CERT - Earnings call transcript Q1 2022

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Operator

Good day, and thank you for standing by. Welcome to the Certara First Quarter 2022 Earnings Conference Call. [Operator instructions] Please be advised that today's conference may be recorded. [Operator instructions] I would now like to hand the conference over to your host today, David Deuchler. Please go ahead.

David Deuchler

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

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

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

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

William Feehery

David. strategic how with earnings the goals. you everyone. prepared you, Andrew Thank Good Thank first I and joining we financial for executed questions. the XXXX first afternoon, we performed then business will and will Certara I our in as pleased Certara's quarter on take with start remarks, am quarter and call. of

position continue XX% in of first including million, to as revenue growing biosimulation. strong year-over-year, We We our grow $XX.X leader XX. a Pinnacle quarter global reported

licenses XX% Software Pinnacle Simcyp $XX.X a XX. revenue Technology-driven the year. Phoenix revenue last first was services $XX.X million, driven of continues XX our rate, growing and with renewal XX% and Pinnacle representing in core compared the growth with double-digit quarter was XX% meet growth from impact to by year-over-year expectations. million, our

the services in business. We technology-driven sequential are with pleased improvement our

omicron at and the the fourth clinical clients' availability and in and business the we be regulatory effectively regulatory issues to projects our to employee saw delays and services of the client normalized on and better through to trials as focused quarter exited well project activity. conversion bookings manage through more navigating related COVID remain continue revenue as of quarter to services. expected, our managed from We impact levels We first in variant As call, our on discussed January the some several delayed.

we very trends customers. in strong, technology-driven both remainder the remain new Looking the continue. forward to positive to the and services add year, we business continue to and expect in of the momentum software Booking

year. growth to healthy experience in new customers last continue over double-digit We

to well-positioned remain we such, As our guidance. achieve financial XXXX

highlights. recent other to Now moving on

receive the the award to Our outcomes. contributions the product agencies, for successful Edison we combating Edison category. Winning A model company of a to receive from honored vaccine global game-changing been recognized COVID-XX new trial weeks few therapeutic accolades the the of an highest to one impact in clinical improving designs. launch Simcyp Results our Thomas to ago, FDA, its have submitted can or patient is were the including model vaccine get pandemic COVID-XX continues regulatory a service. support and to Award for the

highlighted last vaccine FDA advance COVID-XX the special efficacy simulator help quarter a children. Our clients that medicines. and such and of populations, and for reactions the in problem biosimulation, Immunity in and of use to FDA using earnings biologics are valuation to biologics. On events. adverse of cases dosing be licensed first The currently our immunogenicity used lead continues reduced elderly be announcement can recently the we effectiveness the we can as model call, our support safety optimize expanded and/or to the to major to our

of drive design immunogenicity helps to having the the within R&D area think FDA for customers. In growth providing is draft We information study a relevant Our the this simulator clinical improved assessments. into better guide labeling products clinically released outcomes. pipeline recommendations guidance, February, at incorporating that

optimization FDA just FDA's Additionally, oncology the drug to. held This a as regarding was contributed this There clinical is we dose a biosimulation I've development study of use an that workshop initiative week and by dosing and Optimus design. to selection mentioned, for optimizing paradigm the the finding reform is positive development. dose Project the in

growing, to remain talent support at in professional goals. these in Certara. invest regulatory programs development guidance. committed strategically we people additional to continue with to We Innovation aligned driven and have are invested developing Certara, that are and growth at and the retaining, capabilities We by

to innovation customer employer and an Our to continue choice. and people, commitment Certara culture, make partnerships of

experts opportunities and a We sales. to well-positioned the the We investment, in across continue on of global particularly in R&D software of the higher started and to year organization, team invest capitalize our ahead. we're with level

a advancing Pinnacle discuss XX as quarter, the growth, This global and pressure did support EBITDA in adjusted to investment development. We of ability understanding, ago, R&D software level adoption to our and our achieve of remainder to guidance to quarter which on adjusted quarter share use of enterprise turn weeks and technology-driven our Specifically, first remain we are goals summary, Andrew our our for to Andy it to the managing, found our Investor cases discuss issued deliver services. on website. I few pleased are ESG in remain This and and to I can investing detail. pleased elevated will margins the Simcyp minute. the be over to EBITDA of EBITDA of reported Relations its support on initiatives in relates software report, commitment our year. to track our financial confident Certara results expand year. in our our our inaugural Simulator also the it I'm Schemick, in advance A stakeholders. ESG sustainable our monitoring report CFO, now first and performance the with dedication we will revenue the with company for continued the to In impact more But

Andrew Schemick

Total impact. approximately negative three representing year-over-year which XX, for everyone. million, was Hello, XXX of William. included the FX March you, growth XX%, ended $XX.X months points Thank revenue basis XXXX, of

revenue reported first was Pinnacle impact. included quarter which Excluding FX basis XXX approximately XX%, points negative growth XX of

months trailing euro, XX to million, I yen. and dollar a months the British in look largest We at the XX%, approximately continue with bookings reminder, pound, exposures at and year-over-year excluding XX% revenue. trailing reported a are currency XX for Pinnacle well-positioned forward on bookings non-U.S. basis up a remain basis As coming $XXX.X XX-month up as XX.

million $XX.X XX% first in was the prior-year period. which increased over the revenue Software quarter,

revenues Excluding by in $X.X Phoenix, our in Pinnacle quarter, which biosimulation contracts. was XX driven XX%. a services select to of under software million reallocation was year-over-year growth XX, the affected was software Simcyp revenue X%. software grew Pinnacle Reported excluding growth by growth contribution, The in software

software disproportionately business by impacted the was move rates. the in FX Additionally,

Software period. million in bookings XX increased which the software contributed million Pinnacle first quarter, to $XX.X quarter. from $X.X were prior-year the in bookings the XX% first

Trailing software software Pinnacle were up excluding first quarter million, excluding was and XX% bookings $XXX.X up X%. XX% XX-month XX. Pinnacle growth, year-over-year year-over-year So XX, bookings

in $XX.X aggregate was the quarter, rate over increased period. first Services which quarter, XXX%. renewal XX% retention was prior-year XX% rate the the was in revenue first net million Software and

strength December As transitory, in January the bookings from million, prior during outlook. XX% our Technology-driven period. quarter. support quarter the were the and during technology-driven month for each provides which have expected, were XX% $XXX.X services bookings was as prior-year services in which to in first TTM and in increased the increased we compared we The confidence weakness million, saw year. XXXX services the in improvement $XX.X bookings

commercial primarily million, $XX.X resulting and amortization to to of million during first $X.X million are cost total aggressive XXXX. $X.X the and million, the development. operational quarter marketing R&D in the This the operating $XX.X intangible P&L to were successfully expenses was was two the quarter primarily for costs increase we expenses of million is to million, XXXX. first software. as million million were medical, XXXX in quarter a increase of XXXX. first first The to due from Total increase for hiring follows: in headcount, employee-related primarily Sales Moving was expenses headcount were million $XX an The components in our benefit of the primarily increase first further made results, quarter first the operating G&A $XX.X investments were XXXX support expenses. other first XXXX. compared million acquired the million, organization. of R&D compared a increase for from compared due of and an quarter $X.X increase to $X.X down quarter XXXX, first software billable for $XX.X expenses from of of expenses the $X.X for asset $XX.X the executed and in quarter to million, The due growth revenue quarters for last of expenses from to quarter that people due increase $X.X

the was account. quarter million interest bank Diluted down implementation. professional income year. audits due Net was the by $X.X was $XX.X of currency tax foreign increasing Income XX% quarter first million for quarter $X.X expense, the quarter the accounting $X amortization Miscellaneous the million, first of million, of compared for dollar of net gains $X.X continuing to to amortization $X.X a at and compared lower $X.X that prior to in with the interest $XX.X the effective of last costs $XX.X P&L, the to XXXX tax XXXX Depreciation was our miscellaneous costs. quarter expense Interest million first to of acquired $X.XX costs due to compared a million million first earnings was foreign the offset one incurred XXXX, assets. maintains EBITDA from financial the the other reduction to The were for term first first $X.X first of million income to increases to representing and XXXX, to due $X.X income was XX% last acquisition-related of million expense the quarter in $X.X million, on million, share per swap. income. rate, XX% for interest $X.X Intangible compared compared first compared XXXX. of as $X.X in rates growth. XXXX $X.X in in Adjusted quarter include quarter year XXXX. SOX expenses $X.XX, And and re-measurement in compared for million, of loan consulting increase to expense million was subsidiaries year. XXXX due was the a partially U.S. compared million, associated asset million company the to from Additionally, and

operating of margin of XX% XXXX. in share of to adjusted the income to million compared As $X.XX, the Adjusted William the quarter, adjusted accelerated the for of full for Despite XXXX XXXX EBITDA in for quarter our first this compared diluted million, earnings in of of $XX.X quarter first margin first to first remain for Adjusted per investments we deliver quarter, year. was $X.XX on quarter was the mentioned, EBITDA the performance net $XX.X we resulting XX%. quarter the first track for XXXX. target

equivalents. the Now sheet, cash and moving we $XXX.X with balance the ended quarter million to of cash

March credit our availability of we XXXX, net outstanding $XXX.X revolving full borrowings had term our and As of million loan facility. under XX, on

in call, of rate our quarter reiterating guidance of fully during of $XXX with million update to you. diluted $XXX full XX% year-end of million, range tax to fully are a EBITDA Revenues range to XX% range and the range of the EPS We $XXX million, rate to exception share, million, an our range shares. XX%. a adjusted fourth the $XXX year per to of the the XX% to tax $XXX million cash range $X.XX in in issued adjusted in shares diluted the the $X.XX the million $XXX in in to of GAAP Thank

line will open we up the for questions. for open line Now questions. the please Operator,

Operator

Thank the first Jefferies. from question line of Windley you. our with comes [Operator instructions] And Dave

is open. go line Your Please ahead.

Dave Windley

Hi. year, X,XXX taking afternoon. when looking was questions. was and last back now for time my over count I to about this Thanks Good X,XXX. your customer thinking,

about XXX added last then two really you've quarters, last So in seen step your year. the customers I've the And up. bookings

how threats were and base making rolled are you that new about they inter So engaging with they [ph], I wondered the customer quickly could if progress in perhaps those expanding? are where and talk you're

Andrew Schemick

greater strong coming in the number seen with particularly Yes. count, QX Hi, $XXX,XXX, also Andrew. and growth in a We've higher out with of and of rates amount in David. It's the growth the clients in with dollar customer than we've clients. clients those the growth the metrics, seen

kind We've also million. accounts, the driving accounts that's $X largest So seen of with than growth. strength greater our

I the larger clients greater than that also on are we're greater than they're the with $XXX,XXX seeing progressing into growth newer clients So strong $X nicely. board, think But and million. coming

Dave Windley

there? in the of of same products in engaging biosim, in any contracts, And seeing other you there engagement? or terms which Is or with are old, with avenues themes customer they're that old are same of kind are it starting they

Andrew Schemick

particularly customers primarily Pinnacle getting We're biosim XX. Phoenix At driven through services. also new this point, to biosim, introduced it's by and

Dave Windley

by Okay. maybe comfortable the about for the we year, point still just made guidance, the investment then that with and should in the EBITDA margin margin And on guidance you how think higher Or and level year with year. off? is grows XX it the the of that? cadence the to revenue the you XQ end us your gets through that Just into tapering help

Andrew Schemick

that the of completing to the integrated target, SOX to the clarify accounting – way first half for the margin, that, higher-than-expected the just The with Yes. about and quarter so costs was costs associated primarily from XX% bridge audit the that implementation.

other bookings QX The performance the in pipeline. was and see of what we light particularly in headcount, in QX, strong can growing half the

the right progression the now – quarter first for essentially, costs, a onetime In the margin onetime terms of of of the is out seeing half we'll year, those what I'm the target take some see in to of the and year QX half back second the and in of quarter-over-quarter, kind back the to XX%. We'll to get the QX quarter. improvement then excess of cost

Dave Windley

Okay, great. Thank you.

Operator

line our Ryskin And of you. Michael Thank of next question comes from the with America. Bank

open. is Please ahead. line Your go

Wolf Chanoff

give Chanoff Great. Hi. a is rest as spoken and some you've how thinking on of the of the this if to you've Mike. how for been be the through successful Thanks. I that from revenue you'd should recapturing XQ, we service year? of in shortfall bit, the kind dynamic plays was modeling This Thanks but color for taking know out Wolf little us more wondering I on questions. it

William Feehery

is here. Feehery This Michael. you, Thank William

lengthening you regulatory. we the projects, trying last a at end certain to saw in particularly in know, services start As year, of

saw went You month we January. the month of quarter. through December in and month-to-month the But improvement through we that each quarter, then saw a continue as the

some what been quarter. I'd There point marching of up still has on – delays made haven't graph the we is there removed. But have direction, are the delayed, – in and the to first gotten right we've completed. be to data So the all are say waiting lot clinical on waiting basically, in we're that largely quite the projects back where been a

Wolf Chanoff

Pinnacle give area? speak deal, been Great. cross-selling realize anything some yes, kind maybe the you've opportunities just, one. Thank on able of that the us much. products to in color then just with some you or particular to you can early higher-level you And Can Thanks.

William Feehery

Thanks. Yeah.

lot Pinnacle for So us. XX up has of opportunities opened a

cross-selling I and immediately, lot think data our product. Pinnacle of we found repository XX, between a opportunities integral

that together. data they So ties nicely kind data repository product, a go into of validation

offering go on some adding to XX. customers Pinnacle our some forward well there's projects. some Pinnacle add been data think tie-ins projects – our of of some We've as We've to We've up managed seen validation some They to as using we able new two Pinnacle services business. make managed by and also open basically XX opportunities we So larger. between there. by services to for

but we be there think I think pretty Pinnacle forward, we're a XX. to will So more come I go off as to start with good

Wolf Chanoff

Great. Thank you.

Operator

Thank line you. Morgan with And Stanley. next Vikram Purohit question our the comes from of

ahead. go Please open. is line Your

Vikram Purohit

Great. Thanks for taking my question.

TAM. by broad that services. current segments, development. drug And a your between have of these the had on in and out then your I one biosimulation corporate noticed versus you TAM further you within a presentation, discovery breakout software I broke each drug So

opportunities the TAM? walk build a us first, here you if the biosimulation to two through of over for years, is the are, moving bit secondly, and what's questions of the So Certara the within which next you that areas of XX you I fully then high-level Certara And forward now especially of most Pinnacle had has think laid out grow could this feeding the just here, specific couple opportunity umbrella? the

William Feehery

The Thanks, the A the minds. trying lot done got Sure. update biosimulation few the years, information of the a the last the lot defined Vikram. and always investors' maybe size research put people to we're we on been market. in market been just have has we've on of corporate, in growing of

latest on thinking we to had the the So down. and it sizes different wanted we provide break

biosimulation playing, expertise on where of has of terms in been our Certara the side. revenue In is bulk development the

the involved companies with or clinical design during particularly of trials. clinical get during typically So Simcyp,

to software earlier our moved And of stage. that But as mirror services kind well. of our so some also we've

either the the as comes and of we increasingly been bit but when to clinical of or during earlier stage we developing, during in during into as SEND phase software preclinical example, the the a standard. have clinical preclinical even is the and the a have certain preclinical phase being data is we submit other discovery, companies for you want kind that to which like software which we visualization have FDA, ago piece a end So then collecting which largely in and little have data which phase. have product are at used of a a our reach pushed hold And called Explorer, data acquired XX, Pinnacle while

phase. is discovery which primarily during the DXXX, have We used

I So as stage the in – biosimulation the go the probably the our forward over interested think company extending time, tied the of XX%, overall that to over is time of helps. Hopefully, the development today XX% is really and reach but we is discovery, in phase. earlier reality business

Vikram Purohit

Very Thank helpful. you.

Operator

And William comes you. with question next the our of Thank Blair. line from Lin Justin

Please is line go open. Your ahead.

Justin Lin

Hi. Good quarter. the afternoon. Congrats on

First of bookings Pinnacle you but XX%, XX, I your was think said all, up software was up X%. excluding it

second, of compare guess, clarify I heard First to to I that did want all, your And how right? expectations? I that

Andrew Schemick

look Typically, bookings that You did hear right. trailing a at over we XX-month period.

Pinnacle ex have time at that have a look that sometimes bookings trailing us to to revenue is factors horizon that we longer XX The client tend on software it an XX sometimes don't late, early, renewals recognition. drive they months XX%. And from is impact over quarter-to-quarter, shift

given terms disproportionate where kind on We products of developed also FX software saw the some of impact are world. our nature the in around bookings, the

then arrangement. services had a year We that constant sale currency that was year that And adjust through bookings for basis. last So this essentially we from impacted didn't delivered that line.

I expecting. and healthy normalize what those, the the the was, I quarter were about XX% of TTM, at think, kind software So terms that of for looking were I would in and things and at call we quarter looking is bookings when

Justin Lin

rate on at what Got your That's affected general as are guess, the deployment or helpful. capital you your rising environment thinking can all? M&A in I priorities us investments it. remind

Andrew Schemick

to my of From take we're open opportunities. time sheet, opportunities. current could be M&A it's be evaluate the a given have We're advantage still perspective, to strong – environment a – balance that, good

has I event. been fast-moving say a relatively would this So

We haven't deployment changed our strategies. capital

Justin Lin

the Can with additional me. expanding talk specifically? this one see And you you or people? Or Are investments Okay. toward are in needed and happy your therapy whether you moment? right just the expertise cell for our there in capability gene about last at software area hiring opportunities the

William Feehery

of dosing been orphan the This tends type to is work and systems in work Thanks. that cell gene lot growing is And is Certara is gene lend in has deliver. pharmacology faster itself and therapy be which the our pipeline. by for drugs one of and known cell that the just that William. lot to therapy work for Yes. tends what's quantitative to our just our to group, areas. of of A done modeling A

to your and have about the So the ambitions are have, I we larger. much we answer I question, very our but guess, feel good offering group

So market of companies there's fact growth. in will a a in companies it we lot will as forward pharma adding a of the that and a of growing think that lot pharma a be a know general, part of QSP, lot groups adding, going beef be We for it. area, their for to

group as So But planning invest create also pursuing. growing that about that tie to offerings. are that already kind forward. tying in specialized about Simcyp other And our of we're or we're to We our offering. thinking QSP best also lot to to to software we to opportunities software a thinking there's go in we how continue

Justin Lin

very Thank you That's helpful. very much.

Operator

comes Thank with our line question Jacob from the you. And Putman Barclays. of next

open, ahead. is line go Your please

Jacob Putman

that thanks guys, contracts long ability of given and the pass for program? pricing on question. life term Can talk for about they're pricing allow your your scalers, of to the you Hey, many the how

William Feehery

inflationary margins. we're environment the ability company any is. we pricing to we the current because here. Andrew our out. Yes. in have that we're that occasionally particularly goes and price or to inflation right as then with do maintain appropriate have sensitive in it We our increases environment, of in longer-term for ask one I every that basically there's just now making sure enter less. offset ability in believe contracts – can year for contract And contracts the very into aware are Most and customers to other We're start and we can an chime

Jacob Putman

That's costs? how Great. other offsets any And to helpful. about rising

William Feehery

that's be since in growing group We've our Well, to said us our we free that went of What work, that leads particular, do sales – example, in there's make in company, more to offset some can to which, public, example, rapidly, quite in and do, is in gained efficiencies any sort efficiencies project one investing of go in company they having we heavily, basically, enabling to and and lets always we to would investments been Certara, to basically marketing we're that. infrastructure us that. software scientists from up or more that sell, for write efficiency. for example, leads for

Jacob Putman

Great. much. That’s Thank you so helpful.

William Feehery

Thanks.

Operator

Kesavabhotla instructions] Thank line comes [Operator from with the Baird. our Vikram question And you. of next

Your line ahead. go is open. Please

Vikram Kesavabhotla

Yes, for question. thank taking you the

organization I some fact the the far about give increased of It toward just think sounded talk of year. an last the toward there has saw year what you managing like looked your normalize the balance you are and end in so about in can this of the expectations start year? call, you the headcount the has talked year. for through the update attrition turnover if this Wondering the started workforce on like to and us that what

William Feehery

for question. Thanks Yes, the Vikram.

We the did attrition of uptick in end an right. last You're see at year.

quarter. level that in more saw a normalized the drop we Fortunately, first to down

like we guess, disruptions making market we're we margins. saw, were lot we're I wages, up with of keep in think, terms in there But and uptick, think a of COVID I maintaining I sure people's the our at year perception of perception worked to last COVID careers. end due through and their that – have or that, last of the of people's kind of way things their the

And tremendous which Certara really a really investing training, great backlog some got been right been in to now, helps and attract work people. interesting in I of here. we've bringing think has we've colleagues

first in So all the that's – in seen normalized much we we went I fact as to think quarter. more as the went attrition been we've reflected through

Vikram Kesavabhotla

range this bookings that then Okay, have on guess a based revenue you building into think at I level, just of thanks. that the higher point taken you the in the to And guidance performance. talked approach the remind your guidance historically, can visibility us the you've I from about you've year?

guess there's come if to this Just I you point where year, performance? do wondering been areas in of the some And approach. at of any variability the of revenue that could think the from key updates

Andrew Schemick

so in visibility. used forward same the we've Yes, methodology of terms

the forward bookings. today In light think the the this primarily TTM revenues that have I looking well the high year. perspective opportunities last confidence bookings QX of the bookings performance, now. at for two predicting we of in the the for for guidance quarters, as actuals from as into have variability visibility of don't The rely we the right the the the around versus year end pipeline

program that to offset bottoms of up the we do revenue drug successes. So is And kind think forecast. to get just to development I client that build the variability in timelines and client

Vikram Kesavabhotla

you. All right. Thank

Operator

this time. over turn for to And William questions And any remarks. further the like conference no showing back I further would to at I'm you. Feehery Thank

William Feehery

Yes. Thank you all for joining us.

We the confident significant as in overall and fourth think where the three is all quite we month-over-month improvement saw We're improvement the bookings. would very I saw quarter, year. to very message I months feeling quarter, in that look say throughout the – after were happy the strong we our QX. in forward see to we're rest we of

So future you quarters. updating very forward to Thank everybody much. look in

Certara (CERT) 8 May 222022 Q1 Earnings call transcript