Ahmed Muhammad Rahat

Ahmed Muhammad Rahat, on for Mike Cherny, sought clarification on the $100-$150 million tariff figure, asking if it represents direct impact or potential exposure, what is embedded in guidance, and if price increases aim to preserve margin percentages or gross profit dollars.

Answer

Executive Edward Pesicka clarified that the $100-$150 million figure represents the total expected cost increase at the SKU level, which the company plans to fully pass through to customers to cover the higher costs. The expectation is to cover the dollar-for-dollar impact.

Ahmed Muhammad Rahat of Bank of America inquired about the elevated level of cancellations, asking if there were any significant outliers or specific concentrations by customer type.

Answer

CEO Dr. Steve Cutler responded that there was nothing unusual about the cancellations. He stated they were generally elevated across all customer segments, reflecting the company's overall business portfolio, and that this trend is expected to continue through the year.

Ahmed Muhammad Rahat, on for Michael Cherny, asked about the business setup for 2025, focusing on demand trends from Tier 1 and smaller biotech clients and whether Certara is observing project approval hesitancy similar to its peers.

Answer

Executive William Feehery acknowledged that while the sales pipeline is healthy, Certara is experiencing a lengthening of the time to close projects, indicating some customer hesitancy. Executive John Gallagher added that the revised 2024 guidance reflects a challenged end-market environment, with that caution expected to continue into the next year.