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Certara, Inc. (CERT) Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 was solid: revenue rose 10% year over year to $106.0M, driven by biosimulation software and services; adjusted diluted EPS was $0.14 and adjusted EBITDA was $34.8M with a 33% margin, aided by slower-than-expected hiring (+~200bps) .
  • Significant beats vs consensus: revenue $106.0M vs $104.9M* and adjusted EPS $0.14 vs $0.113*; Q4 2024 also beat on revenue and EPS, while Q3 2024 missed revenue but beat EPS .
  • Guidance was maintained: FY 2025 revenue $415–$425M, adjusted EBITDA margin 30–32%, adjusted diluted EPS $0.42–$0.46, fully diluted shares 162–164M, tax rate 25–30% .
  • Key catalysts: FDA’s roadmap to reduce animal testing (tailwind for biosimulation), launch of Non‑Animal Navigator, Simcyp V24 release, and share repurchase authorization ($100M; ~$25M already repurchased) .

What Went Well and What Went Wrong

  • What Went Well

    • Strong bookings across software (+23% YoY) and services (+7% YoY) with total bookings +12% YoY to $118.2M; Chemaxon contributed $4.9M bookings and $5.9M revenue .
    • FDA tailwind and product innovation: “We are pleased with the first quarter’s strong performance in both core biosimulation and the regulatory services businesses,” and FDA’s roadmap “demonstrates the vast opportunities ahead for Biosimulation” .
    • Adjusted EBITDA margin at 33% ahead of expectations due to slower hiring; management reiterates FY25 guidance despite industry challenges .

  • What Went Wrong

    • Tier 1 biosimulation services softness; NRR of 102% below historical averages due to timing of software revenue recognition and rising ratable mix .
    • Persistent end‑market headwinds: downstream IRA price controls, biotech funding caution, elongated decision cycles at large pharma .
    • GAAP diluted EPS ($0.03) reflects amortization and other non‑GAAP items; regulatory services still mixed despite improvement, with management cautious on broader macro .

Financial Results

MetricQ3 2024Q4 2024Q1 2025
Revenue ($USD Millions)$94.820 $100.361 $106.004
GAAP Diluted EPS ($USD)$(0.01) $0.04 $0.03
Adjusted Diluted EPS ($USD)$0.13 $0.15 $0.14
Net Income ($USD Millions)$(1.371) $6.577 $4.743
Adjusted EBITDA ($USD Millions)$33.061 $33.524 $34.843
Cash and Cash Equivalents ($USD Millions)$233.023 $179.183 $179.086
Segment / KPIQ3 2024Q4 2024Q1 2025
Software Revenue ($USD Millions)$35.9 $42.3 $46.369
Services Revenue ($USD Millions)$58.908 $58.091 $59.635
Total Bookings ($USD Millions)$96.1 $144.5 $118.2
Software Bookings ($USD Millions)$34.8 $59.7 $40.8
Services Bookings ($USD Millions)$61.3 $84.8 $77.4
Software Net Retention Ratio (%)—106 102
Chemaxon Revenue ($USD Millions)—$6.6 $5.9
Q1 2025 Actual vs ConsensusActualConsensus Mean*
Revenue ($USD Millions)$106.004 $104.889*
Primary EPS ($USD; adjusted)$0.14 $0.113*

Note: *Values retrieved from S&P Global.

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue ($USD Millions)FY 2025$415–$425M $415–$425M Maintained
Adjusted EBITDA Margin (%)FY 202530–32% 30–32% Maintained
Adjusted Diluted EPS ($USD)FY 2025$0.42–$0.46 $0.42–$0.46 Maintained
Fully Diluted Shares (M)FY 2025162–164 162–164 Maintained
Tax Rate (%)FY 202525–30% 25–30% Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 2024, Q4 2024)Current Period (Q1 2025)Trend
AI/technology initiativesCoAuthor launched; continued R&D and AI investment; building integrated platform and Certara Cloud AI features gaining traction; new releases coming; AI spend at clients a tailwind Building momentum
FDA roadmap / Non‑Animal NavigatorNot highlighted in Q3; Q4 focused on strategy and M&A Launch of Non‑Animal Navigator; strong inbound interest; webinar attendance (400+ cited in remarks) New tailwind
Macro (IRA, funding, tariffs)Guidance assumes similar subdued end markets; elongated decisions at Tier 1; biotech funding lag Headwinds persist (IRA, funding); tariff risk viewed as indirect; Tier 1 decision slowness continues Unchanged headwind
Regulatory services performanceQ3 mixed; Q4 returned to growth in bookings and revenue Q1 growth in regulatory services bookings; strategic review ongoing Stabilizing/improving
Simcyp & platform updatesIntegrating Chemaxon; expanding platform; Cloud push Simcyp V24 released with DDI, special populations, UI/AI help; broad adoption Product strengthening
Capital allocation—$100M buyback authorized; ~$25M executed; Arsenal lock‑up to April 2026 New capital return lever

Management Commentary

  • Strategy and tailwinds: “The FDA’s recently announced roadmap for reducing animal testing in preclinical studies further demonstrates the vast opportunities ahead for Biosimulation. Certara is well positioned…” — William F. Feehery, CEO .
  • Execution and guidance: “Our first quarter performance reflected strong commercial execution… we are reiterating guidance for 2025.” — John Gallagher, CFO .
  • Margin drivers and hiring cadence: Adjusted EBITDA margin was 33%, ~200bps higher due to slower hiring in Q1; margins expected to normalize as hiring picks up mid‑year .
  • Capital returns and strategic review: Board authorized $100M repurchase; ~$25M repurchased to date; regulatory services business under preliminary external discussions .

Q&A Highlights

  • Non‑Animal Navigator interest and scope: Broad inbound across biotech, big pharma, and agencies; initial focus on mAbs dosing via QSP and Simcyp; toxicology NAMs evolving; timeline beyond Q2 .
  • Net retention and ratable mix: NRR at 102% (below historical ~110) due to timing in organic software revenue and rising ratable subscription mix; expect NRR to improve as revenue realization progresses .
  • Macro/tariffs: No direct tariff impact on CERT; Tier 1 decision‑making remains slow; headwinds from IRA and biotech funding persist .
  • Cloud and hosted Phoenix: Early innings; enhancements planned to raise hosted take‑rate; Certara Cloud increases portfolio visibility for customers .
  • Capital allocation: ~$25M of $100M buyback executed post‑authorization; primary capital use remains M&A and organic strategic investments .

Estimates Context

  • Q1 2025: revenue beat ($106.0M vs $104.9M*) and adjusted EPS beat ($0.14 vs $0.113*). Q4 2024 also beat on revenue and adjusted EPS; Q3 2024 missed on revenue but beat on adjusted EPS .
MetricQ3 2024Q4 2024Q1 2025
Revenue Consensus Mean ($USD Millions)95.567*99.130*104.889*
Revenue Actual ($USD Millions)94.820 100.361 106.004
Primary EPS Consensus Mean ($USD)0.1105*0.1254*0.1134*
Primary EPS Actual ($USD)0.13 0.15 0.14

Note: *Values retrieved from S&P Global.

Implications: Street likely to lift near‑term revenue/EPS trajectories given recurring beats and maintained FY25 guidance; adjusted EBITDA margin should moderate as hiring accelerates per management .

Key Takeaways for Investors

  • Demand resilience: Bookings strength and recurring revenue base support FY25 targets; Chemaxon contributions provide incremental growth in discovery software .
  • Tailwind from FDA roadmap: Near‑ to medium‑term upside optionality as industry shifts to NAMs; Non‑Animal Navigator positions CERT well for preclinical mAbs programs .
  • Profitability path: Q1 margin upside was timing‑related; expect margins to align with 30–32% guidance as hiring resumes, keeping EBITDA leverage intact .
  • Capital returns/M&A: ~$25M buyback executed; primary capital use remains disciplined software tuck‑ins and platform integration, a constructive mix for TSR .
  • Segment mix: Software outperformance (+18% YoY) and services growth (+4% YoY) demonstrate balanced execution amid macro headwinds .
  • Risk monitor: Tier 1 decision slowness and biotech funding remain headwinds; watch NRR progression and ratable mix effects on revenue timing .
  • Trading lens: With consistent beats and reiterated guide, near‑term sentiment skew positive; any incremental disclosures on regulatory services review or FDA pilot studies could be stock catalysts .

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