CERT - Earnings call transcript Q1 2021

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Operator

Good day and thank you for standing by. Welcome to the Certara First Quarter 2021 First Quarter 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there'll be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded. now today, hand David would to conference I speaker your Deuchler Instructions] like the to over [Operator Investor Relations. ahead. go Please

David Deuchler

Good for all Thank today's everyone. call. participating conference afternoon in you

William on call copy press Feehery, Schemick, Certara of Financial today, the the results Earlier the release released Officer. the XX, quarter On we ended Chief Chief Officer; March company's and from website. Executive Andrew financial for available Certara is have, XXXX. A

relate management federal will performance like that of events, pursuant I'd statements, we variety which from provisions the that Private to Litigation harbor expectations of this due forward-looking within statements remind are Before of those are safe statements in a to call XXXX. Securities may make you Any Reform or results include expressed future the that begin, contained differ during or forward-looking Actual meaning to securities made statements call, in results statements. implied forward-looking materially factors. Act the the of or predictions to the of this laws,

available responses EPS not description should Exchange net measures. list XX, We Factors Form of be or adjusted and aware management factors some contains broadcast XXXX. GAAP guarantee section recent to any by urge or filed to directly our and information questions, with comparable Securities and live I to in of a call with estimates are of and Certara's performance. financial whether that statements, uncertainties that, press as be future and company's to accurate conference March available business, because intention website. today the please of financial will projections a future the disclaims information, release, call law in time-sensitive For of of May XX-K the non-GAAP consider as the income, these And measures except measures revise with Reconciliations forward-looking and other the should EBITDA, the Risk on the any Commission associated on is or only otherwise. obligation refer certain and new to risks The you non-GAAP over update turn these required XXXX. you remarks earnings to statements Certara most may only are or adjusted or William. Also, their adjusted considered X, financial events mention

William Feehery

quarter with David. pleased the I questions. will am Good and first take in everyone. XXXX, Certara how earnings quarter full the Thank will performed I joining we you, public Thank with first as very Andrew prepared our you company. business start quarter afternoon and for Certara's a remarks call. then, of first overall

in our on pandemic deeply well-defined world. around XX%, we team to quarter of our a our Asia both, services. in In our of am against Revenue in the this turning first XX%. China expanded to continued first end-to-end another Certara very customer quarter of achieving of XXXX, during tech-enabled many developing EBITDA by Pacific, saw the compared robust strengthen by ways and financial this software company global strategic We in While we accelerate as how with total quarter further are to medicines bookings I compared plan. XXXX, in growth our the footprint position delivering of quarter, results of first of and grew first XXXX, COVID-XX Adjusted innovative both across strong impact and biosimulation, patients. adoption momentum the on some quarter services, In our with global Europe first lives we grew XX% quarter XX% in remained the to demonstrated revenue to the the continued has growth focused demand quarter the leader platform year-over-year in executing of of record the quarter continues XX% corner by customers, in regions, XXXX. software proud and revenue. our with fueled

Shanghai Drug month. the our generic FDA and models In key passion biosimulation. to enhanced obtain recently drug expands It cases virtual published labels Information based as drug majority drugs This of needs version XX at renewed in of new the a Simcyp the for during Phoenix lactation. pregnancy new maternal were participate the Asia the the is based biosimulation, and simulator. Simcyp virtual later FDA complex excited development. in study the bioequivalence, modernization assessment continue comparative We office, simulator. informed FDA's Devices with Pharmaceutical Simcyp by this of automates the performance we in Simcyp Furthermore, advancement more health, by approved had assessing in of of to worldwide approval the XX to achieve version drive also conference in XX our licenses The new first Association's using a biowaivers. is innovation excited surpassed Scientists to quarter. such Japan, quarter Medical the strong for Europe our and that of novel and expansion. illustrating a employees patients. than use instead clinical manuscript, of platform of a simulator This of team, the latest in bioequivalence in drug our and to our Our our in Agency to the customers support announce are our The simulator

regarding our used use these was simulator dosing, special For for and therapies, decisions to safety populations. for guidance critical address new

capabilities program simulator biosimulation go-to-market and established. in is information dosing predicts mechanistic biologics, patients Simcyp is further help and safety Biologics opens consortium, Safety following our services. the The is markets biologics is module stand-alone strategy the predict believe potentially with in well week, announced Simcyp are patients Another called development, software of major conclusions Earlier for up optimize special this of as an Simulator Simcyp to XX% issues, use of which safety biosimulation another software. the virtual Simulator, issues generated growing having only Simcyp such a of With by the tech-enabled Biologics licensing children, the dosing of or elderly behavior software This Intelligence, Simcyp that to in and path area we the important can using customers the the and update we and comorbidities. in new in research, where similar our now customers accelerating Biologics and regimens licensed newly platform investment. new to the earlier small its of biologic protein customers upgraded as populations, software, kind where impact address a Secondary contributed drug outside failures. is which questions, faster. Simulator be now available molecules, expanded the We off-target

move these and this therapeutic of its for automate, from and markets. go allowing compounds software, seeds issues of growth The some software and decided decisions, of or in pharmacologists future target. secondary And streamline which is the pharmacology, to into safety which secondary activity us desired in is adjust forward, increase introduction a drug discontinue. With longer safety of toxicologists arise new related to not standardize that confidence can no tap analysis the are pharmacology innovation term to go, this plants

to over services. Turning

acquisition growth experience and to continues of business the biotechnology our services with customers. existing of expansion due new work elevated to enabled technology the Our customers

of services software is technologies incorporates of use the powered our offering highly Certara's proprietary The by and and differentiated services business profitable. drug the development throughout Our discovery continuing. majority biosimulation

science proud the as and thought technology and incredibly at of of are well-known biosimulation. leaders We in of our the who forefront scientists are team the industry of

track solid of as and to view relative activity higher impressive total the levels performance reflective on in our total our pandemic. begin demand bookings that types customer all our of well is across at The plan. Our company remains of out very company our to driven way growth make is customers we by supports XXXX

of many The their decisions we're first quarter major we're partner. often choice programs making biosimulation first budget are strategic as on is their our that customers typically proud and their when

this and Certara by achievements result the our quarter work hard were remarkable of dedicated talented colleagues. Our

by subject of continue remaining in were expert our employee more experts add this quarter. scientists many XX% to business Approximately matter our than increasing the team new worldwide, We hires X% were the base to developers. and quarter and our hires of

very Our turnover low. remains

mentioned world the pandemic continuing starting in are the are while disease. we from this some others parts earlier of to with As recover a I fierce battle

biosimulation in are we at times. end In thoughts our leading than provide continue companies our the global the across widely and of more with in the and Our customers of world XXXX. one especially to India these through colleagues to recognized is as support summary, in X,XXX largest challenging relationships team Certara

infectious such end-to-end all the first throughout Certara platform involved across diseases had FDA of customers, a and success We oncology. about good quarter. our customer customers diseases, annually use their These stages are Certara's approved and expanding and the a programs, discovery range continued as programs drugs very development development enthusiastic wide diverse of base. the areas therapeutic thousands Today during is a at covering of number autoimmune with in of whom of

our results our CFO, turn to customers. dedicated We to quarter. delivering And now for high-quality opportunities day. expanding our for over discuss are call financial are to the and Andrew innovating science-backed our first the results every I’ll

Andrew Schemick

William. Thank Hello, everyone. you

three As the year-over-year earlier, representing March million, growth months XX of for $XX.X mentioned was total ended XXXX revenue XX%.

renewal a increased year strong X% result was as quarter prior first and Software $XX.X rates. which million, revenue over the bookings of period

$XX.X year XX%. Software bookings from prior aggregate increased million, which renewal period and were rate the XX% was the

to $XX.X trial of which period. for in XX This technical products. lingering by last Services installed for increased rate business, success year, timing of science XX% overall clinical strong Certara services see to of was year from prior $XX.X the and the costs public quarter and related components quarter. compensation company stock-based were quarter land strategy. was see led of costs million to XXXX. a a employee acquisition are has XXXX follows. services to expenses, highly stock-based robust increased our amortization items. continued million and was a million and line to due bookings also And million, an of of solutions. asset expenses, increase $X.X million cost quarter XXXX. costs growth $X operating lower the public capitalized million $X.X in first compared delays number from offset million start-ups increase expenses. to $X.X regulatory million costs. employee G&A $X the continue in XX% increase The million $X.X M&A Sales which stock-based primarily million for million period. and $X.X first The increase amortization due primarily and for costs retention our other to no interest over can travel partially period. was operating loan quarter was biosimulation XXXX. $X.X $X.X quarter XXXX, and prior were in $XX.X quarter due lower in were is in engagements. expenses, compared in which million offset of ongoing for biosimulation a the and customers $X.X $X.X in $X.X driven by in and related for item. in of was depreciation compared some related by There be $X.X of The first first the interest in increase our as secondary company fourth The million, increase expenses million expenses, the demand increase million expenses R&D costs, increases The and changes $XX.X quarter of strong increase compensation Total primarily a were base stock-based of of was for increase in compared transaction holdco partially reduction related to were revenue employee-related very million the to revenue our our project for growth due in We last increase reduction to to costs. first in development research were expenses million the the The $X.X of first down expenses value primarily costs expenses despite Total The $X.X year. to repayment in which quarter quarter million expand due which compensation year $XX.X million for software million, million compensation million $X.X effects the from the significant The was to line in XXXX. may during of partly The for million continue costs an ongoing in the first quarter increase of Continuing was of in decreases P&L, services impact to expense revenue seen related increase expenses. $X.X consulting in due demand $XX $X.X were was first million costs compensation expense and costs, $X.X first marketing travel. due remaining in the million primarily of of expense from of employee increase first Intangible the by and the $X.X stock-based of the $XX.X of million, during million either in $X.X the million XXXX, in increases million offset offering increase XXXX

EBITDA was Adjusted the to for have was first share expenses in million, to XXXX. quarter, first items, of quarter. not was $X.X U.S. $X the net compared for were first for income XX% to first did Diluted share $X.XX of first company million adjusted the margin non-deductible quarter quarter year, and of income, XXXX. for taxes tax quarter for of the U.K. well and The tax increases the an million, operating expenses by quarter was of for and effects income international income increase in was revenues expense tax the of excess million, of compared $X.X delivered income Adjusted earnings was mix million offset the provision effects made impact of for the for the earnings of million The to of diluted was of $X.X as XXXX compensation EBITDA the expense which quarter public expenses Adjusted the rate of the income revenues as per $X.XX million of effective XXXX the, first $X.X $XX.X the of measurable due compared domestic stock first cost in elections Our million quarter were quarter quarter. million, XXXX. last expense. the for the XXXX. for direct of for in to primarily expansion. Ongoing first $X relative earnings, $XX.X decrease having Net quarter we the in of in first of XXXX company $X.XX $X.X first the in that XXXX. resulting an quarter to for earnings. pre-tax per compared net of compared for was a we quarter XXXX, public first $X.XX Despite the tax

like cash Now is the last we the moving the first quarter year, in to our balance One quarter quarter $XXX bonuses timing employees to sheet, paid ended that that, the second with million of point out equivalents. compared I'd this to cash we difference year. to annual and

any as $XXX.X Our XXst million, structure of net of XXXX. financing March current The XXXX. of was total deferred million, not $X.X debt does include outstanding fees maturity, debt until significant

tax in $XXX rate. the range are we annual adjusted in effective $XXX $XXX adjusted revenue, to financial to and updating million, range in be million to year to million, our to adjusted EPS be $XXX Revenues million EBITDA outlook, of Thank between the $X.XX and the of guidance per reported rate of fully Regarding XXXX for XXX share, EBITDA the full previously shares XX% our the be tax XX% diluted XXX XX%, range a guidance be year-end. $X.XX to and cash range slight of you. rate the at to XX%, tax between in revision to range million effective to and to to million be

to turn I'll Now CEO, William back it our Feehery.

William Feehery

full and public In a our Andrew. had company. year successful a as Certara summary, start our first you, quarter, Thank to

growth well deliver to our positioned We end-to-end for our solid team customers. from continue Certara believe shareholders. market trends. our is Our focus on continues platform to benefiting strong that, commitments And to

we of add this open expect a the and We you At Operator, overall to share new biopharmaceutical questions. innovate R&D our solutions spend, capture to larger as to point, platform. call for open-up the continue acquire can lines? we'll end-to-end

Operator

from line [Operator Barclays. Luke Instructions] of from first the comes Sergott question Our

Your line is open. now

Luke Sergott

guys. Hey

to of Just bookings just sense guidance, up. you I'm opening And on trying just be beat so to had -- a Things one strong quick a on seem top a a here line. couple the quarter. get really a decent of

just So, know think bookings you most with to more. flow is opening XXXX, little as we should to through later seems going something be -- expecting like to think or just modest about they're this Is on, a those how likely XX% -- that guidance raise, there about bit I on have from visibility into your a things as that up business. seem it we be conservatism,

William Feehery

Yeah. Thanks don't that? you why Luke. take And Andrew,

Andrew Schemick

sure. Okay,

in been public than in I see to at results year-over-year is bookings better months. a that we'd assess looking a stronger XX%, months given a We'll this like over a achieving in time. adjustments. quarter, I teen's that, not new back us the reassess our we're with terms highly which the the growth. before was with in trailing the rates mid-to-high basis, look would I conservatism, So of another activity, of make those is position any say we of the making quarter would on XX guidance, growth or had but bookings And The comfortable two be anticipated. very have just revenue it trailing growth certainly supportive another company, quarter at to XX% little but a guidance. bit that way also And XX

Luke Sergott

Yeah, That's fair. get fully All that. I right.

dynamic about perspective? call you modeling and services and margin from any through think that to I a pacing the here between year, when trajectory software the so, And want piece, the the and out

Andrew Schemick

call. about talked last briefly, we it So

items grow we services the the coming are profile So for for you cycles pace about, the year, EBITDA of will XX% kind of given given XX% movements high bookings, of of year, fourth quarter in kind of and throughout the margin one-time software expect or renewal in the quarter is normalize of to quarters the Historically, that trajectory if are The first half with second generated the year. The in sequentially the growth. of bookings half the the first kind software. the revenue the in.

mid-teens that revenue of our kind outlook. growth So targeting -- the with maintaining EBITDA margin

Luke Sergott

If I that And I Where sneak on you expecting last start we great. a on? are one can, know from that that opening contribution Shanghai guys one area? the are on when could being you one. meaningful in Okay, of more office,

William Feehery

the is at started office The And very hiring of year. It opened Luke. Thanks we Hi. open. last then. end

team a have small growing but we there. So

expect as were do, nicely you'd growing do before growing We we we've in go in got due so, to And Pacific we have we that partly coming in even some that a get and sales some China, opened Asia as fact forward. that the to business office.

a for but future, to year think I sign the So some we as the here. it's got good And people. go we do building hire through we've

Luke Sergott

forward. Yeah. I it lot. It great. sounds you there. a Thanks See leave

William Feehery

Luke. a Thanks lot,

Operator

Thank you.

next comes Dave the Windley Our from question of from line Jefferies.

Your line now open. is

Dave Windley

of between market perhaps you? opens accelerate biologics in side. biologics trying questions. Just Thanks clients Good either the if I simulator visibility biologics gave. is, my how curiosity get are applications? for And understanding how up to have my and whether taking a into Hi. afternoon. to wanted how growth to you simulator applying new comment you this team, your could management expanded software around description molecule on small William, as Or and that the that could ask your an you biologics

William Feehery

Yes.

functionality back, over biologics started years And if So, I so. the go don't small Simcyp related adding last, on we've know, focused been five to way or you molecules.

so some continue ways final we'll latest it's culmination So release of And not innovate. the that. to state, in a is the

Because today. are is in customers why different working molecule a a software biologics. to a module. we've molecules, small are get announced are There biologics there's What versus decided work on biologics. we've asked but that only is is small the make of module lot of biologics somewhat customers lot working We around questions on large different. we which that our some that biologics, that, doing have biologics the customers of a on stand-alone group are both work and Quite

product. a little of, So address way more us bit lets straightforward sort them and with it, that

Dave Windley

likely in rapid helpful. That's this Intelligence you. Is week. you very that market would then, predominantly? that's market I capabilities, to How guess, your seed that that of kind newly from the something kind similar of with? And maybe software expect Secondary And or to at something launched. it. Or both uptake? Got like to you about that and do on you the have service unique Thank you make engage get you to your expect on they that tech-enabled license announced through these, product expect is to It that questions of familiar customers these you evolve? the these that clients, sounds you need are

William Feehery

Great. question. No. great Yes, question. Thanks for that

we're pharmacology. does product are aware its So Intelligence that we issues it safety derived it of only what predicts. of, believe the Secondary predicts from the is kind is, And software secondary that that

So action the sort were would of targets be unintended. that this of a drug on

there market this. for So an existing isn't

that point, there the to six market. We this, I over we're get announced starting announcing now we're is the are of think, creating XX right product. What And to months. first so next feedback -- version we've the your customer we're the to out

pharmacologists new about, to we group large be I have add to think more a fairly XX go this very introduction that as this drug we'll the do companies And do find product. and a let's find product. that we're out have need demonstrate there's dozen By going we'll category, now. useful right at and in more and it. we safety toxicologists as a and our a and receptors to of say, than But We about more summer,

kicking we're what right that's now. off So

Dave Windley

or… services Got clients the or engage it. then, -- And the think will license software you in

William Feehery

didn't is Yes, question. apologize. The your to whole both. sorry. answer I'm sorry, get I I

use use You provide It to with really directly. we've services the as Larger previous software said it calls, depends prefer to internal as we I them. on for think clients do and prefer of software tech-enabled and to well. will services groups, lot the a software on ones client. our our also the license can in through depends -- license the basically work to work, the other they do groups And times service

you of for valid, call technology delivery So guess, them both I it, customers. to are mechanisms our the

Dave Windley

Got leave at you it much. it. very I’ll Thank that.

William Feehery

you, Thank David.

Operator

Thank you.

of the from comes America. Our from question of Ryskin next Michael line Bank

Your line is open. now

Michael Ryskin

guys. back first -- the think we a would clinical rest delays your of way interesting delays through one be Hey, the had the impacting hinting of for on tailwind, William, through wondering be in go the taking that, to I a year. could of sort tech-enabled that could Thanks remarks in we and comment things? clarify specifically, the as Andrew on if sort work prepared on little was bit. Are or trial there as question. I go you an you services in last on from services the and business think if on I that system lingering little side you operating their of that was expand normal, some nice of sort sort you those year the of could little the bit, wondering a impact about we business. that of, how should

William Feehery

it's great question. a Yes,

As in we cycle through pointed and in that certain due drug XXXX, have. are for still the out, the that were have delays and COVID to to the XXXX, working in market resulted somewhat that clinical disrupted delays trials their parts way there development of we fact projects is

in seen, waiting for projects, data delayed as but We some to they're are projects their that, have haven't come in. cases we any lost

catching don't the out -- the with has that. to the of to that I it's it a unique of in we'll that implications in As some situation and around we But post-COVID projects part eye if want fair later keep as call you kind COVID, But an us point know potential come multiple situation. year. will the -- on that up of post mean we're have a out,

Michael Ryskin

this year, material as right. a we Secondary questions should are their anticipate new or couple All quarter? should expanding a of or Simcyp product of to fair. any think Is new about of introductions some software a last new or on launches on of I'm the do introductions launches couple new cadence portfolio? And we forward? And going couple the package? there the Intelligence, then, the That's nodule. sort of the you of these think solutions a Okay. on complementary wondering, new sort introduction, business, new a follow-up any should a of more the about is -- own So how complementary how

William Feehery

Yeah.

for products I a of a software quarter. a couple any to do think it challenge company would be

think of it about I our put there'll a you You -- are I a we So These expect Intelligence guess forward. we Simcyp. moves an extensions. should extensions of I should be a market we products entirely our is could new we're excited proud couple at product how there'll Particularly in But pretty it? as something into extension what do a help and an of. others business, I And new be around will sophisticated that very think more year Secondary time, of the way out. same doing to the is be customers but existing think think been that us of logical go extension what we've really

Michael Ryskin

that forward? through or think mentioned one up, for sort count you X% a bump and you last are Okay. think head to And increase year? similar go one, anticipating I sort of the sort quarter. Is year SG&A we as early count of the quick you a Andrew, in of just the in head last then one about cadence How me. one additions rest the do of

Andrew Schemick

of year. is I cadence for think a the rest look the think similar the I similar to -- that's way best Yeah

Michael Ryskin

Thanks. Great. Okay.

Operator

question from Instructions] you. comes Thank Kreger Our line from [Operator William of the next John Blair.

Your line is now open.

John Kreger

Thanks questions about guys. have I of couple mix. a

preclinical revenue about talked discovery mix much you've past, in being and smaller chunks the in clinical in think your mainly I post with market.

getting bookings, I'm if you right, that that in you any got that you is biggest software? shift seeing What seeing to fairly should where are in clients be I've typical? mix, look or changes at are your of expect your the we sort recent Assuming using at how are

William Feehery

Andrew, do you question? address to that want

Andrew Schemick

can No discussed previously there. mix Sure is changes consistent with The the mix. start. I

John Kreger

large and between a fairly small stable, Andrew. are any Thanks, one or you similar mix And clients? change? about Great. Is that maybe seeing how

Andrew Schemick

-- answer of more mean What growth both growth the seeing with I in we're had in quarter. small seeing I first What clients. is in the uptick and in We we -- record large new We're the higher rates can mid-teens of clients growth logos a that. see number areas. and

John Kreger

couple All how COVID as one guys headwind it right. you Should be role contributor a a think you all as Can or little talk a work? if then Thanks. a XXXX? last view to through And more, back just in of you to about we And played move Bill. bit a expect that at you would have the maybe material tailwind quarters? therefore, you

William Feehery

Yeah. way was this is Thanks, business the I throughout think COVID. John. The that resilient about really

So a said we other COVID on I'm a skipping last projects back without continue of back moved had when our things We work XX them. work And I work serving COVID moving clients do able on what proud forget beat. we year. to But move with and we're that on they lot to the with then customers with to last more really moved to we them. have did were really that than year,

very it the managing extent operations that But company worked we're a really pipeline broad we we quarter. the pharmaceutical some as into have the believe be that event. year. Obviously, go diverse business will significant somewhat projects financial this And disruptions of and a last first different across we pharma. we from a So on standpoint, in the to the happened don't

we expect the kind us -- to a throughout stable it a or basically makes year. pretty whole lets this be things. And of really wouldn't go headwind either I into as tailwind it so that

John Kreger

you. Thank Okay.

Operator

call Thank turn further for questions. to I showing you. Feehery, I over like to At back William the am would CEO closing this remarks. time, no

William Feehery

think very quarter with believe joining company. we And wanted updating forward wrap believe set to our we are well much. performed we with I first quite our can to throughout delivered rest that look This year. the Thank Thank you. We'll Certara as the a of I good you for team well. solid us. forward in think quarter. of for very everybody tonight. we've thank And I out everybody up was I coming that the very as plan. up set on go that, quarters. The very public a I the proud team. I'm

Operator

today's participating. Thanks call. concludes conference for This

may You disconnect. now

Certara (CERT) 9 May 212021 Q1 Earnings call transcript