Earnings call transcript Q1 2023

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Operator

Good day, and thank you for standing by. Welcome to the Certara First Quarter 2023 Earnings Conference Call. [Operator Instructions] Please be advised that today’s conference is being recorded.

I would now like to hand the conference over to your speaker today, David Deuchler, Investor Relations. Please go ahead.

David Deuchler

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

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

results from that Before you Company’s Investor make the statements will expressed we that Relations include statements, in statements. you forward-looking management the begin, materially information, the on I slide Please remind would materials may and implied or refer which site. actual this for find additional those X like call differ accompanying to forward-looking can during in to

may of directly the measures. mention some In the remarks available measures available their non-GAAP on these the website. most financial Company’s management Reconciliations measures comparable to GAAP earnings release in are or responses recent questions, non-GAAP financial to

in refer of as accompanying For information, any of please only except revise X, future additional broadcast contains This the accurate or law, conference projections otherwise. XXXX. statements, the materials. forward-looking live information, by or any update today, to to information is as obligation, because disclaims call financial or May reconciliation time-sensitive and Certara whether the required events tables new

I And with turn will the that, call William. over to

William Feehery

remarks, start prepared joining Quarter questions. XXXX First with Certara’s then Earnings take Good for and David. you you, John I Thank Thank will everyone. afternoon, we Call. your and will

positions this and the of with pleased year us XXXX, our well are start for which We to beyond. remainder

patients services. Certara’s medicines executing on and accelerate is software biosimulation, to Our team using to focused mission

will people biosimulation. well-being process use improving from to accelerate lower the and globally. We probability the safely continue development health increase that in of informs and the the millions trials, of of drug information looking of through and development clinical customers deliver decision-making of that success ultimately analysis see cost critical interest to the We expanded

Before John a I’d new like to and thrilled to a and discussing welcome future joined role results, Certara over to addition our an on financial little month board. been formally team. play Certara’s ago as success, and valuable Certara’s John growth I’m in leadership already the Gallagher a first John have will him quarter important CFO. has

There’s lot platform the biosimulation continues at excited to of and be the a awareness around world. about expand pace Certara’s Certara to adoption of as

Just XXX more conducting in drugs weeks lieu now claims announced novel inform studies. ago, a XXX few to over Certara’s has clinical of we drug Simcyp than Simulator that used PBPK label been for

XXXX received consecutive of to in Certara’s addition, and and ninth technology-driven drug for In the year, by approvals new XX% FDA our use were biosimulation software who proud say services. customers we’re U.S. that

Shifting to performance. our quarter first

expectations revenue profitability for reported and are met We quarter. financial million of which XX% total XX% results, with our constant and revenue a our the basis. on $XX.X a basis currency on by Certara’s grew pleased year-over-year

Revenue across growth services to categories. and as demand continue software see strong biosimulation driven all we was by customer

XX% and XX% revenue million a basis currency growth of quarter software represented a on on First reported $XX constant year-over-year basis.

biosimulation majority the from platforms software of to our continue These revenues. XX. software, our see strong Pinnacle Phoenix three core performance as well represent and We software as Simcyp

and expanded users ability tool help will a therapeutic update March, on of This QSP to our models. compounds announced the we early year, of XX. their unveiled own we added more annual pharmacodynamic library Designer, model Simcyp In our Simcyp now populations, and version develop diverse that

customers. our pharmaceutical software and new core relationships platforms our innovating to with use our to to strengthen and commitment and support features is what investment expand biotech cases continued Our continues with

chemical DXXX announced enables incorporates hard our These software, automated the team which AI platform. AI and enhanced learning technology are prediction, our of deep the Certara of capabilities Vyasa data. to DXXX Following the integrate proprietary recently throughout updated the cutting-edge novel of transaction, the has We and both generation close include models property worked rollout their of data. predictive development on and structure trained public analysis that unstructured

which by this excited upgrades, encouraged make the offerings. software team with traction are the these the software technology our find We speed was to learning across new to customers. will product at team by we’re applications able Throughout our year, our early and for continue deep

basis reported continued a the first technology-driven currency throughout trend an encouraging on levels at strength quarter months. experienced basis growing XXXX. XXXX first throughout constant compared remained million, of X% which an on revenue area quarter XXXX. And services was XX grew Certara’s and strength, services of $XX.X comparable throughout due the bookings past growth a with expect XX% Biosimulation we to

We see our strong biosimulation and clients expand use gene across demand its cell continue to as biologics, services small for therapies molecules. and

we weighted be headwind is continues performing our Our recovery as to they to services within of slower be navigate growth more initially a pace The market challenging expected in anticipated, towards half regulatory the a second year. of is businesses environment. the expectations growth, than the range regulatory to moving but are and of

on regulatory remain pipeline, and we Our focused far. so strengthening encouraged progress made the is by team the

XXXX to team throughout well and deepest our as biosimulation term for we’re work. Certara continue hard my research with like of believe dedication over their I the close, quarter close our success organization development. catalyze to long results. would and our positioned To appreciation for of pleased adoption extending and first and We the support the is we by entire that to remarks drug my

our first results Gallagher, I will financial detail. now turn our John it over quarter more in discuss to CFO, to

John Gallagher

everyone. William. Thank Hello, you,

exciting the transition expected me the helpful innovative opportunity team through I and like join responsibilities, way later and to such Before Andy William results, financial this which at to reviewing has to an entire Certara be as thank quarter. our been an company. work of would for orderly is we completed our to

ended a basis XX% XX% and months for three constant March a our on to XX, was year-over-year currency of financial representing Moving million, the XXXX, reported on revenue basis. $XX.X results. growth Total

discussed, overall thus demand biosimulation insulated strong funding. As in around and for concerns the from remains industry

and analysis our of receivables or accounts less found revenues an transferred XXXX for X% Specifically, we through early-stage were venture than with of company. performed associated our total recently typically banks that

revenue increased prior quarter, and was XX% the over was first a quarter Software and million XX. software period which revenue for a Ratable accounted basis basis. first currency the $XX XX% biosimulation on revenues. quarter constant on year in Pinnacle software in XX% the of reported driven subscription by and Growth

the prior has million, of to up plan. been this in software aggregate strong, to year-over-year. Software delays We timing. plan XX-month our pushed deals due quarter. were with no and experienced was bookings million period. remain in The that timing-related our first quarter second rate the annual overall line There renewal first impact were which $XX.X the from into increased year XX% bookings X% software quarter, is the our The software XX% bookings first in which health trailing quarter, $XXX.X some

in the regulatory Services which perform mid revenue year services and was prior growing reported headwind remains the million the to range, overall X% the to while period in high to constant Biosimulation basis well, a first over quarter, teens services XX% on increased currency rate. a continued $XX.X growth a basis. on

million, which X% prior were were year. to $XX Technology-driven which the X% quarter period. million, XX-month services the year compared prior the from increased Trailing first services increased $XXX bookings as for bookings

Biosimulation and encouraging of adoption for services continued be an robust to indicator bookings the momentum biosimulation.

business are our we and against difficult focused Regulatory backdrop. strengthening improving a pipeline are on for our focused our a regulatory team, addition, high performance XXXX. on In we market services priority remains commercial in

increase cost software as $XX.X quarter from licenses. first of for as an primarily quarter million related due of growth headcount billable first million, to to the in Total revenue was $XX.X of employee XXXX, well costs the XXXX

quarter increase for from expenses first $XX million of operating $XX.X were the an XXXX. first the quarter XXXX Total in of million,

$X as components marketing operating XXXX. is and the compared costs the $X.X Sales follows. related team. primarily for to of The million sales were first marketing expenses expanding of quarter increase to employee million This and to are due expenses

due XXXX. software employee-related to were R&D first for to $X.X compared of for costs expenses million were quarter expenses development. million up R&D $X.X primarily the

were to $XX.X first million for of $XX.X expenses G&A the XXXX. million compared quarter

including year-over-year. the flat in of G&A consideration, impact estimate contingent expenses, for a acquisition was change value Excluding fair

Intangible million asset in and of $X.X the million XXXX. amortization to to $X.X million first $XX.X XXXX. first compared Depreciation expense of was $XX.X quarter compared amortization million quarter was in the

P&L, $X.X expense to higher loan. the million term $X.X the first to was down interest rate for million XXXX of to relating our floating compared Continuing interest due quarter expense

roughly our fixed at debt a have and XXX, X.XX% plus floating at about about X.X% which As at XX% is today’s LIBOR XX% rate. we of reminder,

compared to foreign quarter $X.X in $X.X quarter interest million income to Income the higher for tax of million was Miscellaneous due to XXXX income, million of first was million expense XXXX. by $X.X currency expenses. the offset first $X.X compared

XXXX million of of to income $X.X Net for quarter for XXXX. was million first compared the quarter the first $X.X

EBITDA of Reported quarter for the adjusted margin quarter quarter first of for the representing million Adjusted $XX.X $XX.X XX% XX% XXXX, compared XXXX. to XXXX growth. was of the in million first first EBITDA was

quarter XXXX for $XX.X $X.XX $X.XX the XXXX. the million net XXXX was Reported share XXXX. quarter for Adjusted compared first compared of of earnings XXXX quarter first $XX.X first of for per was was per diluted first million $X.XX earnings of share adjusted income Diluted the in for of to XXXX. quarter and the both the quarter to first

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

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

full Turning XXXX. to the guidance for year

representing XX% to range issued We of previously of are the revenue reiterating our to with of million, total XX% growth in million $XXX compared $XXX guidance XXXX.

assumes as originally given expected XX-month in have and to to and also we guidance visibility as of regulatory compared our low biosimulation continued to anticipated, software digits revenue single software strength revenues. be growth subscription which assumes revenue guidance total a continues services where bookings. software percentage trailing Our more half XXXX, than weighted increase the is second The services, in good

in of EBITDA in in expect million to EPS and We million adjusted fully XXX $X.XX of range XX%. $XXX the shares per million, share, the diluted million to tax $XXX rate range $X.XX XXX to range of the to adjusted range the in XX% the of

call I CEO, turn the will back now closing remarks. to our Feehery, William over for

William Feehery

in positioned as the summarize and quarter believe biosimulation. first with And our our in that growth message you, this leader pleased To we we’re Thank today, well a results. future John. continue Certara as global year is for we

open now questions. will Operator, the open line? line can for We you the

Operator

of Instructions] first Windley from you. question the Our of line comes [Operator David Jefferies. Thank

David Windley

environment around about could I what adds. wondered curious transfers you customer if I comments wanted -- about to from mentioned. on appreciate the payment John the talk banks start, that Bill, funding I are the like And how just companies. those challenging customer that’s assume small new for companies, companies in small small and your I those and predominantly ad have would if a progressed trends looked typically more

John Gallagher

John. all the Yes. look look, David, that we seeing we’re this the Hi Yes, we’re actually is good categories. as adding, at across new contribution customers

that’s the line had The rate in in XX% mentioned is in a remarks, I As renewal net line we with retention with averages. historical rate also plan.

and the -- it’s logos. when existing new customers apart, XX% software fact, of X% you expanding about you In then take growth and from that in XX%, look at growth then and about

we’ve mix as logos what Tier on we of our for and have you with there already, new top and biopharma growing, given So, do got X that And historical X are in a of Tier companies sure. the annual they’re averages. in line sort about seen customers

David Windley

it. Got

XX% the then being what maybe year row, I XX% comment about coming about the -- comment a the excuse customers seventh of question, an me, and you your but or that -- journeys? to talk customers we And perhaps Okay. is of are approvals biosimulation in is is more customers how off-the-beaten-path -- from importance believe, or qualify, as possible simulation quantify to those in qualitative How growing how those they How within approval might said. trend in in terms those using approval? programs measure it the

William Feehery

thanks David, a couple for question. Yes. -- points. the The of

Simcyp’s XXX statistics We of the drugs passed, it’s at recently records, also on. gave been some used look if use public about Simcyp. just you

measure. one claims. XXX that’s over within been that, there’s So And label

clinical approved to used avoid an drug. documented of trials So, number which development of cases these some in was during are the biosimulation

thing becoming few a been bigger is quite strong -- the in accepted, that and have can -- biosimulation as The a approved. the And fact we services other last point demand that’s we’re for reflection working not playing is to drugs of part just our recently, more and we’re years. has over that the been but

Operator

line the from Stanley. comes question Morgan next Our of Vikram Purohit of

Vikram Purohit

you unfolded Our services the business. the has just in you an what first of you bit uptick lead of the has the side one versus what for more a a could half Thanks. second unpack in us mentioned bit do earlier. regulatory Could And differently factors your detail is believe recovery I expected the year? on prior that slower to there expectations? than been you think

William Feehery

Yes. Thanks, Vikram.

bit what year. first a with year is services flat for the had we first regulatory behind last we’re was It and So, quarter, growth the planned roughly for expecting quarter. single-digit

are for building interest we increased it. up So, and our pipeline seeing

So, the catch we we we will do that as through up believe year. move

last some there. the As year to management you sales know, made organization and changes we the

it’s us so, taken little But with fits software of think that and us. time lot in it the And to we of a a have that And biosimulation services business It’s it’s still nicely bit pipeline. good we quite a Certara. rebuild profitable. for in the

Vikram Purohit

the particularly follow-up a CFO on different And to topic, a given it. allocation, quickly Got we transition. wanted ask capital about recent as

any about Thanks. there’s or competencies bring like in or changes thinking development you’d see if you wanted Just this when in house? think priorities to to

William Feehery

you want then me in there? start, John, and to chime can you Do

John Gallagher

Yes. Yes, sure, Bill.

William Feehery

Yes.

not significant changes. So, we’re expecting

when both healthy we judicious and paid successful and been and that nothing chosen what ability doing And our running history We we of to prices are right. -- M&A. have the sheet balance we’ve quite we’re sit a and that to a in shown, have we we I a -- have conservatively, acquire obviously, we’ve isn’t think, time the successful have we do

very things that the in for if That can Pinnacle said, where we’ve like our there’s cases shareholders. to our have also market move XX, that shown be interesting ability we in valuable

successful been and he bit the we organization the turn think what Maybe has to place over he about in. -- talk I’ll wants bring allocation how to and John far good a to capital stay. so to our a So, what he wants it sees little --

John Gallagher

Yes. Thanks, Bill.

the We Company approach good as you’ve healthy strategic the very seeing track strength those front. not we had from continue Obviously, position a a mentioned, So seen on And the what change of because Bill mentioned, evaluate. M&A Bill from here. sheet. any we’re of has record balance to

And have climate have We’re and uncertain. we so. mentioned, $XXX to pleased a really the the when at time hand, equivalents macroeconomic cash is on cash million very of we

our we that at the it disposal, to that that important think environment have with it’s way cash So, is. especially funding the

have So, as I coming then of as the the capital acumen and well. organization the M&A are sort that that strong as an key balance sheet, the plus it exists in opportunities to allocation, internal we see

Operator

the [Operator Instructions] of line from Our next Stephens Garro question Inc. Jeff of comes

Jeff Garro

regulatory start with Maybe a two-parter around services.

to to quarter you access the low Just growth for curious services what extent are on large the that the needed business? reach the and market regulatory what first market front, curious described of piece the impact projects single-digit also services that bookings. that regulatory expectation of revenue And on

William Feehery

So thanks, Jeff.

just So let me your understand question.

what was around part bookings, you’re is first saying? that The the

Jeff Garro

hit, The parts have the the duration regulatory when same you’ve they’ve the of first outsized past, of visibility some impact having sometimes but about of a part, in really as end the the the kind longer really FDA business. talked process and those at submission positive projects don’t

William Feehery

Yes.

-- business thanks question. regulatory for our So, the

historically Our we of every and has the our regulatory business biosimulation And business timing tend up larger kind handful quarter. down of make move existence been a do cited reasons for them a that than lumpy business because projects. to in you the year, and of the can more

those or X back X over we couple years, If generally the last I projects. year, had a look of every

it’s a so, we’ll And probably reasonable that year. have this couple assume to

in business the bills. which the of pretty What more certainly run and we normal course business, much saw quarter is first booked the great the were kind pays

ones those quarter. have in really we didn’t So, of the first large one

question. So your maybe that answers

John Gallagher

assumptions, transactions. cook going number into very we’re a our get set And too, that -- the we large to necessarily to of don’t

larger be So in, would extent we our upside to that get low to the some deals coming then digits. that single

Jeff Garro

just software was it. how bit That’s think me about to we trying for any bookings software the hoping Got strong cadence tough impact color of XX bookings. was rates. a QX. timing on comparison number, it. a mentioned Got the on also just that but coming I ahead rest trailing should year-over-year months the think around follow-up renewal recognize And And the in for for maybe helpful. the of and more to the bookings year, software

William Feehery

John. Yes. ahead, Go

John Gallagher

so you the a software XX%. there, reiterated, we strong We timing. experience on did QX into some see yes, So months, of the as on the as -- that bookings mentioned, QX. as XX specifically and and QX you mainly timing trailing is And out

and that XX% book-to-bill on full range that year, at expectations the in software look we be confidence we’ll X.X, us our ratio when the of about gives be continues that recognizing on So, revenue. right to

William Feehery

Yes.

-- something didn’t can We second bookings in quarterly be software this have reasons, somewhat we’ve to Jeff, for and quarter out first up we, the last various So the renewed the year. them that sometimes sign that pointed year, we variable. customers quarter

That get timing we revenues the terms won’t really this affect year.

customers into looking we renew since in them What where signed the as quarter So, and expected, to at maybe the quarter. of second we’re they significant, first estimate didn’t a took little a large than months then. longer that’s accurate had we saw few what more the trailing we’ve But lose a all were anybody we slipped and we point going. XX to bit

don’t about -- we’re don’t think that right I think particularly there’s I now. So, concerned

Operator

line the Our next Barclays. Luke question Sergott of comes from of

Luke Sergott

of there. could then actually regulatory has just help up how second commentary to if I been give it the half guide, that to looks. you is get piece the pushing you’re sense But the And out what size an your services business want helpful. update us step-up and in then follow and impacted? on All if a the being recovery,

William Feehery

want you me John? start, to Do

John Gallagher

overall. it’s said in about flat size half, expecting that from the And quarter. XX% of of we the change we’re as the on Bill on the low single outlook the second mean, to a year. business, full digits before, And growth. we the had business But recovery didn’t the get it’s I Sure. that for

So imply see that coming to that as been QX. that start imply does -- we’ll does growth we’ve in, in that mentioning,

Luke Sergott

your I to on hearing -- then -- you side. out regulations? them what the the And on they’re FDA the the so talk But when with can get going for from their Okay. about you’re mostly push update reason them being conversations

William Feehery

but say rest Yes. I heard do this? We’re don’t have like we’ve -- it that on anything the interested to we from industry, we’re them. new how put -- don’t I the think of highly I

we’re -- So waiting.

Luke Sergott

We all are.

William Feehery

Right. Thank you.

Operator

comes Blair. question William line next of Our Smock from of the Max

Max Smock

A quick you one think you dive actually deep did on last receivable. quarter, indicated And here reserve. mentioned increase -- in for me you on you had an the debt I bad your a accounts

Just wondering quarter, in the would impacted? you call maybe accounts out in trend whether that continue anything was the receivable your here of from deep quarter? dive call you some that there, did first to anything of customers there out saw that if being you first smaller you’re more else And -- here

John Gallagher

Yes, sure. Yes.

put bad million $XX we in it did in reserve all, so have of reserve, $XXX,XXX. context, accounts about put in -- So of to debt sequential first bad down actually debt to just came it we context, And quarters to the receivable.

that more of have have receivables a regional through it through -- immaterial that our increase receivables took what’s relatively of we the that with exposure you heard banks prepared biotech early-stage and given a exposure to a did funding. what remarks subsequent of bit, So, with we biotechs. some the or the X% to we is, look is give emerging banks any any our a magnitude, periods, been and less while in are happening take of that pretty exposed sense look, than to banks in just some We it accounts did small. is order running concluded course, venture We of of you

Max Smock

Okay. It makes sense.

William Feehery

a the customers, just Certara’s -- we I’d they’re add structured, in is to -- but thing get drugs it. tend don’t which, by of to revenues XX% our other we definition, surprised one acquiring of weren’t by us. spending small lot in means got is The companies phase, We lot purchase early-stage way that a are that a you’re The from behind new interested when clinical ton over and this. business promise of

Max Smock

sense. Makes Okay.

are revenue? not due seeing to And the years that On up the pick conscious the at we that of higher couple given opportunity over particular? do the on to what seen an saw and backlog bookings regulatory have convert step the just to of in additions in not slowdown line have you Why you why services depressed more at last some rate moving decision-making demand Is with kind Or services burn here, think existing services? to we we forward in drive XXXX? services all? you the net slowdown of at least regulatory kind with forward, which from cash here headcount productivity customers or moving up do expect in that be a on

William Feehery

Well, a couple of headcount. comments on

seeing are a both in disclosed in the on we headcount, growth XX-K. last the First, year-over-year we since that number headcount and basis

So sequentially, we’re seeing headcount. growth in

as software And the as biosimulation adding well people services consultants are billable that developers. for we’re

So, demand us going talking we’ve space. the relates both growth bookings that it to that obviously about in to strong meet revenue the been the is and as that help

William Feehery

second which delayed So part in your regulatory. of there chunk our question, backlog projects are is of the basically to a answer

waiting grow is that are for over customer or years. some before trial the It’s the answer waiting that do from we tended FDA of always data the by to work has an predictable for phase clinical of not the come back. customer, Sometimes last of them couple and next the

and There’s to back. an of there come active. customers those work. still already most the booked -- They’ve those for point of still opportunity at some lot it are A

business the predict when going trying when So, want get all exactly a it’s to happen. to I that’s of But starts. to don’t of in question it

Operator

next the BofA. of Instructions] of line Our comes question [Operator Ryskin from Mike

Wolf Chanoff

Thanks for on Wolf is This for Mike. questions. taking Chanoff

want bit a bigger picture of with a to start one. kind I So of

to larger lot could dynamics acquirers. the I if primarily a been of And any walk there’s targets? this. Do as process? think broadly among here us Certara’s was color larger acquirers notable their you multiyear Thanks. something through pharmas, that see takes space typically given offerings the out that Just presence I great. this be a M&A roll from wondering a Is biotech result of in your the you would

William Feehery

our for the which are acquirers the are Thanks bigger customers. question. Yes. Generally, companies, the already

way So, penetrate to a -- we’re as them. not to seeking have use M&A

But tend already to a do working acquired, you we’ve happen acquisition. go with what been the of We’re if drug have company is there. been that’s on kind a we along for

So and we’re usually, the acquirer accelerate wants it. spend more, and of to part things

So net -- it normally usually, that it’s when happens. a can -- well, let’s it just is us for say positive

asset in, invest have we’re an You basically going involved already someone that to is more it. and with

we’re going that into pulled as So, get to approval. goes with that Is helpful? along it

Wolf Chanoff

slightly balance That in progression the guidance, margin sense. the then Just just EBITDA any you’re year? that your changes XQ and the you’ve I’d there throughout Are technical year. about hear thoughts fact where given to of the a about makes And love to thinking how came more you question. the reiterated

John Gallagher

the for Thanks Right. Yes. question.

a EBITDA EBITDA margin. due stated half QX, first half, basis. know had imbalance mid-XXs XX% on we last bit we looking some goal. at is of So margin, kind before the back year, we on some We’ve -- a I to of had were second little investments, on our

You year. happen shouldn’t expect this that to

of those quarters. we the in the in as and expect we in for then each instead, So EBITDA on XXXX ratably sort it remaining of come margin, look line to with the at quarters mid-XXs

Operator

next SVB Instructions] question Joy line comes the from Securities. Zhang Our of [Operator of

Joy Zhang

else earnings one, than calling first downstream a And expected. see, calculation out, Curious would some this if business we’ve think we impact if sort reg my from CROs of get negative things it’s have call quarter anything out that heard some you that. on would not be impact rates impact any you you of it potential if I worse? seen guess an I higher that or sort

William Feehery

doesn’t regulatory, as Part In there some projects the for many so Joy. can bit, business works. impact saw are I the a us. of business we It’s first what cancellations. industry there project in affect circumstances a would that I particular or say always big it is up drug of the think Thanks, our little exact how in just numbers the degree are biosimulation, depending move quarter. generally our us and this don’t down on is the are. to the way

Joy Zhang

And small large side. comment helpful. super about I your as biotech That’s and new from customers the coming follow-up, a appreciate side earlier both pharma

into if -- of dig for there’s these biopharma in can customers, you the we’re if there call on any the side. anything out length groups to given sort the cash sales terms the of curious conservation small trends Just for cycles of just of seeing

John Gallagher

reported number Well, greater to at addition would of million that greater the our customers in is the what are the the of year-end. I’d already on thing other accounts be add that since accounts maybe customer $X that the comments are than amongst $XXX,XXX, customers this values, we and larger growing categories, account than both those we were

this Simcyp, we we services software the look at about the and we’re and in moment, seeing you those not results, the teens XX core Phoenix what And when So in at the the impact. categories. both revenue growing in mid- mid-teens, to biosim of grew Pinnacle high said and of QX, given the products

strong adding continuing our growth on the revenue. see we’re in rates very Fortunately, results to and customers

William Feehery

said So, if I right what Joy, add the really on X could on to market there, I effects going John there’s now. in think

probably with some have deals is is software one and lengthening reported. and we’ve what companies to services what a the So of seen bit, time in close it’s

growing. the that been demand has for counterbalancing been has And biosimulation, which strong

see results, you we but of the probably don’t it’s one’s kind resolving, because think [ph] I see balancing So other out our when one now. right

Operator

of of Berenberg comes Capital Instructions] Markets. Gaurav from Goparaju the [Operator line next Our question

Gaurav Goparaju

regulatory hit services guidance QX if happen levels Just favorable you in recover possible? the to would example, existing top for if the two For you doesn’t segments. see customers quick Is with the reaching ones that help of in maintained? from higher regulatory other me. have expansion What end end you even to in

Just trying to here. the top see contribute to line what would

John Gallagher

or reg in the a year. I transactions, it, exceed of full reg. get or So, to said what to in cooked earlier, on large number what the that order in occur low was single deals of have don’t what we higher can the we saying And is was on digits which larger for based end

get were we if the in, some And have we and get higher So, end. of alignment quarter. flattish the at that a would us few we on those

of to growth QX, So see in as would half start expect approach year. the to we start to we second the

Gaurav Goparaju

platform it. quick that software? then new products Got platform. and follow-up. products more modules like from this on driven add that you And of expand for not customers interest their just active to consumption the new looking the And users Simcyp or new yet so are new a again, to Have from more is Discovery so

William Feehery

Yes. the a in some substitute a didn’t the the also of as but that it. for the -- not set is our for use Simcyp that Simcyp existing are using customers question. both. pick seen -- it it come Discovery, of of other in expanding of use organization seen parts we’ve Thanks Simcyp, using answer basically basically up, for different new within And parts customers organization product. this the of for Simcyp We’ve

Operator

of of [Operator question comes Baird. next Instructions] Joe Our from line Vruwink the

Joe Vruwink

software the Maybe think function market biosim opportunity. through relative what increased Maybe of. I materials investor past. walk sizing in just is with to size question just on I TAM the noticed used this today had I’ll start your the in can a a the you’ve you of

IPO? you’ve at Is other just greater, factors spend Is a maybe there is there some You since new per or are play? the evidence it new product. launched account products that mentioned

John Gallagher

Yes.

the of of your there, basically adoption So listen, is the and biosimulation. what overall on piece we’re question seeing you’re expansion of seeing the an because then TAM growth

because the the why experiencing space. in TAM. the It’s in you’d are see we to mid-teens growth that’s So, as growth answer

Joe Vruwink

Okay.

or no evolution that’s early So just the development bit market, maybe more? of products from new after impact or discovery normal stage a going

John Gallagher

That’s correct. in be Because Yes, drug of to has vast -- of that’s majority the revenue continues discovery. correct. our continues the still, phase been clinical and be to

drug the inching or development. drug So, not not that -- it’s an but there’s into discovery

base. inching not So, you’re biosimulation adoption there what is and really, growth in in there’s just an into development the in continued seeing clinical drug discovery

Joe Vruwink

been for a there’s create a your Has Obviously, just software revenue wondering quarterly any within in more this of this are disclosures. been if kind variability a ongoing revenue way mix shift only those Understood. maybe or Okay. as subscriptions. know subscriptions impacting to good value, towards then and ratable in lifetime bookings customer relative bigger I expectations? And the but follow-up,

John Gallagher

sure. Yes,

So out revenue, is a reported the little XX%. on we QX. by is But a and was describing, conversion subscription. we to also the what was there, it quarter of before, though, impacted, you’re the -- reported into of software on QX which timing was -- it’s bit headwind as software revenue of mentioned for piece That

XX% It material? And So, from Yes. the is that headwind, up would headwind? at Is it of revenue. a It’s a year to growth really. in QX No, of that’s impact that in growth. not revenues, XX% Is and modest overall a we’re software conversion. that more prior. headwind

Operator

next Our Instructions] line comes [ph] Kyle Services. [Operator of Financial the Credit Suisse from question Cruz at

Unidentified Analyst

software acquisition? months XX the color on more Could trailing provide you organic the XX maybe Pinnacle excluding bookings, some

John Gallagher

sure. Yes,

we’ve annualized So, now Pinnacle.

continue is, bookings. trailing XX-month the a bookings it a going XX-month look, overall the we’re portfolio strong seeing I before continues hey, But to to driver is and about Pinnacle a trailing addition what out talk not be and to software are the good of at ex We’re did That’s XX%. growth to Pinnacle. say that break number. in

Unidentified Analyst

of And are revenues the proportion unrelated distinction your in With business, of the preclinical? clinical and a then the XX% your clinical follow-up. you the business other growth revenues seen of that from have of kind an maybe

William Feehery

So, a I’m seen sorry, distinction? have we

Unidentified Analyst

guess it clarify, than growing of part the similarly? growing I has clinical faster preclinical maybe of or to been the business, your been is have they Yes. business, like kind

William Feehery

a used faster launched the we because bit in growing to probably products few it than is would that say little I a area. preclinical that

revenue So would the change mix what we’re But seeing of two -- it benefits I right that. the think we overall reported the we’ve of between as don’t hasn’t our now.

Operator

to call CEO of would I like now William Certara, the closing turn remarks. Feehery, over back for to

William Feehery

conference quarter call. first our joining for everybody, you, thank Well,

that say at we first had quarter. Certara, would I we a think good

we will industry. that We interest what biosimulation excited doing, pleased this next the that talking with to go the we’re get we quarter. future, call. forward. look very for and There’s end good very lot to you forward about feel and we our I of very attention We think from all much, a about you progress are Thank as prospects the the in and and we’re

Operator

you today’s conclude the Thank participation This in program. for conference. your does

disconnect. now may You

William Feehery

you. Thank

Certara (CERT) 8 May 232023 Q1 Earnings call transcript