 Incentive Plan

In order to align the Company’s equity compensation program with public company practices, the Company’s Board of Directors adopted and stockholders approved the 2020 Incentive Plan. The 2020 Incentive Plan allows for grants of non-qualified stock options, incentive stock options, restricted stock, restricted stock units (“RSUs”), and performance stock units (“PSUs”) to employees, directors, officers, and consultants or advisors of the Company. The 2020 Incentive Plan allows for 20,000,000 shares (the “plan share reserve”) of common stock to be issued. No more than the number of shares of common stock equal to the plan share reserve may be issued in the aggregate pursuant to the exercise of incentive stock options. The maximum number of shares of common stock granted during a single fiscal year to any non-employee director, taken together with any cash fees paid to such non-employee director during the fiscal year, may not exceed $1,000,000 in total value, except for certain awards made to a non-executive chair of our Board of Directors.

Restricted Stock Units

RSUs represent the right to receive shares of the Company’s common stock at a specified date in the future. The fair value of the RSUs is based on the fair value of the underlying shares on the date of grant.

A summary of the Company’s RSU activity is as follows:


		WEIGHTED-			WEIGHTED-
		AVERAGE			AVERAGE
		GRANT DATE			GRANT DATE
	UNITS	FAIR VALUE		UNITS	FAIR VALUE
Non-vested RSUs as of December 31, 2020	30,052	$	23.00
Granted	1,027,512		27.47
Vested	(24,728)		23.00
Non-vested RSUs as of December 31, 2021				1,288,724	$	29.28
Granted*				1,415,901		22.10
Vested**				(420,168)		28.52
Forfeited	(48,956)		26.86	(149,610)		24.87
Non-vested RSUs as of September 30, 2021	983,880	$	27.48
Non-vested RSUs as of September 30, 2022				2,134,847	$	24.98

* The shares granted during 2022 were primarily issued on April 1, 2022 under the 2020 Incentive Plan.

** The number of the RSUs vested includes 134,262 shares that were withheld on behalf of employees to satisfy the statutory tax withholding requirements. The vested shares included 7,059 shares vested but deferred in connection with our director deferral plan.

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~~The number of RSUs vested includes 10,003 shares of common stock that were withheld on behalf of employees to satisfy the statutory tax withholding requirements.~~

Equity-based compensation ~~expense~~expenses related to the RSUs ~~was $2,362~~were $5,312 and ~~$4,898~~$14,538 for three and nine months ended September 30, ~~2021,~~2022, respectively. At September 30, ~~2021,~~2022, the total unrecognized equity-based compensation expense related to outstanding RSUs was ~~$22,559,~~$42,927, which is expected to be recognized over a weighted-average period of ~~29.3~~25.5 months.

Performance Stock Units

~~Performance stock units (“PSUs”) are~~PSUs granted in April 2021 and 2022 were issued under the 2020 Incentive Plan and represent the right to receive shares of the Company’s common stock at a specified date in the future based on the satisfaction of various service conditions and the achievement of certain performance thresholds for individual PSU plans including year over year revenue growth and unlevered free cash flow growth.

Share-based compensation for the PSUs is only recognized to the extent a threshold is probable of being achieved and is recognized using the accelerated attribution approach. The Company will continue to assess the probability of each condition being achieved at each reporting period to determine whether and when to recognize compensation cost. The following table presents a summary of activity on the PSUs for the period ended September 30, ~~2021.~~

2022.

A summary of the Company’s PSU activity is as follows:


		WEIGHTED-			WEIGHTED-
		AVERAGE			AVERAGE
		GRANT DATE			GRANT DATE
	UNITS	FAIR VALUE		UNITS	FAIR VALUE
Non-vested PSUs as of December 31, 2020	—	$	—
Non-vested PSUs as of December 31, 2021				406,575	$	27.35
Granted	400,354		27.01	361,147		22.25
Vested	—		—	(12,291)		24.83
Forfeited	(11,905)		27.45	(57,077)		35.47
Non-vested PSUs as of September 30, 2021	388,449	$	27.00
Non-vested PSUs as of September 30, 2022				698,354	$	24.10

Equity-based compensation ~~expense~~expenses related to the PSUs ~~was $1,916~~were $345 and ~~$3,506~~$1,940 for the three and nine months ended September 30, ~~2021.~~2022. At September 30, ~~2021,~~2022, the total unrecognized equity-based compensation expense related to outstanding PSUs was ~~$6,982,~~$3,467, which is expected to be recognized over a weighted-average period of ~~19.5~~15.6 months.

The following table summarizes the components of total equity-based compensation expense included in the condensed consolidated statements of operations and comprehensive ~~(loss) income~~loss for each period presented:


	THREE MONTHS ENDED SEPTEMBER 30,				NINE MONTHS ENDED SEPTEMBER 30,				THREE MONTHS ENDED SEPTEMBER 30,				NINE MONTHS ENDED SEPTEMBER 30,
	2021		2020		2021		2020		2022		2021		2022		2021
Cost of revenues	$	1,442	$	53	$	3,738	$	151	$	2,454	$	1,442	$	6,834	$	3,738
Sales and marketing		602		34		1,636		99		160		602		1,670		1,636
Research and development		514		34		1,528		97		957		514		4,115		1,528
General and administrative expenses		5,607		1,060		13,944		1,939
General and administrative										3,233		5,607		11,199		13,944
Total	$	8,165	$	1,181	$	20,846	$	2,286	$	6,804	$	8,165	$	23,818	$	20,846

2020 Employee Stock Purchase Plan

On December 10, 2020, stockholders approved the 2020 Employee Stock Purchase Plan (the “Employee Stock Purchase Plan”). Under the Employee Stock Purchase Plan, employees, and those of the Company’s subsidiaries, may purchase shares of common stock, during pre-specified offering periods. Named executive officers will be eligible to participate in

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the Employee Stock Purchase Plan on the same terms and conditions as all other participating employees. The maximum number of shares authorized for sale under the Employee Stock Purchase Plan is 1,700,000 shares.

As of September 30, 2022, no shares of common stock have been purchased under the Employee Stock Purchase Plan and no offering has been made to eligible employees under the Plan.

9.11.

Segment Data

Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker (“CODM”), in deciding how to allocate resources and in assessing performance.

The Company has determined that its chief executive officer is its CODM. The Company manages its operations as a single segment for the purposes of assessing and making operating decisions. The Company’s CODM allocates resources and assesses performance based upon financial information at the consolidated level. Since the Company operates in 1one operating segment, all required financial segment information can be found in the condensed consolidated financial statements.

The following table summarizes revenue by geographic area for the three and nine months ended September 30, ~~2021~~2022 and ~~2020:~~2021:


	THREE MONTHS ENDED				NINE MONTHS ENDED				THREE MONTHS ENDED				NINE MONTHS ENDED
	SEPTEMBER 30,				SEPTEMBER 30,				SEPTEMBER 30,				SEPTEMBER 30,
	2021		2020		2021		2020		2022		2021		2022		2021
Revenue⁽¹⁾:
Americas	$	54,911	$	44,910	$	150,594	$	135,187	$	64,367	$	54,911	$	186,784	$	150,594
EMEA		13,307		10,679		41,222		30,601		13,276		13,307		42,833		41,222
Asia Pac		5,726		4,728		18,942		13,101
Asia Pacific										7,057		5,726		19,394		18,942
Total	$	73,944	$	60,317	$	210,758	$	178,889	$	84,700	$	73,944	$	249,011	$	210,758

(1)	Revenue is attributable to the countries based on the location of the customer.

~~10.~~12.

Income Taxes

The Company generally records its interim tax provision based upon a projection of the Company's estimated annual effective tax rate ("EAETR"). This EAETR is applied to the year-to-date consolidated pre-tax income to determine the interim provisions for income taxes before discrete items. The effective tax rate ("ETR") each period is impacted by a number of factors, including the relative mix of domestic and international earnings, adjustments to the valuation allowances, and discrete items. The ~~currently~~ forecasted ETR may vary from the actual year-end due to the changes in these factors.

The Company's global ETR for the three ~~and nine~~ months ended September 30, 2022 and 2021 ~~and 2020 were 48%, (11)%, 22%,~~was 54% and 48%, respectively, including discrete tax items. The ~~current year decrease~~period-over-period increase in the ETR was principally due to the combined effect of the ~~discrete~~overall increase in pre-tax book income and the tax effect of certain ~~prior period swap losses that are required~~discrete items.

The Company's global ETR for the nine months ended September 30, 2022 and 2021 was 63%, and (11)%, respectively, including discrete tax items. The current year increase in the ETR was principally due to ~~be excluded from~~ the ~~EAETR calculation and~~combined effect of the overall increase in pre-tax ~~loss.~~book income and the tax effect of certain discrete items.

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~~11.~~13.

Earnings per Share

Earnings per share is computed by dividing net income (loss) by the weighted-average common shares outstanding. Basic earnings per common share is computed by dividing net income available to common shareholders by the ~~weighted-~~

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~~average~~weighted-average number of common shares outstanding during the period. Diluted earnings per common share considers potentially dilutive securities outstanding during the period.

Basic and diluted earnings per share is computed by dividing net income (loss) by the weighted-average common shares outstanding:

THREE MONTHS ENDED SEPTEMBER 30,

NINE MONTHS ENDED SEPTEMBER 30,

2021

2020

2021

2020
Numerator:








Net income (loss) available to common shareholders

$
(1,762)

$
1,227

$
(3,567)

$
5,050
Denominator:





Basic weighted average common shares outstanding

149,016,609

132,407,786

147,894,227

132,407,786
Effects of dilutive securities

—

—

—

—
Diluted weighted average common shares outstanding

149,016,609

132,407,786

147,894,227

132,407,786
Earnings (loss) per share:

Basic

$
(0.01)

$
0.01

$
(0.02)

$
0.04
Diluted

$
(0.01)

$
0.01

$
(0.02)

$
0.04

~~Subsequent~~

~~12. Subsequent Events~~

On October 1, 2021, the Company completed the acquisition of Pinnacle 21, LLC (“Pinnacle”), a company that develops advanced software for standards-based data management for regulatory submissions, for total consideration of $250,000 cash and 2,239,717 shares of restricted common stock of the Company. We will complete the initial accounting for the acquisition of Pinnacle 21, LLC, including the allocation of purchase consideration, in the fourth quarter of 2021.



	THREE MONTHS ENDED SEPTEMBER 30,				NINE MONTHS ENDED SEPTEMBER 30,
	2022		2021		2022		2021
Numerator:
Net income (loss) available to common shareholders	$	3,936	$	(1,762)	$	5,557	$	(3,567)
Denominator:
Basic weighted average common shares outstanding		157,140,166		149,016,609		156,523,022		147,894,227
Effects of dilutive securities		2,447,479		—		2,869,512		—
Diluted weighted average common shares outstanding		159,587,645		149,016,609		159,392,534		147,894,227
Earnings per share:
Basic	$	0.03	$	(0.01)	$	0.04	$	(0.02)
Diluted	$	0.02	$	(0.01)	$	0.03	$	(0.02)

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion summarizes the significant factors affecting the operating results, financial condition, liquidity, and cash flows of our Company as of and for the periods presented below. The following discussion and analysis should be read in conjunction with the unaudited condensed consolidated financial statements and the related notes thereto included elsewhere in this Quarterly Report and our 2021 Annual ~~Report on Form 10-K for the fiscal year ended December 31, 2020.~~Report. The statements in this discussion regarding industry outlook, our expectations regarding our future performance, liquidity, and capital resources, and all other non-historical statements in this discussion are forward-looking statements and are based on the beliefs of our management, as well as assumptions made by, and information currently available to, our management. Actual results could differ materially from those discussed in or implied by forward-looking statements as a result of various factors, including those discussed below and elsewhere in this Quarterly Report, particularly in the sections ~~entitled~~ “Special Note Regarding Forward-Looking Statements” and “Risk Factors” of this Quarterly Report.

We intend the discussion of our financial condition and results of operations that follows to provide information that will assist the reader in understanding our condensed consolidated Financial Statements, the changes in certain key items in those financial statements from period to period, and the primary factors that accounted for those changes, as well as how certain accounting principles, policies and estimates affect our condensed consolidated Financial Statements.

Executive Overview

We accelerate medicines to patients using biosimulation software, technology, and ~~technology~~services to transform traditional drug discovery and development. Biosimulation is a powerful technology used to conduct virtual trials using virtual patients to predict how drugs behave in different individuals. Biopharmaceutical companies use our proprietary biosimulation software throughout drug discovery and development to inform critical decisions that not only save significant time and money but also advance drug safety and efficacy, improving millions of lives each year.

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As a global leader in biosimulation based on ~~2020~~2021 revenue, we provide an integrated, end-to-end platform used by more than ~~1,650~~2,000 clients including biopharmaceutical companies, regulatory agencies and academic institutions across 6162 countries, including ~~all~~38 of the top 35

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40 biopharmaceutical companies by ~~R&D~~research and development spend in ~~2019.~~2020. Since 2014, customers who use our biosimulation software and ~~technology-enabled~~technology-driven services have received ~~over~~ 90% of all new drug approvals by the ~~U.S. Food and Drug Administration (“FDA”).~~FDA. Moreover, 17 global regulatory authorities license our biosimulation software to independently analyze, verify, and review regulatory submissions, including the FDA, ~~Europe’s European Medicines Agency (“EMA”),~~ Health Canada, Japan’s ~~Pharmaceuticals and Medical Devices Agency,~~PMDA, and China’s ~~National Medical Products Administration.~~NMPA. Demand for our offerings continues to expand rapidly.

We build our biosimulation technology on first principles of biology, chemistry, and pharmacology with proprietary mathematical algorithms that model how medicines and diseases behave in the body. For over two decades, we have honed and validated our biosimulation technology with an abundance of data from scientific literature, lab research, and preclinical and clinical studies. In turn, our customers use biosimulation to conduct virtual trials to answer critical questions, such as: What will be the human response to a drug based on preclinical data? How will other drugs interfere with this new drug? What is a safe and efficacious dose for children, the elderly, or patients with pre-existing conditions? Virtual trials may be used to optimize dosing on populations that are otherwise difficult to study for ethical or logistical reasons, such as infants, pregnant women, the elderly, and cancer patients.

Biosimulation results need to be incorporated into regulatory documents for compelling submissions. Accordingly, we provide regulatory science solutions and integrate them with biosimulation so that our customers can navigate the complex and evolving regulatory landscape and maximize their chances of approval. Our differentiated regulatory services are powered by submissions management software and natural language processing for scalability and speed, allowing us to deliver more than ~~200~~250 regulatory submissions over the past four years. Our team of ~~more than 200~~ regulatory professionals has extensive experience applying industry guidelines and global regulatory requirements.

The final hurdle to delivering medicines to patients is market access, defined as strategies, processes, and activities to ensure that therapies are available to patients at the right price. We believe that biosimulation and market access will continue to be increasingly intertwined as health systems and countries move toward outcomes-based pricing. We have ~~recently~~ expanded into ~~technology-enabled~~ market access solutions, which help our customers understand the real-world impact of therapies and dosing regimens earlier in the process and effectively communicate this to payors and health authorities. Our solutions are underpinned by ~~technologies such as Bayesian statistical software and~~ SaaS-based value communication tools.

With continued innovation in and adoption of our biosimulation software, technology, and ~~technology-enabled~~ services, we believe more biopharmaceutical companies worldwide will leverage more of our end-to-end platform to reduce cost, accelerate speed to market, and ensure safety and efficacy of medicines for all patients.

~~Initial Public Offering~~

On December 15, 2020, the Company completed its IPO, pursuant to which the Company issued and sold 14,630,000 shares of common stock and certain selling stockholders, including EQT, sold 18,783,250 shares of our common stock (representing the full exercise of the underwriters’ option to purchase additional shares), at a public offering price of $23.00 per share. The Company received net proceeds of $316.3 million after deducting underwriters’ discounts and commissions. In addition, $4.4 million of legal, accounting and other offering costs, net of the tax effect of $0.3 million incurred in connection with the sale of the Company’s common stock in the IPO, were capitalized and offset against the proceeds received in the IPO.

~~Secondary~~ Public Offering

On March 29, 2021, ~~the Company~~we completed an underwritten secondary public offering in which certain selling stockholders, including EQT, sold ~~10,000,000~~11,500,000 shares of ~~its~~our common stock, ~~including an additional~~which included 1,500,000 shares of common stock pursuant to the full exercise of the underwriters’ option to purchase additional shares. ~~The Company~~We did not offer any common stock in ~~this~~that transaction and did not receive any proceeds from the sale of the shares of common stock by the selling stockholders. ~~The Company~~We incurred cost of $1.1 million in relation to the secondary public offering.

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~~Other Public Offering~~

On September 13, 2021, ~~the Company~~we completed another public offering, at a public offering price of $31.00 per share, pursuant to which ~~the Company~~we sold 4,500,000 shares of ~~its~~our common stock, and certain selling stockholders sold 18,500,000 shares of ~~the Company’s~~our common stock, ~~including an additional~~which included 3,000,000 shares of common stock pursuant to the full exercise of the underwriters’ option to purchase additional shares. ~~The Company~~We received net proceeds of $134.1 million, after deducting underwriters' discounts and commissions. In addition, $0.7 million of legal, accounting and other offering costs incurred in connection with the sale of ~~the Company's~~our common stock in the public offering, were capitalized and offset against the proceeds received.

On November 22, 2021, we completed another secondary public offering in which certain selling stockholders, including EQT, sold 10,000,000 shares of our common stock. We did not offer any common stock in this transaction and did not receive any proceeds from the sale of the shares of common stock by the selling stockholders. We incurred costs of $0.6 million, recorded in general and administrative expenses, in relation to the secondary public offering.

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On August 11, 2022, the Company completed another secondary public offering in which certain selling stockholders, including EQT, sold 7,000,000 shares of the Company’s common stock. The Company did not offer any common stock in this transaction and did not receive any proceeds form the sale of the shares of common stock by the selling stockholders. The Company incurred costs of $0.6 million, recorded in general and administrative expenses, in relation to the secondary public offering.

Key Factors Affecting Our Performance

We believe that the growth of and future success of our business depends on many factors. While each of these factors presents significant opportunities for our business, they also pose important challenges that we must successfully address to sustain our growth and improve results of operations.

Customer Retention and Expansion

Our future operating results depend, in part, on our ability to successfully enter new markets, increase our customer base, and retain and expand our relationships with existing customers. We monitor two key performance indicators to evaluate retention and expansion: new bookings and renewal rates.

●

Bookings: Our new bookings represent a signed contract or purchase order where there is sufficient or reasonable certainty about the customer’s ability and intent to fund and commence the software and/or services. Bookings vary from period to period depending on numerous factors, including the overall health of the biopharmaceutical industry, regulatory developments, industry consolidation, and sales performance. Bookings have varied and will continue to vary significantly from quarter to quarter and from year to year.

●

Renewal Rates: Our renewal rates measure the percentage of software customers who renew their licenses or subscriptions at the end of the license or subscription periods. The renewal rate is based on revenues and excludes the effect of price increases or expansions.

The table below summarizes our quarterly bookings and renewal rate trends:


	2021							2020							2021						2022
	Q1			Q2		Q3		Q1			Q2		Q3		Q1		Q2		Q3		Q1		Q2		Q3

Bookings (in millions)	$	81.9		75.1		72.3		$	61.0		70.1		72.9		81.9		75.1		72.3		108.5		100.3		79.8
Renewal Rate		92	%	90	%	87	%		92	%	96	%	84	%	92	%	90	%	87	%	92	%	92	%	93	%

Investments in Growth

We have invested and intend to continue to invest in expanding the breadth and depth of our solutions, including through acquisitions and international expansion. We expect to continue to invest (i) in scientific talent to expand our ability to deliver solutions across the drug development spectrum; (ii) in sales and marketing to promote our solutions to new and existing customers and in existing and expanded geographies; (iii) in research and development to support existing solutions and innovate new technology; and (iv) in other operational and administrative functions to support our expected growth. We expect that our headcount will increase over time and also expect our total operating expenses will continue to increase over ~~time, albeit, at a rate lower than revenue growth.~~

26time.

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Our Operating Environment

The acceptance of model-informed biopharmaceutical discovery and development by regulatory authorities affects the demand for our products and services. Support for the use of biosimulation in discovery and development from regulatory bodies, such as the FDA and EMA, has been critical to its rapid adoption by the biopharmaceutical industry. There has

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been a steady increase in the recognition by regulatory and academic institutions of the role that modeling and simulation can play in the biopharmaceutical development and approval process, as demonstrated by new regulations and guidance documents describing and encouraging the use of modeling and simulation in the biopharmaceutical discovery, development, testing, and approval process, which has directly led to an increase in the demand for our services. Changes in government or regulatory policy, or a reversal in the trend toward increasing the acceptance of and reliance upon in silico data in the drug approval process, could decrease the demand for our products and services or lead regulatory authorities to cease use of, or to recommend against the use of, our products and services.

Governmental agencies throughout the world, but particularly in the United States where the majority of our customers are based, strictly regulate the biopharmaceutical development process. Our business involves helping biopharmaceutical companies strategically and tactically navigate the regulatory approval process. New or amended regulations are expected to result in higher regulatory standards and often additional revenues for companies that service these industries. However, some changes in regulations, such as a relaxation in regulatory requirements or the introduction of streamlined or expedited approval procedures, or an increase in regulatory requirements that we have difficulty satisfying or that make our regulatory strategy services less competitive, could eliminate or substantially reduce the demand for our regulatory services.

Competition

The market for our biosimulation products and related services for the biopharmaceutical industry is competitive and highly fragmented. In biosimulation software, we compete with other scientific software providers, technology companies, in-house development by biopharmaceutical companies, and certain open source solutions. In the ~~technology-enabled~~technology-driven services market, we compete with specialized companies, in-house teams at biopharmaceutical companies, and academic and government institutions. In some standard biosimulation services, and in regulatory and market access, we also compete with contract research organizations. Some of our competitors and potential competitors have longer operating histories in certain segments of our industry than we do and could have greater financial, technical, marketing, R&D, and other resources. Some of our competitors offer products and services directed at more specific markets than those we target, enabling these competitors to focus a greater proportion of their efforts and resources on those specific markets. Some competing products are developed and made available at lower cost by government organizations and academic institutions, and these entities may be able to devote substantial resources to product development. Some clinical research organizations or technology companies may decide to enter into or expand their offerings in the biosimulation area, whether through acquisition or internal development. We also face competition from open source software initiatives, in which developers provide software and intellectual property free of charge, such as R and PK-Sim software. In addition, some of our customers spend significant internal resources in order to develop their own solutions.

Impact of COVID-19

The continued spread of COVID-19 may adversely impact our business, financial condition or results of operations as a result of increased costs, negative impacts to our healthy workforce or a sustained economic downturn. The extent to which the COVID-19 pandemic may impact our business in the future is highly uncertain and cannot be predicted. In addition, a recession or a prolonged period of depressed economic activity related to COVID-19 and measures taken to mitigate its spread could have a material adverse effect on our business, financial condition and results of operations. As of September 30, ~~2021,~~2022, we believe there have been ~~no material adverse~~and will be short-term impacts on ~~the Company’s financial condition, results~~our business due to new variants of ~~operations or cash flows.~~

27COVID-19. The presence of these new variants has caused a slowdown in closing out clinical trials and delays in regulatory services projects. We believe that these are transitory impacts that we are well-equipped to manage going forward.

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Non-GAAP Measures

Management uses various financial metrics, including total revenues, income from operations, net income, and certain metrics that are not required by, or presented in accordance with, GAAP, such as ~~Adjusted~~adjusted EBITDA, adjusted net income, and adjusted diluted earnings per share, to measure and assess the performance of our business, to evaluate the effectiveness of our business strategies, to make budgeting decisions, to make certain compensation decisions, and to compare our performance against that of other peer companies using similar measures. We believe that presentation of the GAAP and the non-GAAP metrics in this filing will aid investors in understanding our business.

Management measures operating performance based on ~~Adjusted~~adjusted EBITDA defined for a particular period as net income (loss) excluding interest expense, provision (benefit) for income taxes, depreciation and amortization expense, intangible

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asset amortization, equity-based compensation expense, acquisition and integration expense, and other items not indicative of our ongoing operating performance. Management also measures operating performance based on adjusted net income defined for a particular period as net income (loss) excluding, equity-based compensation expense, amortization of acquisition-related intangible assets, acquisition and integration expense, and other items not indicative of our ongoing operating performance. Further, management measures operating performance based on adjusted diluted earnings per share defined for a particular period as adjusted net income divided by the weighted-average diluted common shares outstanding.

We believe ~~Adjusted~~adjusted EBITDA, isadjusted net income, and adjusted diluted earnings per share are helpful to investors, analysts, and other interested parties because itthey can assist in providing a more consistent and comparable overview of our operations across our historical periods. In addition, ~~this measure is~~these measures are frequently used by analysts, investors, and other interested parties to evaluate and assess performance.

Adjusted EBITDA, ~~and~~ adjusted net income, and adjusted diluted earnings per share are non-GAAP ~~measure~~measures and are presented for supplemental purposes only and should not be considered as an alternative or substitute to financial information presented in accordance with GAAP. Adjusted EBITDA, ~~and~~ adjusted net income and adjusted diluted earnings per share have certain limitations in that they do not include the impact of certain expenses that are reflected in our condensed consolidated ~~statement~~statements of operations that are necessary to run our business. Other companies, including other companies in our industry, may not use these measures and may calculate itboth differently than as presented, ~~on this report,~~ limiting the usefulness as a comparative ~~measures.~~measure.

The following table reconciles ~~Net~~net income (loss) to Adjusted EBITDA:


	THREE MONTHS ENDED SEPTEMBER 30,				NINE MONTHS ENDED SEPTEMBER 30,				THREE MONTHS ENDED SEPTEMBER 30,				NINE MONTHS ENDED SEPTEMBER 30,
	2021		2020		2021		2020		2022		2021		2022		2021

	(in thousands)				(in thousands)				(in thousands)
Net (loss) income^(a)	$	(1,762)	$	1,227	$	(3,567)	$	5,050
Net income (loss)^(a)									$	3,936	$	(1,762)	$	5,557	$	(3,567)
Interest expense^(a)		3,289		5,929		13,549		19,810		5,221		3,289		12,328		13,549
Interest income^(a)		(84)		(12)		(255)		(36)		(322)		(84)		(347)		(255)
(Benefit) provision for income taxes^(a)		(1,631)		350		349		4,696
(Benefit from) provision for income taxes(a)										4,557		(1,631)		9,473		349
Depreciation and amortization expense^(a)		533		614		1,687		1,836		417		533		1,321		1,687
Intangible asset amortization^(a)		10,209		9,956		30,436		29,804		12,846		10,209		38,007		30,436
Currency gain (loss)^(a)		(545)		37		(189)		(190)
Currency (gain) loss^(a)										(2,376)		(545)		(5,639)		(189)
Equity-based compensation expense^(b)		8,165		1,181		20,846		2,286		6,804		8,165		23,818		20,846
Acquisition-related expenses^(c)(d)		7,561		216		9,713		1,165		253		7,561		1,331		9,713
Integration expense^(d)		—		57		—		57
Transaction-related expenses^(e)		154		487		1,776		487		596		154		724		1,776
Severance expense^(f)		—		150		—		361		722		—		722		—
Reorganization expense^(g)		—		83		—		190
Loss on disposal of fixed assets^(h)		22		9		304		9
Executive recruiting expense⁽ⁱ⁾		86		188		413		188
First-year Sarbanes-Oxley implementation costs^(j)		129		—		469		—
Loss on disposal of fixed assets^(g)										49		22		56		304
Executive recruiting expense^(h)										—		86		—		413
First-year Sarbanes-Oxley implementation costs⁽ⁱ⁾										—		129		961		469
Adjusted EBITDA	$	26,126	$	20,472	$	75,531	$	65,713	$	32,703	$	26,126	$	88,312	$	75,531

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~~The following table reconciles Net income (loss) to Adjusted Net Income:~~

THREE MONTHS ENDED SEPTEMBER 30,

NINE MONTHS ENDED SEPTEMBER 30,


2021

2020

2021

2020

(in thousands)

(in thousands)
Net (loss) income^(a)

$
(1,762)

$
1,227

$
(3,567)

$
5,050
Currency gain (loss)^(a)

(545)

37

(189)

(190)
Equity-based compensation expense^(b)

8,165

1,181

20,846

2,286
Acquisition-related expenses^(c)

7,561

216

9,713

1,165
Integration expense^(d)

—

57

—

57
Transaction-related expenses^(e)

154

487

1,776

487
Severance expense^(f)

—

150

—

361
Reorganization expense^(g)

—

83

—

190
Loss on disposal of fixed assets^(h)

22

9

304

9
Executive recruiting expense⁽ⁱ⁾

86

188

413

188
First-year Sarbanes-Oxley implementation costs^(j)

129

—

469

—
Income tax expense impact of adjustments^(k)

(3,036)

(335)

(5,382)

(600)
Adjusted Net Income

$
10,774

$
3,300

$
24,383

$
9,003

~~The following table reconciles Diluted Earnings Per Share to Adjusted Diluted Earnings Per Share:~~31

THREE MONTHS ENDED SEPTEMBER 30,

NINE MONTHS ENDED SEPTEMBER 30,

2021

2020

2021

2020

(in thousands)
Diluted earnings per share^(a)

$
(0.01)

$
0.01

$
(0.02)

$
0.04
Currency gain (loss)^(a)

—

—

—

—
Equity-based compensation expense^(b)

0.05

0.01

0.13

0.02
Acquisition-related expenses^(c)

0.05

—

0.06

—
Integration expense^(d)

—

—

—

—
Transaction-related expenses^(e)

—

—

0.02

—
Severance expense^(f)

—

—

—

—
Reorganization expense^(g)

—

—

—

—
Loss on disposal of fixed assets^(h)

—

—

—

—
Executive recruiting expense⁽ⁱ⁾

—

—

—

—
First-year Sarbanes-Oxley implementation costs^(j)

—

—

—

—
Income tax expense impact of adjustments^(k)

(0.02)

—

(0.03)

—
Adjusted Diluted Earnings Per Share

$
0.07

$
0.02

$
0.16

$
0.06

Diluted weighted average common shares outstanding

149,016,609

132,407,786

147,894,227

132,407,786
Effect of potentially dilutive shares outstanding ^(l)

4,303,765

—

4,584,295

—
Diluted weighted average common shares outstanding

153,320,374

132,407,786

152,478,522

132,407,786

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The following table reconciles net income (loss) to Adjusted Net Income:

THREE MONTHS ENDED SEPTEMBER 30,

NINE MONTHS ENDED SEPTEMBER 30,


2022

2021

2022

2021

(in thousands)
Net income (loss)^(a)

$
3,936

$
(1,762)

$
5,557

$
(3,567)
Currency (gain) loss^(a)

(2,376)

(545)

(5,639)

(189)
Equity-based compensation expense^(b)

6,804

8,165

23,818

20,846
Amortization of acquisition-related intangible assets^(c)

10,921

8,569

32,900

25,473
Acquisition-related expenses^(d)

253

7,561

1,331

9,713
Transaction-related expenses^(e)

596

154

724

1,776
Severance expense^(f)

722

—

722

—
Loss on disposal of fixed assets^(g)

49

22

56

304
Executive recruiting expense^(h)

—

86

—

413
First-year Sarbanes-Oxley implementation costs⁽ⁱ⁾

—

129

961

469
Income tax expense impact of adjustments^(j)

(4,257)

(5,188)

(12,236)

(11,810)
Adjusted Net Income

$
16,648

$
17,191

$
48,194

$
43,428

The following table reconciles diluted earnings per share to Adjusted Diluted Earnings Per Share:

THREE MONTHS ENDED SEPTEMBER 30,

NINE MONTHS ENDED SEPTEMBER 30,

2022

2021

2022

2021

(in thousands except share and per share data)
Diluted earnings per share^(a)

$
0.02

$
(0.01)

$
0.03

$
(0.02)
Currency gain^(a)

(0.01)

—

(0.04)

—
Equity-based compensation expense^(b)

0.05

0.05

0.16

0.13
Amortization of acquisition-related intangible assets^(c)

0.07

0.05

0.21

0.17
Acquisition-related expenses^(d)

—

0.05

0.01

0.06
Transaction-related expenses^(e)

—

—

—

0.02
Severance expense^(f)

—

—

—

—
Loss on disposal of fixed assets^(g)

—

—

—

—
Executive recruiting expense^(h)

—

—

—

—
First-year Sarbanes-Oxley implementation costs⁽ⁱ⁾

—

—

0.01

—
Income tax expense impact of adjustments^(j)

(0.03)

(0.03)

(0.08)

(0.08)
Adjusted Diluted Earnings Per Share

$
0.10

$
0.11

$
0.30

$
0.28

Diluted weighted average common shares outstanding

157,140,166

149,016,609

156,523,022

147,894,227
Effect of potentially dilutive shares outstanding ^(k)

2,447,479

4,303,765

2,869,512

4,584,295
Diluted weighted average common shares outstanding

159,587,645

153,320,374

159,392,534

152,478,522
(a) Represents amounts as determined under GAAP.

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(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 costs associated with mergers and acquisitions and any retention bonuses pursuant to the acquisitions.

~~(d)~~

~~Represents integration costs related to post-acquisition integration activities.~~

(e)	Represents costs associated with ~~directly expensed costs from the stock~~our public offerings ~~and debt modification.~~that are not capitalized.

(f)	Represents charges for severance provided to former executives and non-executives.

(g)	Represents ~~expense related to reorganization, including legal entity reorganization.~~

~~(h)~~

~~Represents~~ the gain/loss related to disposal of fixed assets.

~~(i)~~(h)

Represents recruiting and relocation expenses related to hiring senior executives.

~~(j)~~(i)

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 in ~~2021.~~2021, as well as implementing cost of ASC 842.

~~(k)~~(j)

Represents the income tax effect of the non-GAAP adjustments calculated using the applicable statutory rate by jurisdiction.

~~(l)~~(k)

Represents potentially dilutive shares that were ~~excluded~~included from ~~the Company's~~our GAAP diluted weighted average common shares ~~outstanding because the Company had a reported net loss and therefore including these shares would have been anti-dilutive.~~outstanding.

Components of Results of Operations

Revenues

Our business generates revenue from the sales of software products and delivery of consulting services.

●

Software. Our software business generates revenues from software licenses, software subscriptions and software maintenance as follows:

●

Software licenses: We recognize revenue for software license fees up front, upon delivery of the software license.

●

Software subscription: Subscription revenue consists of subscription fees to provide our customers access to and related support for our cloud-based solutions. We recognize subscription fees ratably over the term of the subscription, usually one to three years. Any subscription revenue paid ~~up front~~upfront that is not recognized in the current period is included in deferred revenue in our consolidated balance sheet until earned.

●

Software maintenance: Software maintenance revenue includes fees for providing updates and technical support for software offerings. Software maintenance revenue is recognized ratably over the contract term, usually one year.

●

Services. Our services business generates revenues primarily from ~~technology-enabled~~technology-driven services and professional services, which include software implementation services. Our service arrangements are time and materials, fixed

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fee, or prepaid. Revenues are recognized over the time services are performed for time and materials, and over time by estimating progress to completion for fixed fee and prepaid services.

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Cost of Revenues

Cost of revenues consists primarily of employee related expenses, equity-based compensation, the costs of third-party subcontractors, travel costs, distributor fees, amortization of capitalized software and allocated overhead. We may add or expand computing infrastructure service providers, make additional investments in the availability and security of our solutions, or add resources to support our growth.

Operating Expenses

●

Sales and Marketing. Sales and marketing expense consists primarily of employee-related expenses, equity-based compensation, sales commissions, brand development, advertising, travel-related expenses and industry conferences and events. We plan to continue to invest in sales and marketing to increase penetration of our existing client base and expand to new clients.

●

Research and Development. ~~R&D~~Research and development expense accounts for a significant portion of our operating expenses. We recognize expenses as incurred. ~~Research and development~~R&D expenses consist primarily of employee-related expenses, equity-based compensation, third-party consulting, allocated software costs and tax credits. We plan to continue to invest in our R&D efforts to enhance and scale our software product offerings by development of new features and increased functionality.

●

General and Administrative. General and administrative expense consists of personnel-related expenses associated with our executive, legal, finance, human resources, information technology, and other administrative functions, including salaries, benefits, bonuses, and equity-based compensation. General and administrative expense also includes professional fees for external legal, accounting and other consulting services, allocated overhead costs, and other general operating expenses.

We expect to increase the size of our general and administrative staff to support the anticipated growth of our business. As a public company, we expect to incur significant expenses on an ongoing basis that we did not incur as a private company. Those costs include additional director and officer liability insurance ~~expense,~~expenses, as well as third-party and internal resources related to accounting, auditing, ~~SOX~~Sarbanes-Oxley compliance, legal, and investor and public relations expenses. As a result, we expect the dollar amount of our general and administrative expense to increase for the foreseeable future. Excluding public company expenses, we expect general and administrative expense to grow at a rate lower than revenues.

●

Intangible Asset Amortization. Intangible asset amortization consists primarily of amortization expense related to intangible assets recorded in connection with acquisitions and amortization of ~~capitalize~~capitalized software development costs.

●

Depreciation and Amortization Expense. Depreciation and amortization expense consists of depreciation of property and equipment and amortization of leasehold improvements.

Other Expenses

●

Interest Expense. Interest expense consists primarily of interest expense associated with the Credit ~~Facilities,~~Agreement, including amortization of debt issuance costs and discounts. We expect interest expense to decline as a result of lower outstanding indebtedness going forward.

●

Miscellaneous. Miscellaneous expense consists of miscellaneous non-operating expenses primarily comprised of foreign exchange transaction gains and losses.

●

Provision for (Benefit from) Income Taxes. Provision for (benefit from) income taxes consists of U.S. federal and state income taxes and income taxes in certain foreign jurisdictions in which we conduct business. We expect income tax expense to increase over time as ~~the Company continues~~we continue to grow net income.

31

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~~Acquisition~~Acquisitions

On March 2, 2021, we completed a transaction ~~which~~that qualified as a business ~~combination.~~combination for a total consideration of $2.7 million. The business combination was not ~~material~~significant to our ~~condensed~~ consolidated financial statements. Based on ~~the Company’s preliminary~~our purchase price allocation, approximately $1.2 million, $0.1 million and ~~$1.1~~$1.2 million of the purchase price was assigned to customer relationships, non-compete agreements and goodwill, respectively.

On June 7, 2021, we completed a transaction ~~which~~that qualified as a business ~~combination.~~combination for a total consideration of $15.2 million. The business combination was not ~~material~~significant to our ~~condensed~~ consolidated financial statements. Based on ~~the Company’s preliminary~~our purchase price allocation, approximately $7.4 million and $4.7 million of the purchase price was assigned to customer relationships and goodwill, respectively.

~~Subsequent to the quarter end, on~~On October 1, 2021, we completed ~~our~~the acquisition of 100% of the equity of Pinnacle ~~21, LLC (“Pinnacle”)~~for a total consideration of $339.1 million, consisting of cash $266.3 million ($246.9 million net with cash acquired from the acquisition) and 2,239,717 shares of our restricted common stock. Based on our purchase price allocation, approximately $15.8 million, $103.0 million, $24.6 million and $180.9 million of the purchase price was assigned to trademark, acquired software, customer relationships, and goodwill, respectively. Pinnacle has been included in our condensed consolidated results of operations since the date of acquisition.

On January 3, 2022, we completed the acquisition of Integrated Nonclinical Development Solutions, Inc., a company that ~~develops advanced~~provides the SEND Explorer software and drug development consulting. This acquisition, for ~~standards-based data management for regulatory submissions, for~~a total consideration of ~~$250.0~~$8.0 million, ~~cash~~qualified as a business combination. The business combination was not significant to our condensed consolidated financial statements. Based on the purchase price allocation, approximately $2.4 million, $1.0 million, $0.1 million, and ~~2,239,717 shares of restricted common stock~~$2.9 million of the ~~Company. We expect~~purchase price was assigned to ~~complete the initial accounting for the acquisition of Pinnacle 21, LLC, including the allocation of purchase consideration,~~customer relationships, developed technology, non-compete agreements, and goodwill, respectively

For more information about our acquisitions, see Note 5. “Business Combinations” in the ~~fourth quarter of 2021.~~notes to the condensed consolidated financial statements.

Results of Operations

We have included the results of operations of acquired companies in our consolidated results of operations from the date of their respective acquisitions, which impacts the comparability of our results of operations when comparing results for the three and nine months ended September 30, ~~2021~~2022 to the three and nine months ended September 30, ~~2020.~~2021.

Three Months Ended September 30, ~~2021~~2022 Versus Three Months Ended September 30, ~~2020~~2021

The following table summarizes our unaudited statements of operations data for the three months ended September 30, ~~2021~~2022 and ~~2020:~~2021:

Revenues


	THREE MONTHS ENDED SEPTEMBER 30,				CHANGE				THREE MONTHS ENDED SEPTEMBER 30,				CHANGE
	2021		2020		$		%		2022		2021		$		%

	( in thousands)								( in thousands)
Software	$	19,268	$	17,717	$	1,551	9	%	$	28,392	$	19,268	$	9,124	47	%
Services		54,676		42,600		12,076	28	%		56,308		54,676		1,632	3	%
Total revenues	$	73,944	$	60,317	$	13,627	23	%	$	84,700	$	73,944	$	10,756	15	%

Table of Contents

Revenues increased ~~$13.6~~$10.8 million, or ~~23%~~15%, to ~~$73.9~~$84.7 million for the three months ended September 30, ~~2021~~2022 as compared to the same period in ~~2020.~~2021. Excluding $7.7 million revenue from Pinnacle, which was acquired in late 2021, the revenues increased $3.0 million, or 4%. The overall increase in revenues was primarily due to growth in our ~~technology-enabled~~technology-driven services and software product offerings from strong renewal rates, client expansion, and new ~~customers.~~customers as well as business acquisitions. The increase was partially offset by the negative impact on our revenue from fluctuation of the foreign currency exchange rates.

Software ~~revenue~~revenues increased ~~$1.6~~$9.1 million, or 9%47%, to ~~$19.3~~$28.4 million for the three months ended September 30, ~~2021~~2022 as compared to the same period in ~~2020, driven primarily by $1.5~~2021. Excluding $7.3 million ~~growth in~~revenue from Pinnacle, the revenues from software increased $1.9 million, or 10%. The overall growth is primarily attributable to maintaining high net revenue retention rates and renewal rates ~~and new customers~~ for our core software ~~products.~~products, growth from acquisitions and new customers. The increase was partially offset by the negative impact on our revenue from fluctuation of the foreign currency exchange rates.

Services ~~revenue~~revenues increased ~~by $12.1~~$1.6 million, or ~~28%~~3%, to ~~$54.7~~$56.3 million for the three months ended September 30, ~~2021~~2022, as compared to the same period in ~~2020, driven by~~2021. The growth in ~~our technology-enabled~~overall services ~~which resulted from strong~~revenue is primarily attributable to continued growth in ~~biosimulation and regulatory services.~~

~~Table~~biosimulation. The increase was partially offset by the negative impact on our revenue from fluctuation of ~~Contents~~the foreign currency exchange rates.

Cost of Revenues


	THREE MONTHS ENDED SEPTEMBER 30,				CHANGE				THREE MONTHS ENDED SEPTEMBER 30,				CHANGE
	2021		2020		$		%		2022		2021		$		%

	(in thousands)								(in thousands)
Cost of revenues	$	28,769	$	23,030	$	5,739	25	%	$	32,812	$	28,769	$	4,043	14	%

Cost of revenues increased by ~~$5.7~~$4.0 million, or ~~25%~~14%, to ~~$28.8~~$32.8 million for the three months ended September 30, ~~2021~~2022 as compared to the same period in ~~2020.~~2021. The increase was primarily due to a ~~$4.0~~$1.6 million increase in intangible assets amortization, a $1.0 million increase in stock-based compensation costs, a $0.4 million increase in employee-related costs, ~~resulting from billable head count growth and~~ a ~~$1.4~~$0.4 million increase in ~~stock-based compensation costs. The remaining~~equipment and travel expenses, and a $0.5 million increase ~~is primarily due~~related to ~~consulting costs.~~cost of licenses.

Sales and Marketing Expenses


	THREE MONTHS ENDED SEPTEMBER 30,						CHANGE				THREE MONTHS ENDED SEPTEMBER 30,						CHANGE
	2021			2020			$		%		2022			2021			$		%

	(in thousands)										(in thousands)
Sales and marketing	$	5,082		$	3,106		$	1,976	64	%	$	6,376		$	5,082		$	1,294	25	%
% of total revenues		7	%		5	%						8	%		7	%

Sales and marketing expenses increased by ~~$2.0~~$1.3 million, or ~~64%~~25%, to ~~$5.1~~$6.4 million for the three months ended September 30, ~~2021~~2022 as compared to the same period in ~~2020.~~2021. Sales and marketing expenses increased primarily due to a $1.1 million increase in employee-related costs resulting from head count growth, and a ~~$0.6~~$0.5 million increase in marketing, consulting and travel costs, partially offset by a $0.4 million decrease in stock-based compensation costs.

Research and Development Expenses


	THREE MONTHS ENDED SEPTEMBER 30,						CHANGE				THREE MONTHS ENDED SEPTEMBER 30,						CHANGE
	2021			2020			$		%		2022			2021			$		%

	(in thousands)										(in thousands)
Research and development	$	4,530		$	3,295		$	1,235	37	%	$	6,318		$	4,530		$	1,788	39	%
% of total revenues		6	%		5	%						7	%		6	%

Research and development expenses increased by ~~$1.2~~$1.8 million, or ~~37%~~39%, to ~~$4.5~~$6.3 million for the three months ended September 30, ~~2021~~2022, as compared to the same period in ~~2020.~~2021. The increase in ~~R&D~~research and development expenses was

Table of Contents

primarily due to a ~~$0.9~~$2.3 million increases in employee-related costs primarily resulting from head count growth and a ~~$0.5~~$0.4 million increase in stock-based compensation ~~costs.~~cost, partially offset by a $0.9 million increase in capitalized cost in R&D.

General and Administrative Expenses


	THREE MONTHS ENDED SEPTEMBER 30,						CHANGE				THREE MONTHS ENDED SEPTEMBER 30,						CHANGE
	2021			2020			$		%		2022			2021			$		%

	(in thousands)										(in thousands)
General and administrative	$	26,199		$	13,403		$	12,796	95	%	$	17,327		$	26,199		$	(8,872)	(34)	%
% of total revenues		35	%		22	%						20	%		35	%

General and administrative expenses ~~increased~~decreased by ~~$12.8~~$8.9 million, or ~~95%~~34%, to ~~$26.2~~$17.3 million for the three months ended September 30, ~~2021~~2022 as compared to the same period in ~~2020.~~2021. The ~~increase~~decrease in general and administrative expenses was primarily due to a $7.5 million ~~increase~~decrease in business acquisition costs, ~~a $4.6~~$2.4 million ~~increase~~decrease in stock-based compensation costs, partially offset by a ~~$0.7~~$0.5 million increase in ~~insurance expenses,~~employee-related costs, and a ~~$0.3 milllion~~$0.4 million increase in ~~employee related costs.~~transaction cost.

33

~~Table of Contents~~

Intangible Asset Amortization


	THREE MONTHS ENDED SEPTEMBER 30,						CHANGE				THREE MONTHS ENDED SEPTEMBER 30,						CHANGE
	2021			2020			$		%		2022			2021			$		%

	(in thousands)										(in thousands)
Intangible asset amortization	$	9,592		$	9,374		$	218	2	%	$	10,591		$	9,592		$	999	10	%
% of total revenues		13	%		16	%						13	%		13	%

Intangible asset amortization expense increased by ~~$0.2~~$1.0 million, or 2%10%, to ~~$9.6~~$10.6 million for the three months ended September 30, ~~2021~~2022, as compared to the same period in ~~2020.~~2021. The increase in intangible asset amortization expense iswas primarily due to increased amortization cost from the acquired intangible assets.

Depreciation and Amortization Expense


	THREE MONTHS ENDED SEPTEMBER 30,						CHANGE				THREE MONTHS ENDED SEPTEMBER 30,						CHANGE
	2021			2020			$		%		2022			2021			$		%

	(in thousands)										(in thousands)
Depreciation and amortization	$	533		$	614		$	(81)	(13)	%	$	417		$	533		$	(116)	(22)	%
% of total revenues		1	%		1	%						0	%		1	%

Depreciation and amortization expense ~~of $0.5 million was relatively flat for the three months ended September 30, 2021 as compared to the same period in 2020.~~

~~Interest Expense~~

THREE MONTHS ENDED SEPTEMBER 30,

CHANGE


2021

2020

$

%

(in thousands)

Interest expense

$
3,289

$
5,929

$
(2,640)

(45)
%
% of total revenues

4
%

10
%





~~Interest expense~~ decreased ~~$2.6~~by $0.1 million, or ~~45%~~22%, to ~~$3.3~~$0.4 million for the three months ended September 30, ~~2021~~2022, as compared to the same period in ~~2020.~~2021. The decrease ~~in interest expense~~ was primarily due to ~~lower average outstanding principal balances on our credit facilities~~a decrease in ~~the third quarter of 2021 compared to the same period in 2020.~~
~~Miscellaneous, net~~

THREE MONTHS ENDED SEPTEMBER 30,

CHANGE


2021

2020

$

%

(in thousands)

Miscellaneous, net

$
(657)

$
(11)

$
(646)

nm

% of total revenues

(1)
%

(0)
%





~~Miscellaneous income was $0.7 million~~depreciation from computer equipment and furniture for the three months ended September 30, ~~2021~~2022, as compared to ~~miscellaneous expenses of $0.0 million for~~ the same period in ~~2020. The change was primarily due to $0.6 million currency translation gains.~~2021.
Interest Expense


THREE MONTHS ENDED SEPTEMBER 30,

CHANGE


2022

2021

$

%

(in thousands)

Interest expense

$
5,221

$
3,289

$
1,932

59
%
% of total revenues

6
%

4
%

Table of Contents

Interest expense increased by $1.9 million, or 59%, to $5.2 million for the three months ended September 30, 2022 as compared to the same period in 2021. The increase in interest expense was primarily due to increased interest on term loan debt due to market interest rates increase reflected on the debt interest.

Other, net

THREE MONTHS ENDED SEPTEMBER 30,

CHANGE


2022

2021

$

%

(in thousands)

Other, net

$
(2,855)

$
(657)

$
(2,198)

335
%
% of total revenues

(3)
%

(1)
%





Net other income increased by $2.2 million, to $2.9 million for the three months ended September 30, 2022 as compared to the same period in 2021. The increase in other income was primarily due to a $2.0 million increase in remeasurement gains related to the fluctuation of foreign currency exchange rates and a $0.2 million increase in interest income.
Provision for Income Taxes

THREE MONTHS ENDED SEPTEMBER 30,

CHANGE

THREE MONTHS ENDED SEPTEMBER 30,

CHANGE


2021

2020

$

%


2022

2021

$

%

( in thousands)

( in thousands)

Provision for income taxes

$
(1,631)

$
350

$
(1,981)

(566)
%

$
4,557

$
(1,631)

$
6,188

379
%
Effective income tax rate

48
%

22
%





54
%

48
%





~~Our income~~Income tax ~~benefit~~expense was ~~$1.6~~$4.6 million, resulting in an effective income tax rate of ~~48%~~54% for the three months ended September 30, ~~2021~~2022 as compared to income tax ~~expense~~benefit of ~~$0.4~~$1.6 million, or an effective income tax rate of ~~22%~~48%, for the same period in ~~2020.~~2021. Our income tax expense for the three months ended September 30, ~~2021 was primarily due to the discrete tax effect of certain prior period swap losses that are required to be excluded from the EAETR calculation~~2022 and ~~the overall increase in pre-tax book loss. Our income tax expense for the three months ended September 30, 2020~~2021 was primarily due to the tax effects of U.S. pre-tax income, the impact of non-deductible items, the effects of tax elections made for U.K. earnings, the relative mix of domestic and international earnings, and discrete tax ~~items.~~items including $1.4 million corporate income taxes and interest assessed by the Portuguese Tax Authority (“PTA”) for 2012, 2014, and 2019.
Net Income (loss)

THREE MONTHS ENDED SEPTEMBER 30,

CHANGE

THREE MONTHS ENDED SEPTEMBER 30,

CHANGE


2021

2020

$

%


2022

2021

$

%

(in thousands)

(in thousands)

Net income (loss)

$
(1,762)

$
1,227

$
(2,989)

(244)
%

$
3,936

$
(1,762)

$
5,698

323
%

Net ~~loss~~income was $3.9 million, representing a $5.7 million increase in net income for the ~~third quarter of 2021 was $1.8 million,~~three months ended September 30, 2022 as compared to a net ~~income~~loss of ~~$1.2~~$1.8 million in the ~~third quarter~~same period of ~~2020.~~2021. The ~~loss~~increase in net income was primarily due to a ~~$7.0~~$10.8 million increase in ~~stock-based compensation expense,~~total revenue, a ~~$7.5~~$4.9 million decrease in operating expenses, and a $2.0 million currency gain, partially offset by a $4.0 million increase in ~~acquisition~~ cost of revenue, a $6.2 million increase in tax expense, and ~~other employee related costs. The loss was partially offset by higher revenues and lower~~a $1.9 million increase in interest ~~expense in the third quarter~~expense.

Table of ~~2021.~~Contents

Nine Months Ended September 30, ~~2021~~2022 Versus Nine Months Ended September 30, ~~2020~~2021

The following table summarizes our unaudited statements of operations data for the nine months ended September 30, ~~2021~~2022 and ~~2020:~~2021:

Revenues

NINE MONTHS ENDED SEPTEMBER 30,

CHANGE


2021

2020

$

%

( in thousands)

Software

$
61,284

$
55,925

$
5,359

10
%
Services

149,474

122,964

26,510

22
%
Total revenues

$
210,758

$
178,889

$
31,869

18
%

NINE MONTHS ENDED SEPTEMBER 30,

CHANGE


2022

2021

$

%

( in thousands)

Software

$
86,309

$
61,284

$
25,025

41
%
Services

162,702

149,474

13,228

9
%
Total revenues

$
249,011

$
210,758

$
38,253

18
%

Revenues increased ~~$31.9~~$38.3 million, or 18%, to ~~$210.8~~$249.0 million for the nine months ended September 30, ~~2021~~2022 as compared to the same period in ~~2020.~~2021. Excluding $20.7 million revenue from Pinnacle, which was acquired in late 2021, the revenues increased $17.6 million, or 8%. The overall increase in revenues was primarily due to growth in ~~both~~ our technology-driven services and software product offerings ~~primarily related to~~from strong renewal rates, client ~~expansions~~expansion, and new customers ~~in both~~as well as business acquisitions. The increase was partially offset by the negative impact on our ~~technology-enabled service product lines and software.~~revenue from fluctuation of the foreign currency exchange rates.
Software ~~revenue~~revenues increased ~~by $5.4~~$25.0 million, or ~~10%~~41%, to ~~$61.3~~$86.3 million for the nine months ended September 30, ~~2021~~2022 as compared to the same period in ~~2020, driven primarily by 10% or $5.2~~2021. Excluding $19.3 million ~~growth~~ in revenue from ~~subscriptions~~Pinnacle, the revenues from software increased $5.7 million, or 9%. The overall growth is primarily attributable to maintaining high net revenue retention rates and ~~license products offerings. The revenue growth was driven by strong~~ renewal rates for our core software products, growth from acquisitions and new ~~customers~~customers. The increase was partially offset by the negative impact on our revenue from ~~software products.~~fluctuation of the foreign currency exchange rates.
Services ~~revenue~~revenues increased ~~by $26.5~~$13.2 million, or ~~22%~~9%, to ~~$149.5~~$162.7 million for the nine months ended September 30, ~~2021~~2022 as compared to the same period in ~~2020, driven by~~2021. The growth in overall services revenue is primarily attributable to continued growth in biosimulation. The increase was partially offset by the negative impact on our ~~technology-enabled biosimulation and regulatory services.~~

~~Table~~revenue from fluctuation of ~~Contents~~

the foreign currency exchange rates.

Cost of Revenues


	NINE MONTHS ENDED SEPTEMBER 30,				CHANGE				NINE MONTHS ENDED SEPTEMBER 30,				CHANGE
	2021		2020		$		%		2022		2021		$		%

	(in thousands)								(in thousands)
Cost of revenues	$	82,327	$	65,860	$	16,467	25	%	$	100,795	$	82,327	$	18,468	22	%

Cost of revenues increased by ~~$16.5~~$18.5 million, or ~~25%~~22%, to ~~$82.3~~$100.8 million for the nine months ended September 30, ~~2021~~2022 as compared to the same period in ~~2020.~~2021. The increase was primarily due to a ~~$10.4~~$9.2 million increase in employee-related costs resulting from billable head count growth, a ~~$3.6~~$5.0 million increase in intangible assets amortization, a $3.1 million increase in stock-based compensation ~~costs,~~cost, a $1.3 million increase related to cost of licenses, and a ~~$2.3~~$1.4 million increase in travel, equipment and other miscellaneous operating expenses, partially offset by a $1.7 million decrease in consulting ~~costs.~~and professional services.

Table of Contents

Sales and Marketing Expenses


	NINE MONTHS ENDED SEPTEMBER 30,						CHANGE				NINE MONTHS ENDED SEPTEMBER 30,						CHANGE
	2021			2020			$		%		2022			2021			$		%

	(in thousands)										(in thousands)
Sales and marketing	$	13,423		$	8,773		$	4,650	53	%	$	19,608		$	13,423		$	6,185	46	%
% of total revenues		6	%		5	%						8	%		6	%

Sales and marketing expenses increased by ~~$4.7~~$6.2 million, or ~~53%~~46%, to ~~$13.4~~$19.6 million for the nine months ended September 30, ~~2021~~2022 as compared to the same period in ~~2020.~~2021. Sales and marketing expenses increased primarily due to a ~~$2.9~~$4.5 million increase in employee-related costs resulting from head count growth, a $1.6 million increase in travel, consulting and professional services, marketing, equipment, and other miscellaneous operating expenses.

Research and Development Expenses

NINE MONTHS ENDED SEPTEMBER 30,

CHANGE


2022

2021

$

%

(in thousands)

Research and development

$
21,607

$
13,862

$
7,745

56
%
% of total revenues

9
%

7
%





Research and development expenses increased by $7.7 million, or 56%, to $21.6 million for the nine months ended September 30, 2022 as compared to the same period in 2021. The increase in research and development expenses was primarily due to a $7.6 million increase in employee-related costs primarily resulting from headcount growth and a $2.6 million increase in stock-based compensation cost, partially offset by a $2.7 million increase in capitalized cost in R&D.

General and Administrative Expenses


NINE MONTHS ENDED SEPTEMBER 30,

CHANGE


2022

2021

$

%

(in thousands)

General and administrative

$
53,444

$
60,795

$
(7,351)

(12)
%
% of total revenues

21
%

29
%





General and administrative expenses decreased by $7.4 million, or 12%, to $53.4 million for the nine months ended September 30, 2022, as compared to the same period in 2021. The decrease in general and administrative expenses was primarily due to a $8.9 million decrease in acquisition-related costs, a $2.7 million decrease in stock-based compensation costs, and a $1.1 million decrease in transaction costs, partially offset by a $3.0 million increase in employee-related costs resulting from head count growth, and a ~~$1.5~~$1.8 million increase in ~~stock-based compensation costs.~~professional and consulting expenses.
~~Research and Development Expenses~~Intangible Asset Amortization

NINE MONTHS ENDED SEPTEMBER 30,

CHANGE


NINE MONTHS ENDED SEPTEMBER 30,

CHANGE


2021

2020

$

%


2022

2021

$

%

(in thousands)

(in thousands)

Research and development

$
13,862

$
9,139

$
4,723

52
%
Intangible asset amortization

$
31,095

$
28,527

$
2,568

9
%
% of total revenues

7
%

5
%





12
%

14
%





~~Research and development expenses~~Intangible asset amortization expense increased by ~~$4.7~~$2.6 million, or ~~52%~~9%, to ~~$13.9~~$31.1 million for the nine months ended September 30, ~~2021~~2022 as compared to the same period in ~~2020.~~2021. The increase in ~~R&D expenses was~~intangible asset amortization expense is primarily due to ~~a $2.9 million increases in employee-related~~increased amortization costs ~~resulting~~ from head count growth and a $1.4 million increase in stock-based compensation costs. The remaining increases were primarily due to an increase in consulting costs and an increase in cost due to lower software capitalization.the acquired intangible assets.

~~General and Administrative Expenses~~40

NINE MONTHS ENDED SEPTEMBER 30,

CHANGE


2021

2020

$

%

(in thousands)

General and administrative

$
60,795

$
36,125

$
24,670

68
%
% of total revenues

29
%

20
%





General and administrative expenses increased by $24.7 million, or 68%, to $60.8 million for the nine months ended September 30, 2021 as compared to the same period in 2020. The increase in general and administrative expenses was primarily due to a $12.0 million increase in stock-based compensation costs, $9.4 million increase in acquisition costs, and $2.1 million increase in insurance costs. The remaining increases are due to increases in public company costs, stock

Table of Contents

~~offering costs, first-year Sarbanes-Oxley implementation costs,~~Depreciation and ~~executive recruiting costs. The increases were partially offset by decreases in consulting cost, travel and entertainment related costs, office supplies and facilities costs.~~

~~Intangible Asset~~ Amortization Expense


	NINE MONTHS ENDED SEPTEMBER 30,						CHANGE				NINE MONTHS ENDED SEPTEMBER 30,						CHANGE
	2021			2020			$		%		2022			2021			$		%

	(in thousands)										(in thousands)
Intangible asset amortization	$	28,527		$	28,056		$	471	2	%
Depreciation and amortization											$	1,321		$	1,687		$	(366)	(22)	%
% of total revenues		14	%		16	%						1	%		1	%

~~Intangible asset~~Depreciation and amortization expense ~~increased~~decreased by ~~$0.5~~$0.4 million, or 2%22%, to ~~$28.5~~$1.3 million for the nine months ended September 30, ~~2021~~2022 as compared to the same period in ~~2020.~~2021. The ~~increase in intangible asset amortization expense is~~decrease was primarily due to ~~$0.3 million~~a decrease in ~~amortization cost~~depreciation from computer equipment and furniture for the nine months ended September 30, 2022 as compared to the same period in ~~acquired intangibles and $0.2 million increase in amortization cost in capitalized software development.~~2021.

~~Depreciation and Amortization~~

Interest Expense


	��	NINE MONTHS ENDED SEPTEMBER 30,						CHANGE				NINE MONTHS ENDED SEPTEMBER 30,						CHANGE
		2021			2020			$		%		2022			2021			$		%

		(in thousands)										(in thousands)
Depreciation and amortization		$	1,687		$	1,836		$	(149)	(8)	%
Interest expense												$	12,328		$	13,549		$	(1,221)	(9)	%
% of total revenues			1	%		1	%						5	%		6	%

~~Depreciation and amortization~~Interest expense ~~was $1.7~~decreased by $1.2 million, or 9%, to $12.3 million for the nine months ended September 30, ~~2021, a decrease of $0.1 million, or 8%~~2022 as compared to the same period in ~~2020. The decrease was primarily due to decrease in depreciation in leasehold improvement and computer equipment.~~

~~Interest Expense~~

NINE MONTHS ENDED SEPTEMBER 30,

CHANGE


2021

2020

$

%

(in thousands)

Interest expense

$
13,549

$
19,810

$
(6,261)

(32)
%
% of total revenues

6
%

11
%





~~Interest expense decreased by $6.3 million, or 32%, to $13.5 million for the nine months ended September 30, 2021 as compared to the same period in 2020.~~2021. The decrease in interest expense was primarily due to ~~lower average outstanding principal balances on our credit facilities in the first nine months~~$3.3 million of ~~2021 compared to the same period in 2020. The decrease in interest expense was partially offset by~~ interest expense reclassed in from other comprehensive income due to hedge ~~ineffectiveness.~~ineffectiveness in 2021, and partially offset by a $1.9 million interest increase on term loan debt.
~~Miscellaneous,~~Other, net

NINE MONTHS ENDED SEPTEMBER 30,

CHANGE

NINE MONTHS ENDED SEPTEMBER 30,

CHANGE


2021

2020

$

%


2022

2021

$

%

(in thousands)

(in thousands)

Miscellaneous, net

$
(194)

$
(456)

$
262

(57)
%
Others, net

$
(6,217)

$
(194)

$
(6,023)

nm

% of total revenues

(0)
%

(0)
%





(2)
%

(0)
%

~~Table~~Net of ~~Contents~~

~~Miscellaneous incomes decreased~~other income increased by ~~$0.3~~$6.0 million to $6.2 million for the nine months ended September 30, ~~2021~~2022 as compared ~~for~~to the same period in ~~2020.~~2021. The ~~decrease~~increase in other income was primarily due to a $5.3 million increase in remeasurement gains related to the fluctuation of foreign currency exchange rates, a $0.3 million ~~loss recorded~~increase in ~~the current period~~other foreign currency transactions, and a $0.2 million decrease in losses from fixed asset disposal.

Provision for ~~disposal of fixed assets.~~Income Taxes

~~Provision for Income Taxes~~


	NINE MONTHS ENDED SEPTEMBER 30,						CHANGE				NINE MONTHS ENDED SEPTEMBER 30,						CHANGE
	2021			2020			$		%		2022			2021			$		%

	( in thousands)										( in thousands)
Provision for income taxes	$	349		$	4,696		$	(4,347)	(93)	%	$	9,473		$	349		$	9,124	nm
Effective income tax rate		(11)	%		48	%						63	%		(11)	%

~~Our income~~Income tax expense was ~~$0.3~~$9.5 million, resulting in an effective income tax rate of ~~(11)%~~63% for the nine months ended September 30, ~~2021~~2022 as compared to an income tax expense of ~~$4.7~~$0.3 million, or an effective income tax rate of ~~48%~~(11)%, for the same period in ~~2020.~~2021. Our income tax expense for the nine months ended September 30, ~~2021 was primarily due to the discrete tax effect of certain prior period swap losses that are required to be excluded from the EAETR calculation~~2022 and ~~the overall increase in pre-tax book loss. Our income tax expense for the nine months ended September 30, 2020~~2021 was primarily due to the tax effects of U.S. pre-tax income, the impact of non-deductible items, the effects of tax elections made for U.K. earnings,

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and the relative mix of domestic and international earnings and discrete tax ~~items.~~items including $1.4 million for corporate income taxes and interest assessed by the Portuguese Tax Authority (“PTA”) for 2012, 2014, and 2019.

Net Income (loss)


		NINE MONTHS ENDED SEPTEMBER 30,				CHANGE				NINE MONTHS ENDED SEPTEMBER 30,				CHANGE
		2021		2020		$		%		2022		2021		$		%

		(in thousands)								(in thousands)
Net income (loss)	$		(3,567)	$	5,050	$	(8,617)	(171)	%	$	5,557	$	(3,567)	$	9,124	256	%

Net ~~loss was $3.6~~income increased by a $9.1 million, or 256%, to $5.6 million for the nine months ended September 30, ~~2021~~2022, as compared to a net ~~income~~loss of ~~$5.1~~$3.6 million ~~for~~in the same period of 2021. The $9.1 increase in ~~2020. The loss~~net income was primarily due to ~~$18.6~~a $38.3 million increase in ~~stock based compensation~~total revenue, a $5.7 million foreign currency gains related to remeasurement and other currency gains, and a $1.2 million decrease in interest expense, ~~$15.7~~partially offset by a $18.5 million increase in ~~employee related costs, and $9.4~~cost of revenue, an $8.8 million increase in ~~acquisition costs. The loss was partially offset by increased revenue~~operating expenses, and ~~lower interest expense~~a $9.1 million increase in ~~the first nine months of 2021.~~tax expense.

Liquidity and Capital Resources

We have consistently generated positive cash flow from operations, providing $57.1 million and $39.6 million as a source of funds for the nine months ended September 30, 2022 and 2021, respectively. Our additional liquidity comes from several sources: maintaining adequate balances of cash and cash equivalents, issuing common stock, and accessing credit facilities and revolving lines of credit. The following table provides a summary of the major sources of liquidity for periods ended at September 30, 2022 and December 31, 2021 and as of September 30, 2022 and December 31, 2021.

September 30, 2022

December 31, 2021

(in thousands)
Net cash from operating activities

$
57,058

$
60,388
Cash and cash equivalents⁽¹⁾

$
210,509

$
185,797
Net proceeds from issuing common stock

$
—

$
133,351
Term loan credit facilities

$
298,225

$
300,490
Revolving line of credit

$
100,000

$
100,000
(1) Cash balance as of September 30, 2022 included $46.0 million cash and cash equivalents held outside of the United States.
Our material cash requirements from known contractual obligations are principal and interest payments of long-term debt. We also have future cash obligations of $12.6 million for lease contracts, which have remaining terms of one to six years.

The principal amount of long-term debt outstanding as of September 30, 2022 matures in the following years:


Remainder of 2022

2023

2024

2025

2026

TOTAL
Maturities

$
755

$
3,020

$
3,020

$
3,020

$
288,410

$
298,225

We assess our liquidity in terms of our ability to generate adequate amounts of cash to meet current and future needs. We believe our existing sources of liquidity will be sufficient to meet our working capital, capital expenditures, and contractual obligations for the foreseeable future. Our expected primary uses on a short-term and long-term basis are for repayment of debt, interest payments, working capital, capital expenditures, geographic or service offering expansion, acquisitions, investments, and other general corporate purposes. We have historically funded our operations primarily through cash generated from operations. We have historically used long-term debt and cash on hand to fund acquisitions. We hold our cash balances in the United States and numerous locations in the rest of the world.

~~As of September 30, 2021, we had cash and cash equivalents $416.9 million, of which $35.6 million represents cash and cash equivalents held outside of the United States.~~42

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investments, and other general corporate purposes. We believe we will meet short and longer-term expected future cash requirements and obligations through a combination of cash flows from operating activities, available cash balances, and potential future equity or debt transactions.

Our future capital requirements, however, will depend on many factors, including funding for potential acquisitions, investments, and other growth and strategic opportunities, which could increase our cash requirements. While we believe we have, and will be able to generate, sufficient liquidity to fund our operations for the foreseeable future, our sources of liquidity could be affected by factors described under “Risk Factors” in our 2021 Annual Report.

Cash Flows

The following table presents a summary of our cash flows for the periods shown:


	NINE MONTHS ENDED SEPTEMBER 30,				NINE MONTHS ENDED SEPTEMBER 30,
	2021		2020		2022		2021

	(in thousands)				(in thousands)
Net cash provided by operating activities	$	39,557	$	32,129	$	57,058	$	39,557
Net cash used in investing activities		(20,599)		(7,209)		(15,238)		(20,599)
Net cash provided by (used in) financing activities		127,035		(24,103)
Effect due to foreign exchange rate changes on cash, cash equivalents, and restricted cash		(1,326)		1,170
Net (decrease) increase in cash, cash equivalents, and restricted cash	$	144,667	$	1,987
Net cash used in financing activities						(6,395)		127,035
Effect of foreign exchange rate changes on cash and cash equivalents, and restricted cash						(8,266)		(1,326)
Net increase in cash and cash equivalents, and restricted cash					$	27,159	$	144,667
Cash paid for interest	$	10,671	$	21,077	$	12,310	$	10,671
Cash paid for income taxes	$	6,744	$	6,675	$	7,784	$	6,744

Operating Activities

~~Cash~~Our cash flows from operating activities primarily include net income adjusted for (i) non-cash items included in net income, such as provisions for credit losses, depreciation and amortization, stock-based compensation, deferred taxes and other non-cash items and (ii) changes in the balances of operating assets and liabilities.Net cash provided by operating activities in the first nine months of ~~2021~~2022 was ~~$39.6~~$57.1 million, compared to ~~$32.1~~$39.6 million in the same period of ~~2020.~~2021. The ~~$7.4~~$17.5 million increase in cash from operating activities was primarily due to ~~decreased interest payments for the current period and higher~~ cash collected from ~~revenue generated sales activities,~~higher revenues and less cash used for prepaid and other assets, partially offset by the increase in cash ~~outflow from higher employee related expenses.~~utilized for accounts payable and other liabilities.

Investing Activities

~~Cash~~Net cash used by investing activities in the first nine months of ~~2021~~2022 was ~~$20.6~~$15.2 million, ~~an increase~~a decrease of ~~$13.4~~$5.4 million, compared to ~~$7.2~~$20.6 million in the same period of ~~2020. During the nine months ended September 30, 2021,~~2021. The change in investing activities ~~used~~was primarily due to an $8.2 million decrease in cash ~~primarily for investing~~payments in connection with business acquisitions, partially offset by a $2.9 million increase in cash utilized in capitalized ~~software~~ development costs and capital expenditures to support our growth.

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Financing Activities

~~Cash provided~~Net cash used by financing activities in the first nine months of ~~2021~~2022 was ~~$127.0~~$6.4 million, compared to ~~$24.1million~~$127.0 million cash ~~used~~provided in the same period of ~~2020.~~2021. The ~~$151.1~~$133.4 million ~~increase~~change in cash ~~from~~flow in financing activities was primarily due to the $133.4 million cash proceeds received in the third quarter of 2021 from issuing common stock ~~offerings~~of the Company. In addition, in ~~September 2021 and~~comparing the ~~principal portion payment on a term loan debt during~~ first nine months of 2022 with the same period of 2021, cash payments increased $2.7 million in ~~2020.~~connection with share awards vested and withheld for payroll tax, and offset by a $2.9 million decrease related to debt issuance costs.

~~Funding Requirements~~

We believe that our existing cash and cash equivalents will be sufficient to fund our operations and capital expenditure requirements for the foreseeable future. Our future capital requirements will depend on many factors, including funding for potential acquisitions, investments, and other growth and strategic opportunities that might require use of existing cash, borrowings under our revolving credit facility, or additional long-term financing. We may also use existing cash and cash flows from operations to pay down long-term debt from time to time.

While we believe we have sufficient liquidity to fund our operations for the foreseeable future, our sources of liquidity could be affected by various factors, such as changes to the U.S. economic condition, market interest rates, the Federal Reserve monetary policy, other government policies, etc.

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Indebtedness

We are a party to a Credit Agreement that originally provided for a $250.0 million senior secured term loan and commitments under a revolving credit facility in an aggregate principal amount of $20.0 million, with a sub-commitment for the issuance of letters of credit of $10.0 million. The ~~loans~~term loan was originally scheduled to mature on August 14, 2024, and the commitments under the revolving credit facility were originally scheduled to mature on August 14, ~~2024, with respect to the term loan thereunder, and August 14, 2022, with respect to the revolving credit facility thereunder.~~2022.

In January 2018, we and the lenders amended the Credit Agreement to add incremental term loans in the amount of $25.0 million to be used for our general corporate purposes. Additionally, in April 2018, we and the lenders amended the Credit Agreement to (i) add incremental term loans in the amount of $40.0 million to be used for our general corporate purposes and (ii) provide a reduction of 50 basis points in the margin under the term loan. The terms of such incremental term loans were the same as the terms of our existing term loans, including in respect of maturity, and they are considered an increase in the aggregate principal amount of the existing term loans outstanding under the Credit Agreement and are part of the existing term loan.

We entered into a third restated and amended loan agreement on June 17, 2021 (“Third Amendment”), which provides for, among other things, (i) the extension of the termination date applicable to the revolving credit commitments under the Credit Agreement to August 2025, (ii) the extension of the maturity date applicable to the term loans under the Credit Agreement to August 2026, and (iii) an increase of approximately $80.0 million in commitments available under the revolving line of credit (resulting in an aggregate amount of commitments of $100.0 million). The term loan under the Third Amendment has substantially the same terms as the existing term loans and revolving credit commitments. The Credit Agreement is collateralized by substantially all U.S. assets and stock pledges for the non-U.S. subsidiaries and contain various financial and nonfinancial covenants.

Borrowings under the Credit Agreement currently bear interest at a rate per annum equal to either (i) the Eurocurrency rate, with a floor of 0.00%, as adjusted for the reserve percentage required under regulations issued by the Federal Reserve Board for determining maximum reserve requirements with respect to Eurocurrency funding, plus an applicable margin rate of 3.50% for the term loan and between 4.00% and 3.50% for revolving credit loans, depending on the applicable first lien leverage ratio, (ii) an alternative base rate (“ABR”), with a floor of 1.00%, plus an applicable margin rate of 2.50% for the term loan or between 3.00% and 2.50% for revolving credit loans, depending on the applicable first lien leverage ratio (with the ABR determined as the greatest of (a) the prime rate, (b) the federal funds effective rate, plus 0.50%), and (iii) the Eurocurrency rate plus 1.00%.

Additionally, we are obligated to pay under the revolving credit facility (i) a commitment fee of between 0.50% and 0.25% per annum of the unused amount of the revolving credit facility, depending on the applicable first lien leverage ratio, (ii) customary letter of credit issuance and participation fees, and (iii) other customary fees and expenses of the letter of credit issuers.

All obligations under the Credit Agreement are unconditionally guaranteed by our wholly owned direct and indirect subsidiaries, subject to certain exceptions. All obligations under the Credit Agreement, and the guarantees of those obligations, are secured on a first lien basis, subject to certain exceptions, by substantially all of our assets and the assets of the other guarantors.

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As of September 30, ~~2021,~~2022, we had ~~$301.2~~$298.2 million of outstanding borrowings on the term loan, and $100.0 million of availability under the revolving credit facility under the Credit Agreement, and outstanding letters of credit of $0.1 million under the Credit Agreement.

As of September 30, ~~2021,~~2022, we were in compliance with the covenants of the Credit Agreement.

Contractual Obligations and Commercial Commitments

There have been no material changes to our contractual obligations during the nine months ended September 30, ~~2021~~2022 from those disclosed in our ~~Annual~~2021Annual Report, ~~on Form 10-K,~~ except for ~~payment~~payments made in the ordinary course of business.

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Income Taxes

We recorded income tax ~~benefit~~expense of ~~$1.6 million and income tax expense $0.3~~$9.5 million for the ~~three and~~ nine months ended September 30, ~~2021, respectively,~~2022, and income tax expense of ~~$0.4 million and $4.7~~$0.3 million for the ~~three and~~ nine months ended September 30, ~~2020, respectively.~~2021.

As of September 30, ~~2021,~~2022, we had federal and state ~~NOLs~~net operating losses(“NOLs”) of approximately ~~$3.3~~$2.4 million and ~~$3.0~~$2.6 million, respectively, which are available to reduce future taxable income and expire between 2024 and ~~2036~~2040 and 2029 and ~~2038,~~2039, respectively. We had federal and state R&D tax credit carryforwards of approximately ~~$2.3~~$1.5 million and ~~$0.6~~$0.4 million, respectively, to offset future income taxes, which expire between ~~2024~~2038 and ~~2040.~~2041. We also had foreign tax credits of approximately ~~$12.5~~$15.1 million, which will start to expire in 2025. These carryforwards that may be utilized in a future period may be subject to limitations based upon changes in the ownership of our stock in a future period. Additionally, we carried forward foreign NOLs of approximately ~~$16.1~~$24.5 million which will start to expire ~~starting~~ in 2022, foreign research and development credits of ~~$2.5~~$0.4 million which expire ~~between~~in 2029, ~~and 2030,~~ and Canadian investment tax credits of approximately ~~$2.7~~$3.8 million which expire between 2030 and 2039. Our carryforwards are subject to review and possible adjustment by the appropriate taxing authorities.

As required by Accounting Standards Codification (‘‘ASC’’) Topic 740, Income Taxes, our management has evaluated the positive and negative evidence bearing upon the realizability of our deferred tax assets, which are composed principally of NOL carryforwards, R&D credit carryforwards, investment tax credit carryforward, and foreign tax credit carryforwards. Management has determined that it is more likely than not that we will not realize the benefits of foreign tax credit carryforwards. At the foreign subsidiaries, management has determined that it is more likely than not that we will not realize the benefits of certain NOL carryforwards. As a result, a valuation allowance of ~~$16.7~~$18.2 million was recorded at December 31, ~~2020.~~2021. As of September 30, ~~2021,~~2022, the valuation allowance remained unchanged from December 31, ~~2020.~~2021.

Off-Balance Sheet Arrangements

During the periods presented, we did not have, and currently we do not have, any ~~material~~ off-balance sheet arrangements, as defined under the rules and regulations of the ~~SEC.~~SEC, that have, or are reasonably likely to have, a material effect on our current or future financial condition, results of operations, liquidity, capital expenditures or capital resources.

Critical Accounting ~~Policies and~~ Estimates

Our accounting policies are more fully described in Note 2, “Summary of Significant Accounting Policies,” in our audited consolidated financial statements included in our 2021 Annual ~~Report on Form 10-K for the year ended December 31, 2020.~~Report. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. We monitor estimates and assumptions on a continuous basis and update these estimates and assumptions as facts and circumstances change and new information is obtained. Actual results could differ materially from those estimates and assumptions. We discussed the accounting policies that we believe are most critical to the portrayal of our results of operations and financial condition and require management’s most difficult, subjective and complex judgments in Part II, Item 7, “Management’s Discussion

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and Analysis of Financial Condition and Results of Operations,” in our 2021 Annual ~~Report on 2020 Form 10-K for the year ended December 31, 2020.~~Report. There were no significant changes to our critical accounting ~~policies and~~ estimates during the nine months ended September 30, ~~2021.~~2022.

Recently Adopted and Issued Accounting Standards

We have reviewed all recently issued standards and have determined that, other than as disclosed in Note 2 to our condensed consolidated financial statements appearing elsewhere in this Quarterly Report, such standards will not have a material impact on our condensed consolidated financial statements or do not otherwise apply to our operations.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk
For information regarding our exposure to certain market risks, see “Quantitative and Qualitative Disclosures about Market Risk,” in Part II, Item 7A of the Company’s 2021 Annual ~~Report on Form 10-K for the year ended December 31, 2020.~~Report. There were no material changes to the Company’s market risk exposure during the nine months ended September 30, ~~2021.~~2022.

Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we evaluated the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rule 13a-15(e) and 15d-15(e) under the Exchange Act as of the end of the period covered by this report. Our disclosure controls and procedures are designed to ensure that information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including the Chief Executive Officer and the Chief Financial Officer, to allow timely decisions regarding required disclosures. Any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objective and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer ~~have~~ concluded that our disclosure controls and procedures were not effective ~~at a reasonable assurance level~~ as of September 30, ~~2021.~~2022 due to a material weakness related to information technology general controls in our internal control over financial reporting. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. This internal control deficiency was identified and reported in the section titled “Management's Annual Report on Internal Control Over Financial Reporting” in the Company’s 2021 Annual Report.
Notwithstanding the ineffective disclosure controls and procedures and the material weakness described in Management's Annual Report on Internal Control Over Financial Reporting, our management concluded that the consolidated financial statements included in this report fairly present, in all material respects, the financial position of the Company as of September 30, 2022 and December 31, 2021, and the results of its operations and its cash flows for the nine months ended September 30, 2022 and September 30, 2021, in conformity with accounting principles generally accepted in the United States of America.
Management’s Plan to Remediate the Material Weakness
The Company outlined a remediation plan in the section titled “Management's Annual Report on Internal Control Over Financial Reporting” in the Company’s 2021 Annual Report. The Company is committed to developing and maintaining a strong internal control environment. Management has evaluated the material weakness described above and has made significant progress in updating its design and implementation of internal controls to remediate the aforementioned control deficiency and enhance the Company’s internal control environment. The remediation plan is being implemented and includes the following: (i) implement a controlled process for the onboarding, offboarding, and access rights modifications in the application environment to ensure appropriate provisioning of rights on a least privileged basis; (ii) document the levels of privileged access roles with specific “allowed” capabilities warranting levels of access for specific roles; (iii)

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implement a quarterly log review by business owners to ensure that no privileged account access was provided and removed outside of documented service requests; (iv) implement a controlled process for application and system level changes in the application environment to ensure appropriate understanding of the changes in financial reporting; and (v) strengthen ownership and reporting through the IT Governance Process currently in place which will serve as the mechanism to monitor the remediation update. Management is committed to successfully implementing the remediation plan as promptly as possible, and currently expects that the remediation of this material weakness will be completed on or before December 31, 2022.

Changes in Internal Control over Financial Reporting

~~There~~During period ended September 30, 2022, there was not any change in our internal control over financial reporting (as ~~such term is~~ defined in Exchange Act Rules 13a-15(f) ~~under the Exchange Act) during period ended September 30, 2021~~ that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

~~Table of Contents~~

PART II — OTHER INFORMATION
Item 1. Legal Proceedings
There have been no material changes to our legal proceedings as previously disclosed in our 2021 Annual ~~Report on Form 10-K for the fiscal year ended December 31, 2020.~~Report.

Item 1A. Risk Factors
Except as described below, there have been no significant changes ~~from~~to the risk factors previously disclosed in our 2021 Annual Report ~~on Form 10-K for the year ended December 31, 2020~~ that we believe are material to our business, financial condition, results of operations, cash flows or growth prospects.

We regularly evaluate potential acquisitions of other companies or technologies, which could divert our management’s attention, result in additional dilution to our stockholders, and otherwise disrupt our operations and adversely affect our operating results.

We have acquired multiple businesses and technologies in the past and we regularly evaluate opportunities to acquire or invest in businesses, solutions or technologies that we believe could complement or expand our solutions, enhance our technical capabilities or otherwise offer growth opportunities. The pursuit of potential acquisitions may divert the attention of management and cause us to incur various expenses in identifying, investigating and pursuing suitable acquisitions, whether or not they are consummated.

If we acquire additional businesses, we may not be able to integrate the acquired personnel, operations and technologies successfully, effectively manage the combined business following the acquisition or preserve the operational synergies between our business units that we underwrite at the time of the acquisition. We cannot assure that following any acquisition we would achieve the expected synergies to justify the transaction, due to a number of factors, including:

●~~inability to integrate or benefit from acquired technologies or services in a profitable manner;~~
●~~unanticipated costs or liabilities associated with the acquisition;~~
●~~incurrence of acquisition-related costs;~~
●~~difficulty integrating the accounting systems, operations and personnel of the acquired business;~~
●
~~difficulties and additional expenses associated with supporting legacy products and hosting infrastructure of the acquired business;~~
●
difficulty converting the customers of the acquired business onto our solutions and contract terms, including disparities in the revenues, licensing, support or professional services model of the acquired company;
●~~diversion of management’s attention from other business concerns;~~
●
~~adverse effects to our existing business relationships with business partners and customers as a result of the acquisition;~~
●~~the potential loss of key employees;~~
●~~use of resources that are needed in other parts of our business; and~~
●~~use of substantial portions of our available cash to consummate the acquisition.~~

Furthermore, acquired businesses may change or increase the risks to which we are exposed. For example, in October 2021 we acquired Pinnacle, whose software is used by the U.S. Food & Drug Administration (FDA) and Japan’s Pharmaceuticals and Medical Devices Agency (PMDA) validate compliance with the Clinical Data Interchange Standards Consortium (CDISC) standards. As a result, we are at increased exposure to risks related to changes the FDA’s or the PMDA’s regulatory standards and risks related to government customers.

~~Table of Contents~~

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None
Item 3. Defaults Upon Senior Securities
None.

Item 4. Mine Safety Disclosures
Not applicable.

Item 5. Other Information
On November 6, 2021, Sherilyn S. McCoy informed our board of directors of her intention to resign as a director of the Company, effective December 1, 2021. The resignation is not the result of any disagreement between Ms. McCoy and the Company. Ms. McCoy serves as the Chair of the Company’s board of directors. The Company’s board of directors is expected to elect Mr. James E. Cashman III, who has served on the board of directors since 2018, to serve as its Chair upon Ms. McCoy’s departure.
None
Item 6. Exhibits
See Exhibit Index.

44

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EXHIBIT INDEX

Incorporated by Reference
Exhibit
Number

Exhibit Title

Form
File No.
Exhibit
Filing Date
2.1

Agreement and Plan Of Merger By and Among Certara, Inc., Puma Merger Sub, LLC Pinnacle 21, LLC and Shareholder Representative Services LLC, as The Equity holder Representative

3.1

Amended and Restated Certificate of Incorporation of Certara, Inc.

S-8
333-251368
4.1
12/15/2020
3.2

Amended and Restated Bylaws of Certara, Inc.

S-8
333-251368
4.2
12/15/2020
10.1

Form of Performance Stock Unit Grant Notice and Agreement for Certara, Inc. 2020 Incentive Plan†*

31.1

Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2

Certification of Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1

Certification of Principal Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002+

32.2

Certification of Principal Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002+

101.INS

XBRL Instance Document –the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document

101.SCH

XBRL Taxonomy Extension Schema Document

101.CAL

XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF

XBRL Taxonomy Extension Definition Linkbase Document

101.LAB

XBRL Taxonomy Extension Label Linkbase Document

101.PRE

XBRL Taxonomy Extension Presentation Linkbase Document

104

Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101)

Incorporated by Reference
Exhibit
Number
Exhibit Title

Form
File No.
Exhibit
Filing Date

31.1

Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2

Certification of Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1

Certification of Principal Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002+

32.2

Certification of Principal Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002+

101.INS

XBRL Instance Document –the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document

101.SCH

XBRL Taxonomy Extension Schema Document

101.CAL

XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF

XBRL Taxonomy Extension Definition Linkbase Document

101.LAB

XBRL Taxonomy Extension Label Linkbase Document

101.PRE

XBRL Taxonomy Extension Presentation Linkbase Document

104

Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101)

†~~Filed herewith.~~
*~~Management contract or compensatory plan or arrangement.~~
+
This certification is deemed not filed for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section, nor shall it be deemed incorporated by reference into any filing under the Securities Act or the Exchange Act.

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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, duly authorized.

CERTARA, INC.

Date: November ~~9, 2021~~7, 2022
By:
/s/ William F. Feehery

Name:
William F. Feehery

Title:

Chief Executive Officer
(Principal Executive Officer)

Date: November ~~9, 2021~~7, 2022
By:
/s/ M. Andrew Schemick

Name:
M. Andrew Schemick

Title:
Chief Financial Officer
(Principal Financial Officer)

Liability
Interest rate swap liability	$	—	$	3,671	$	—	$	3,671
Total	$	—	$	3,671	$	—	$	3,671




		Incorporated by Reference
Exhibit Number	Exhibit Title		Form	File No.	Exhibit	Filing Date
2.1	Agreement and Plan Of Merger By and Among Certara, Inc., Puma Merger Sub, LLC Pinnacle 21, LLC and Shareholder Representative Services LLC, as The Equity holder Representative
3.1	Amended and Restated Certificate of Incorporation of Certara, Inc.		S-8	333-251368	4.1	12/15/2020
3.2	Amended and Restated Bylaws of Certara, Inc.		S-8	333-251368	4.2	12/15/2020
10.1	Form of Performance Stock Unit Grant Notice and Agreement for Certara, Inc. 2020 Incentive Plan†*
31.1	Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certification of Principal Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002+
32.2	Certification of Principal Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002+
101.INS	XBRL Instance Document –the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document
104	Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101)




		Incorporated by Reference
Exhibit Number	Exhibit Title		Form	File No.	Exhibit	Filing Date

31.1	Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certification of Principal Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002+
32.2	Certification of Principal Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002+
101.INS	XBRL Instance Document –the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document
104	Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101)


	CERTARA, INC.

Date: November ~~9, 2021~~7, 2022	By:	/s/ William F. Feehery
	Name:	William F. Feehery
	Title:	Chief Executive Officer (Principal Executive Officer)
Date: November ~~9, 2021~~7, 2022	By:	/s/ M. Andrew Schemick
	Name:	M. Andrew Schemick
	Title:	Chief Financial Officer (Principal Financial Officer)