Certara, Inc. (Nasdaq: CERT), a global leader in biosimulation,
today reported its financial results for the third quarter of
fiscal year 2023.
Third Quarter
Highlights:
- Revenue was
$85.6 million, compared to $84.7 million in the third quarter of
2022, representing growth of 1% over the third quarter of
2022.
- Broad based
recovery in services bookings during the quarter.
- Net loss was
$49.0 million, compared to a net income of $3.9 million in the
third quarter of 2022.
- Net loss includes a $47.0 million
goodwill impairment expense in the third quarter of 2023 related to
the Regulatory business.
- Adjusted
EBITDA was $28.8 million, compared to $32.7 million in the third
quarter of 2022.
- Adjusted net
income was $17.1 million compared to $16.6 million in the third
quarter of 2022.
“During the third quarter we saw customer demand
stabilize across the Certara platform. We continue to see strong
interest from customers in Biosimulation, while our Regulatory
business returned to growth in bookings,” said William F. Feehery,
Chief Executive Officer. “Customer activity improved through the
quarter and we believe the outlook for biosimulation remains
strong. Our newly aligned commercial and services teams
are showing signs of initial success, which we intend to build upon
as we head into 2024.”
Third Quarter
2023 Results
“Certara’s third quarter performance reflects
continued demand for biosimulation software and services across the
platform. Our bookings returned to growth in services and the
software bookings pipeline is strong looking forward. We are
pleased with the business stabilization in the third quarter, and
remain confident in the full year 2023 outlook,” said John
Gallagher, Chief Financial Officer.
Total revenue for the third quarter of 2023 was
$85.6 million, representing growth of 1% over the third quarter of
2022. The overall increase in revenue was primarily due to growth
in our biosimulation technology-driven services and software
portfolio. Strong demand from existing customers, new product
introductions, and new client activity all contributed to the
quarterly revenue performance which was offset by a decline in
regulatory revenue.
On a constant currency basis, total revenue for
the third quarter of 2023 was $84.6 million, relatively flat
compared to the third quarter of 2022. Please see note (1) in the
section A Note on Non-GAAP Financial Measures below for more
information on constant currency revenue.
Total cost of revenue for the third quarter of
2023 was $35.9 million, an increase of $3.1 million from
$32.8 million in the third quarter of 2022, primarily due to a
$3.0 million increase in employee-related costs, including billable
headcount growth, and a $0.4 million increase in intangible assets
amortization, partially offset by a $0.4 million decrease in
miscellaneous operating expense and other items.
Total operating expenses for the third quarter
of 2023 were $102.5 million, which increased by
$61.5 million from $41.0 million in the third quarter of
2022, primarily due to a $47.0 million increase in goodwill
impairment expense related to charge-off of goodwill carrying
balance over fair value of a reporting unit, a $8.8 million
increase related to change in the fair value of contingent
considerations related to recent acquisitions, a $3.8 million
increase in employee-related costs including billable head count
growth, and a $1.6 million increase in lease abandonment
expense.
Net loss for the third quarter of 2023 was
$49.0 million, compared to a net income of $3.9 million
in the quarter of 2022. The $52.9 million decrease in net
income was primarily due to a $47.0 million increase in goodwill
impairment expense, an $8.8 million increase related to change in
the fair value of contingent considerations, a $1.6 million
increase in lease abandonment expense, a $4.1 million increase in
other operating expenses, and a $3.1 million increase in cost of
revenue, partially offset by a $9.2 million decrease in tax
expense, and a $2.5 million increase in interest income.
Diluted earnings (loss) per share for the third
quarter 2023 was $(0.31), as compared to $0.02 in the third quarter
of 2022.
Adjusted EBITDA for the third quarter of 2023
was $28.8 million compared to $32.7 million for the third
quarter of 2022, a decrease of $3.9 million. See note (2) in
the section A Note on Non-GAAP Financial Measures below for more
information on adjusted EBITDA.
Adjusted net income for the third quarter of
2023 was $17.1 million compared to $16.6 million for the third
quarter of 2022, representing 3% growth. Adjusted diluted earnings
per share for the third quarter 2023 was $0.11 compared to $0.10
for the third quarter of 2022. See note (3) in the section A Note
on Non-GAAP Financial Measures below for more information on
adjusted net income and adjusted diluted earnings per share.
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THREE MONTHS ENDED SEPTEMBER 30, |
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NINE MONTHS ENDED SEPTEMBER 30, |
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2023 |
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2022 |
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2023 |
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|
2022 |
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Key Financials |
|
(in millions, except per share data) |
|
Revenue |
|
$ |
85.6 |
|
|
$ |
84.7 |
|
$ |
266.3 |
|
|
$ |
249.0 |
|
Net income (loss) |
|
$ |
(49.0 |
) |
|
$ |
3.9 |
|
$ |
(42.9 |
) |
|
$ |
5.6 |
|
Diluted earnings per share |
|
$ |
(0.31 |
) |
|
$ |
0.02 |
|
$ |
(0.27 |
) |
|
$ |
0.03 |
|
Adjusted EBITDA |
|
$ |
28.8 |
|
|
$ |
32.7 |
|
$ |
93.5 |
|
|
$ |
88.3 |
|
Adjusted net income |
|
$ |
17.1 |
|
|
$ |
16.6 |
|
$ |
54.7 |
|
|
$ |
48.2 |
|
Adjusted diluted earnings per share |
|
$ |
0.11 |
|
|
$ |
0.10 |
|
$ |
0.34 |
|
|
$ |
0.30 |
|
Cash and cash equivalents |
|
|
|
|
|
$ |
272.3 |
|
|
$ |
210.5 |
2023 Financial Outlook
Certara is reiterating its previously reported
guidance for full year 2023. We expect the following:
Full year 2023 revenue to be in the range of
$345 million to $360 million.
Full year 2023 adjusted EBITDA to be in the
range of $120 million to $128 million.
Full year adjusted diluted earnings per share to
be in the range of $0.44 - $0.48.
Fully diluted shares to be in the range of 159
million to 162 million.
Webcast and Conference Call
Details
Certara will host a conference call today,
November 8, 2023, at 5:00 p.m. ET to discuss its third quarter
2023 financial results. Investors interested in listening to the
conference call are required to register online in advance of the
call. A live and archived webcast of the event will be available on
the “Investors” section of the Certara website at
https://ir.certara.com.
About Certara
Certara accelerates medicines using proprietary
biosimulation software, technology and services to transform
traditional drug discovery and development. Its clients include
more than 2,300 biopharmaceutical companies, academic institutions,
and regulatory agencies across 70 countries.
Please visit our website at www.certara.com. We
intend to use our website as a means of disclosing material,
non-public information and for complying with our disclosure
obligations under Regulation FD.
Such disclosures will be included in the
Investor Relations section of our website at
https://ir.certara.com. Accordingly, investors should monitor such
portion of our website, in addition to following our press
releases, Securities and Exchange Commission filings and public
conference calls and webcasts.
Forward-Looking Statements
This press release contains certain statements
that constitute forward-looking statements within the meaning of
the “safe harbor” provisions of the Private Securities Litigation
Reform Act of 1995, with respect to the Company’s full-year
guidance and other statements about the Company’s future business
and financial performance, revenue, margin, and bookings. These
statements typically contain words such as “believe,” “may,”
“potential,” “will,” “plan,” “could,” “estimate,” “expects” and
“anticipates” or the negative of these words or other similar terms
or expressions. Any statement in this press release that is not a
statement of historical fact is a forward-looking statement and
involves significant risks and uncertainties. Although we believe
that the expectations reflected in these forward-looking statements
are reasonable, we cannot provide any assurance that these
expectations will prove to be correct. You should not rely upon
forward-looking statements as predictions of future events and
actual results, events, or circumstances. Actual results may differ
materially from those described in the forward-looking statements
and are subject to a variety of assumptions, uncertainties, risks
and factors that are beyond our control, including the Company’s
ability to compete within its market; any deceleration in, or
resistance to, the acceptance of model-informed biopharmaceutical
discovery; changes or delays in relevant government regulation;
increasing competition, regulation and other cost pressures within
the pharmaceutical and biotechnology industries; economic
conditions, including inflation, recession, currency exchange
fluctuation and adverse developments in the financial services
industry; trends in research and development (R&D) spending;
delays or cancellations in projects due to supply chain
interruptions or disruptions or delays to pipeline development and
clinical trials experienced by our customers; consolidation within
the biopharmaceutical industry; reduction in the use of the
Company’s products by academic institutions; pricing pressures; the
Company’s ability to successfully enter new markets, increase its
customer base and expand its relationships with existing customers;
the impact of acquisitions and our ability to successfully
integrate such acquisitions; the occurrence of natural disasters
and epidemic diseases; any delays or defects in the release of new
or enhanced software or other biosimulation tools; failure of our
existing customers to renew their software licenses or any delays
or terminations of contracts or reductions in scope of work by its
existing customers; our ability to accurately estimate costs
associated with its fixed-fee contracts; our ability to retain key
personnel or recruit additional qualified personnel; lower
utilization rates by our employees as a result of natural disasters
and epidemic diseases; risks related to our contracts with
government customers; our ability to sustain recent growth rates;
our ability to successfully operate a global business; our ability
to comply with applicable laws and regulations; risks related to
litigation; the adequacy of its insurance coverage and ability to
obtain adequate insurance coverage in the future; our ability to
perform in accordance with contractual requirements, regulatory
standards and ethical considerations; the loss of more than one of
our major customers; future capital needs; the ability of our
bookings to accurately predict future revenue and our ability to
realize revenue on bookings; disruptions in the operations of the
third-party providers who host our software solutions or any
limitations on their capacity; our ability to reliably meet data
storage and management requirements, or the experience of any
failures or interruptions in the delivery of our services over the
internet; our ability to comply with the terms of any licenses
governing use of third-party open source software; any breach of
its security measures or unauthorized access to customer data; our
ability to adequately enforce or defend ownership and use of our
intellectual property and other proprietary rights; any allegations
of infringement, misappropriation or violations of a third party’s
intellectual property rights; our ability to meet obligations under
indebtedness and have sufficient capital to operate our business;
any limitations on our ability to pursue business strategies due to
restrictions under our current or future indebtedness; any
additional impairment of goodwill or other intangible assets; our
ability to use our net operating losses and R&D tax credit
carryforwards; the accuracy of management’s estimates and judgments
relating to critical accounting policies and changes in financial
reporting standards or interpretations; any inability to design,
implement, and maintain effective internal controls or inability to
remediate any internal controls deemed ineffective; the costs and
management time associated with operating as a publicly traded
company; and the other factors detailed under the captions “Risk
Factors” and “Special Note Regarding Forward-Looking Statements”
and elsewhere in our Securities and Exchange Commission (“SEC”)
filings, and reports, including the Form 10-K filed by the Company
with the Securities and Exchange Commission on March 1, 2023, and
subsequent reports filed with the SEC. Any forward-looking
statements speak only as of the date of this release and, except to
the extent required by applicable securities laws, we expressly
disclaim any obligation to update or revise any of them to reflect
actual results, any changes in expectations or any change in
events. Factors that may materially affect our results and those
risks listed in filings with the SEC.
A Note on Non-GAAP Financial Measures
This press release contains “non-GAAP measures”
which are financial measures that either exclude or include amounts
that are not excluded or included in the most directly comparable
measures calculated and presented in accordance with U.S. generally
accepted accounting principles (“GAAP”). Specifically, the Company
makes use of the non-GAAP financial measures adjusted EBITDA,
adjusted net income (loss), adjusted diluted earnings per share,
and constant currency (“CC”) revenue, which are not recognized
terms under GAAP. These measures should not be considered as
alternatives to net income (loss) or GAAP diluted earnings per
share or revenue as measures of financial performance or any other
performance measure derived in accordance with GAAP and should not
be considered a measure of discretionary cash available to the
Company to invest in the growth of its business. The presentation
of these measures has limitations as an analytical tool and should
not be considered in isolation, or as a substitute for the
Company’s results as reported under GAAP. Because not all companies
use identical calculations, the presentations of these measures may
not be comparable to other similarly titled measures of other
companies and can differ significantly from company to company.
You should refer to the footnotes below as well
as the “Non-GAAP Financial Measures” section in this press release
below for a further explanation of these measures and
reconciliations of these non-GAAP measures in specific periods to
their most directly comparable financial measure calculated and
presented in accordance with GAAP for those periods.
Management uses various financial metrics,
including total revenues, income (loss) from operations, net income
(loss), and certain non-GAAP measures, including those discussed
above, to measure and assess the performance of the Company’s
business, to evaluate the effectiveness of its business strategies,
to make budgeting decisions, to make certain compensation
decisions, and to compare the Company’s performance against that of
other peer companies using similar measures. In addition,
management believes these metrics provide useful measures for
period-to-period comparisons of the Company’s business, as they
remove the effect of certain non-cash expenses and other items not
indicative of its ongoing operating performance.
Management believes that adjusted EBITDA,
adjusted net income (loss), adjusted diluted earnings per share,
and CC revenue are helpful to investors, analysts, and other
interested parties because they can assist in providing a more
consistent and comparable overview of our operations across our
historical periods. In addition, each of these measures is
frequently used by analysts, investors, and other interested
parties to evaluate and assess performance. Furthermore, our
business has operations outside the United States that are
conducted in local currencies. As a result, the comparability of
the financial results reported in U.S. dollars is affected by
changes in foreign currency exchange rates. We adjust revenues for
constant currency to provide a framework for assessing how our
business performed excluding the effect of foreign currency rate
fluctuations and we believe it is helpful for investors to present
operating results on a comparable basis period over period to
evaluate its underlying performance.
Please note that the Company has not reconciled
the adjusted EBITDA or adjusted diluted earnings per share
forward-looking guidance included in this press release to the most
directly comparable GAAP measures because this cannot be done
without unreasonable effort due to the variability and low
visibility with respect to costs related to acquisitions,
financings, and employee stock compensation programs, which are
potential adjustments to future earnings. We expect the variability
of these items to have a potentially unpredictable, and a
potentially significant, impact on our future GAAP financial
results.
(1) CC revenue excludes the effects of
foreign currency exchange rate fluctuations by assuming constant
foreign currency exchange rates used for translation. Current
periods revenue reported in currencies other than U.S. Dollars are
converted into U.S. Dollars at the average exchange rates in effect
for the comparable prior periods.
(2) Adjusted EBITDA represents net income
excluding interest expense, provision (benefit) for income taxes,
depreciation and amortization expense, intangible asset
amortization, equity-based compensation expense, goodwill
impairment, change in fair value of contingent consideration,
acquisition and integration expense and other items not indicative
of our ongoing operating performance.
(3) Adjusted net income and adjusted
diluted earnings per share exclude the effect of equity-based
compensation expense, amortization of acquisition-related
intangible assets, goodwill impairment, change in fair value of
contingent consideration, acquisition and integration expense, and
other items not indicative of our ongoing operating performance as
well as income tax provision adjustment for such charges.
In evaluating adjusted EBITDA, adjusted net
income, and adjusted diluted earnings per share, you should be
aware that in the future the Company may incur expenses similar to
those eliminated in this presentation and this presentation should
not be construed as an inference that future results will be
unaffected by unusual items.
Contacts:
Investor Relations Contact: David
DeuchlerGilmartin Groupir@certara.com
Media Contact:Daniel YungerKekst
CNCdaniel.yunger@kekstcnc.com
|
CERTARA, INC. AND SUBSIDIARIES CONDENSED
CONSOLIDATED STATEMENTS OF
OPERATIONS(UNAUDITED) |
| |
|
THREE MONTHS ENDED SEPTEMBER 30, |
|
NINE MONTHS ENDED SEPTEMBER 30, |
|
(IN THOUSANDS, EXCEPT PER SHARE AND SHARE
DATA) |
|
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
|
Revenues |
|
$ |
85,576 |
|
|
$ |
84,700 |
|
|
$ |
266,327 |
|
|
$ |
249,011 |
|
|
Cost of revenues |
|
|
35,876 |
|
|
|
32,812 |
|
|
|
106,956 |
|
|
|
100,795 |
|
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
Sales and marketing |
|
|
7,238 |
|
|
|
6,376 |
|
|
|
23,351 |
|
|
|
19,608 |
|
|
Research and development |
|
|
8,980 |
|
|
|
6,318 |
|
|
|
26,155 |
|
|
|
21,607 |
|
|
General and administrative |
|
|
27,760 |
|
|
|
17,327 |
|
|
|
61,777 |
|
|
|
53,444 |
|
|
Intangible asset amortization |
|
|
11,155 |
|
|
|
10,591 |
|
|
|
32,272 |
|
|
|
31,095 |
|
|
Depreciation and amortization expense |
|
|
367 |
|
|
|
417 |
|
|
|
1,139 |
|
|
|
1,321 |
|
|
Goodwill impairment expense |
|
|
46,984 |
|
|
|
— |
|
|
|
46,984 |
|
|
|
— |
|
|
Total operating expenses |
|
|
102,484 |
|
|
|
41,029 |
|
|
|
191,678 |
|
|
|
127,075 |
|
|
Income (loss) from operations |
|
|
(52,784 |
) |
|
|
10,859 |
|
|
|
(32,307 |
) |
|
|
21,141 |
|
|
Other income (expenses): |
|
|
|
|
|
|
|
|
|
Interest expense |
|
|
(5,903 |
) |
|
|
(5,221 |
) |
|
|
(17,046 |
) |
|
|
(12,328 |
) |
|
Net other income |
|
|
5,078 |
|
|
|
2,855 |
|
|
|
6,594 |
|
|
|
6,217 |
|
|
Total other expenses |
|
|
(825 |
) |
|
|
(2,366 |
) |
|
|
(10,452 |
) |
|
|
(6,111 |
) |
|
Income (loss) before income taxes |
|
|
(53,609 |
) |
|
|
8,493 |
|
|
|
(42,759 |
) |
|
|
15,030 |
|
|
Provision (benefit) for income taxes |
|
|
(4,644 |
) |
|
|
4,557 |
|
|
|
142 |
|
|
|
9,473 |
|
|
Net income (loss) |
|
$ |
(48,965 |
) |
|
$ |
3,936 |
|
|
$ |
(42,901 |
) |
|
$ |
5,557 |
|
| |
|
|
|
|
|
|
|
|
|
Net income per share attributable to common stockholders: |
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
(0.31 |
) |
|
$ |
0.03 |
|
|
$ |
(0.27 |
) |
|
$ |
0.04 |
|
|
Diluted |
|
$ |
(0.31 |
) |
|
$ |
0.02 |
|
|
$ |
(0.27 |
) |
|
$ |
0.03 |
|
|
Weighted average common shares outstanding: |
|
|
|
|
|
|
|
|
|
Basic |
|
|
159,165,206 |
|
|
|
157,140,166 |
|
|
|
158,769,638 |
|
|
|
156,523,022 |
|
|
Diluted |
|
|
159,165,206 |
|
|
|
159,587,645 |
|
|
|
158,769,638 |
|
|
|
159,392,534 |
|
|
CERTARA, INC. AND SUBSIDIARIES CONDENSED
CONSOLIDATED BALANCE SHEETS (UNAUDITED) |
|
(IN THOUSANDS, EXCEPT PER SHARE AND SHARE
DATA) |
|
SEPTEMBER 30, 2023 |
|
DECEMBER 31, 2022 |
|
Assets |
|
|
|
|
|
Current assets: |
|
|
|
|
|
Cash and cash equivalents |
|
$ |
272,312 |
|
|
$ |
236,586 |
|
|
Accounts receivable, net of allowance for credit losses of $678 and
$1,250, respectively |
|
|
76,553 |
|
|
|
82,584 |
|
|
Restricted cash |
|
|
— |
|
|
|
3,102 |
|
|
Prepaid expenses and other current assets |
|
|
20,912 |
|
|
|
19,980 |
|
|
Total current assets |
|
|
369,777 |
|
|
|
342,252 |
|
|
Other assets: |
|
|
|
|
|
Property and equipment, net |
|
|
2,126 |
|
|
|
2,400 |
|
|
Operating lease right-of-use assets |
|
|
9,727 |
|
|
|
14,427 |
|
|
Goodwill |
|
|
673,159 |
|
|
|
717,743 |
|
|
Intangible assets, net of accumulated amortization of $257,714 and
$217,705, |
|
|
463,112 |
|
|
|
486,782 |
|
|
Deferred income taxes |
|
|
3,703 |
|
|
|
3,703 |
|
|
Other long-term assets |
|
|
5,217 |
|
|
|
5,615 |
|
|
Total assets |
|
$ |
1,526,821 |
|
|
$ |
1,572,922 |
|
|
Liabilities and stockholders’ equity |
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
Accounts payable |
|
$ |
5,256 |
|
|
$ |
7,533 |
|
|
Accrued expenses |
|
|
44,725 |
|
|
|
35,403 |
|
|
Current portion of deferred revenue |
|
|
47,980 |
|
|
|
52,209 |
|
|
Current portion of long-term debt |
|
|
3,020 |
|
|
|
3,020 |
|
|
Other current liabilities |
|
|
4,446 |
|
|
|
4,993 |
|
|
Total current liabilities |
|
|
105,427 |
|
|
|
103,158 |
|
|
Long-term liabilities: |
|
|
|
|
|
Deferred revenue, net of current portion |
|
|
1,237 |
|
|
|
2,815 |
|
|
Deferred income taxes |
|
|
46,400 |
|
|
|
65,046 |
|
|
Operating lease liabilities, net of current portion |
|
|
7,234 |
|
|
|
10,133 |
|
|
Long-term debt, net of current portion and debt discount |
|
|
288,661 |
|
|
|
289,988 |
|
|
Other long-term liabilities |
|
|
26,111 |
|
|
|
22,121 |
|
|
Total liabilities |
|
|
475,070 |
|
|
|
493,261 |
|
|
Commitments and contingencies |
|
|
|
|
|
Stockholders' equity: |
|
|
|
|
|
Preferred shares, $0.01 par value, 50,000,000 shares authorized, no
shares issued and outstanding as of September 30, 2023and December
31, 2022, respectively |
|
|
— |
|
|
|
— |
|
|
Common shares, $0.01 par value, 600,000,000 shares authorized,
160,279,919 and 159,676,150 shares issued as of September 30, 2023
and December 31, 2022, respectively; 159,848,766 and 159,525,943
shares outstanding as of September 30, 2023 and December 31, 2022,
respectively |
|
|
1,602 |
|
|
|
1,596 |
|
|
Additional paid-in capital |
|
|
1,170,960 |
|
|
|
1,150,168 |
|
|
Accumulated deficit |
|
|
(103,774 |
) |
|
|
(60,873 |
) |
|
Accumulated other comprehensive loss |
|
|
(7,714 |
) |
|
|
(8,230 |
) |
|
Treasury stock at cost, 431,153 and 150,207 shares at September 30,
2023 and December 31, 2022, respectively |
|
|
(9,323 |
) |
|
|
(3,000 |
) |
|
Total stockholders’ equity |
|
|
1,051,751 |
|
|
|
1,079,661 |
|
|
Total liabilities and stockholders’ equity |
|
$ |
1,526,821 |
|
|
$ |
1,572,922 |
|
|
CERTARA, INC. AND SUBSIDIARIESCONDENSED
CONSOLIDATED STATEMENTS OF CASH
FLOWS(UNAUDITED) |
| |
|
NINE MONTHS ENDED SEPTEMBER 30, |
|
(IN THOUSANDS) |
|
|
2023 |
|
|
|
2022 |
|
|
Cash flows from operating activities: |
|
|
|
|
|
Net income (loss) |
|
$ |
(42,901 |
) |
|
$ |
5,557 |
|
|
Adjustments to reconcile net income (loss) to net cash provided by
operating activities: |
|
|
|
|
|
Depreciation and amortization of property and equipment |
|
|
1,139 |
|
|
|
1,321 |
|
|
Amortization of intangible assets |
|
|
40,099 |
|
|
|
38,007 |
|
|
Amortization of debt issuance costs |
|
|
1,146 |
|
|
|
1,156 |
|
|
Provision for credit losses |
|
|
52 |
|
|
|
468 |
|
|
Loss on retirement of assets |
|
|
29 |
|
|
|
56 |
|
|
Equity-based compensation expense |
|
|
20,798 |
|
|
|
23,818 |
|
|
Change in fair value of contingent considerations |
|
|
11,316 |
|
|
|
— |
|
|
Goodwill impairment |
|
|
46,984 |
|
|
|
— |
|
|
Lease abandonment expense |
|
|
1,602 |
|
|
|
— |
|
|
Deferred income taxes |
|
|
(18,532 |
) |
|
|
(3,209 |
) |
|
Changes in assets and liabilities |
|
|
|
|
|
Accounts receivable |
|
|
6,441 |
|
|
|
(7,895 |
) |
|
Prepaid expenses and other assets |
|
|
85 |
|
|
|
4,209 |
|
|
Accounts payable and accrued expenses |
|
|
(1,558 |
) |
|
|
(3,404 |
) |
|
Deferred revenue |
|
|
(6,978 |
) |
|
|
(1,727 |
) |
|
Other liabilities |
|
|
(293 |
) |
|
|
(1,299 |
) |
|
Net cash provided by operating activities |
|
|
59,429 |
|
|
|
57,058 |
|
|
Cash flows from investing activities: |
|
|
|
|
|
Capital expenditures |
|
|
(899 |
) |
|
|
(1,249 |
) |
|
Capitalized development costs |
|
|
(10,000 |
) |
|
|
(8,106 |
) |
|
Investment in intangible assets |
|
|
(54 |
) |
|
|
— |
|
|
Business acquisitions, net of cash acquired |
|
|
(7,550 |
) |
|
|
(5,883 |
) |
|
Net cash used in investing activities |
|
|
(18,503 |
) |
|
|
(15,238 |
) |
|
Cash flows from financing activities: |
|
|
|
|
|
Payments on long-term debt and finance lease obligations |
|
|
(2,290 |
) |
|
|
(2,483 |
) |
|
Payments on financing component of interest rate swap |
|
|
— |
|
|
|
(1,085 |
) |
|
Payment of taxes on shares withheld for employee taxes |
|
|
(5,905 |
) |
|
|
(2,827 |
) |
|
Net cash used by financing activities |
|
|
(8,195 |
) |
|
|
(6,395 |
) |
|
Effect of foreign exchange rate changes on cash and cash
equivalents, and restricted cash |
|
|
(107 |
) |
|
|
(8,266 |
) |
|
Net increase in cash and cash equivalents, and restricted cash |
|
|
32,624 |
|
|
|
27,159 |
|
|
Cash and cash equivalents, and restricted cash, at beginning of
period |
|
|
239,688 |
|
|
|
186,624 |
|
|
Cash and cash equivalents, and restricted cash, at end of
period |
|
$ |
272,312 |
|
|
$ |
213,783 |
|
NON-GAAP FINANCIAL MEASURES
The following table reconciles net income to
adjusted EBITDA:
| |
|
THREE MONTHS ENDED SEPTEMBER 30, |
|
NINE MONTHS ENDED SEPTEMBER 30, |
|
|
|
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
| |
|
( in thousands) |
|
Net income (loss)(a) |
|
$ |
(48,965 |
) |
|
$ |
3,936 |
|
|
$ |
(42,901 |
) |
|
$ |
5,557 |
|
|
Interest expense(a) |
|
|
5,903 |
|
|
|
5,221 |
|
|
|
17,046 |
|
|
|
12,328 |
|
|
Interest income(a) |
|
|
(2,864 |
) |
|
|
(322 |
) |
|
|
(6,428 |
) |
|
|
(347 |
) |
|
(Benefit from) Provision for income taxes(a) |
|
|
(4,644 |
) |
|
|
4,557 |
|
|
|
142 |
|
|
|
9,473 |
|
|
Depreciation and amortization expense(a) |
|
|
367 |
|
|
|
417 |
|
|
|
1,139 |
|
|
|
1,321 |
|
|
Intangible asset amortization(a) |
|
|
13,813 |
|
|
|
12,846 |
|
|
|
40,099 |
|
|
|
38,007 |
|
|
Currency (gain) loss(a) |
|
|
(2,179 |
) |
|
|
(2,376 |
) |
|
|
(165 |
) |
|
|
(5,639 |
) |
|
Equity-based compensation expense(b) |
|
|
8,645 |
|
|
|
6,804 |
|
|
|
20,798 |
|
|
|
23,818 |
|
|
Change in fair value of contingent consideration(d) |
|
|
8,757 |
|
|
|
— |
|
|
|
11,316 |
|
|
|
— |
|
|
Goodwill impairment expense(e) |
|
|
46,984 |
|
|
|
— |
|
|
|
46,984 |
|
|
|
— |
|
|
Acquisition-related expenses(f) |
|
|
1,392 |
|
|
|
253 |
|
|
|
3,276 |
|
|
|
1,331 |
|
|
Integration expense(g) |
|
|
33 |
|
|
|
— |
|
|
|
190 |
|
|
|
— |
|
|
Transaction-related expenses(h) |
|
|
— |
|
|
|
596 |
|
|
|
— |
|
|
|
724 |
|
|
Severance expenses(i) |
|
|
— |
|
|
|
722 |
|
|
|
— |
|
|
|
722 |
|
|
Reorganization expense(j) |
|
|
1,602 |
|
|
|
— |
|
|
|
1,602 |
|
|
|
— |
|
|
Loss on disposal of fixed assets(k) |
|
|
— |
|
|
|
49 |
|
|
|
29 |
|
|
|
56 |
|
|
Executive recruiting expense(l) |
|
|
— |
|
|
|
— |
|
|
|
396 |
|
|
|
— |
|
|
First-year Sarbanes-Oxley implementation costs(m) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
961 |
|
|
Adjusted EBITDA |
|
$ |
28,844 |
|
|
$ |
32,703 |
|
|
$ |
93,523 |
|
|
$ |
88,312 |
|
The following table reconciles net income to
adjusted net income:
| |
|
|
|
|
|
|
|
|
| |
|
THREE MONTHS ENDED SEPTEMBER 30, |
|
NINE MONTHS ENDED SEPTEMBER 30, |
| |
|
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
| |
|
(in thousands) |
|
Net income (loss) (a) |
|
$ |
(48,965 |
) |
|
$ |
3,936 |
|
|
$ |
(42,901 |
) |
|
$ |
5,557 |
|
|
Currency (gain) loss(a) |
|
|
(2,179 |
) |
|
|
(2,376 |
) |
|
|
(165 |
) |
|
|
(5,639 |
) |
|
Equity-based compensation expense(b) |
|
|
8,645 |
|
|
|
6,804 |
|
|
|
20,798 |
|
|
|
23,818 |
|
|
Amortization of acquisition-related intangible assets(c) |
|
|
11,377 |
|
|
|
10,921 |
|
|
|
33,892 |
|
|
|
32,900 |
|
|
Change in fair value of contingent consideration(d) |
|
|
8,757 |
|
|
|
— |
|
|
|
11,316 |
|
|
|
— |
|
|
Goodwill impairment expense(e) |
|
|
46,984 |
|
|
|
— |
|
|
|
46,984 |
|
|
|
— |
|
|
Acquisition-related expenses(f) |
|
|
1,392 |
|
|
|
253 |
|
|
|
3,276 |
|
|
|
1,331 |
|
|
Integration expense(g) |
|
|
33 |
|
|
|
— |
|
|
|
190 |
|
|
|
— |
|
|
Transaction-related expenses(h) |
|
|
— |
|
|
|
596 |
|
|
|
— |
|
|
|
724 |
|
|
Severance expenses(i) |
|
|
— |
|
|
|
722 |
|
|
|
— |
|
|
|
722 |
|
|
Reorganization expense(j) |
|
|
1,602 |
|
|
|
— |
|
|
|
1,602 |
|
|
|
— |
|
|
Loss on disposal of fixed assets(k) |
|
|
— |
|
|
|
49 |
|
|
|
29 |
|
|
|
56 |
|
|
Executive recruiting expense(l) |
|
|
— |
|
|
|
— |
|
|
|
396 |
|
|
|
— |
|
|
First-year Sarbanes-Oxley implementation costs(m) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
961 |
|
|
Income tax expense impact of adjustments(n) |
|
|
(10,572 |
) |
|
|
(4,257 |
) |
|
|
(20,669 |
) |
|
|
(12,236 |
) |
|
Adjusted net income |
|
$ |
17,074 |
|
|
$ |
16,648 |
|
|
$ |
54,748 |
|
|
$ |
48,194 |
|
The following tables reconcile diluted
earnings per share to adjusted diluted earnings per share:
| |
|
|
|
|
|
|
|
|
| |
|
THREE MONTHS ENDED SEPTEMBER 30, |
|
NINE MONTHS ENDED SEPTEMBER 30, |
| |
|
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
| |
|
(In thousands except share and per share
data) |
|
Diluted earnings per share(a) |
|
$ |
(0.31 |
) |
|
$ |
0.02 |
|
|
$ |
(0.27 |
) |
|
$ |
0.03 |
|
|
Currency (gain) loss(a) |
|
|
(0.01 |
) |
|
|
(0.01 |
) |
|
|
— |
|
|
|
(0.04 |
) |
|
Equity-based compensation expense(b) |
|
|
0.06 |
|
|
|
0.05 |
|
|
|
0.13 |
|
|
|
0.16 |
|
|
Amortization of acquisition-related intangible assets(c) |
|
|
0.07 |
|
|
|
0.07 |
|
|
|
0.21 |
|
|
|
0.21 |
|
|
Change in fair value of contingent consideration(d) |
|
|
0.05 |
|
|
|
— |
|
|
|
0.07 |
|
|
|
— |
|
|
Goodwill impairment expense(e) |
|
|
0.30 |
|
|
|
— |
|
|
|
0.30 |
|
|
|
— |
|
|
Acquisition-related expenses(f) |
|
|
0.01 |
|
|
|
— |
|
|
|
0.02 |
|
|
|
0.01 |
|
|
Integration expense(g) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Transaction-related expenses(h) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Severance expenses(i) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Reorganization expense(j) |
|
|
0.01 |
|
|
|
|
|
0.01 |
|
|
|
|
Loss on disposal of fixed assets(k) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Executive recruiting expense(l) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
First-year Sarbanes-Oxley implementation costs(m) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
0.01 |
|
|
Income tax expense impact of adjustments(n) |
|
|
(0.07 |
) |
|
|
(0.03 |
) |
|
|
(0.13 |
) |
|
|
(0.08 |
) |
|
Adjusted Diluted Earnings Per Share |
|
$ |
0.11 |
|
|
$ |
0.10 |
|
|
$ |
0.34 |
|
|
$ |
0.30 |
|
| |
|
|
|
|
|
|
|
|
|
Basic weighted average common shares outstanding |
|
|
159,165,206 |
|
|
|
157,140,166 |
|
|
|
158,769,638 |
|
|
|
156,523,022 |
|
|
Effect of potentially dilutive shares outstanding (o) |
|
|
742,488 |
|
|
|
2,447,479 |
|
|
|
1,078,382 |
|
|
|
2,869,512 |
|
|
Adjusted diluted weighted average common shares |
|
|
159,907,694 |
|
|
|
159,587,645 |
|
|
|
159,848,020 |
|
|
|
159,392,534 |
|
The following tables reconcile revenues to the
revenues adjusted for constant currency:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
THREE MONTHS ENDED SEPTEMBER 30, |
|
CHANGE |
| |
|
|
2023 |
|
|
2023 |
|
|
2022 |
|
$ |
|
% |
|
$ |
% |
| |
|
Actual |
|
CC |
|
Actual |
|
Actual |
|
Actual |
|
CC Impact |
|
|
| |
|
(GAAP) |
|
(non-GAAP) |
|
(GAAP) |
|
(GAAP) |
|
(GAAP) |
|
(non-GAAP) |
|
(non-GAAP) |
| |
|
(in thousands except percentage) |
|
Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Software |
|
$ |
31,331 |
|
$ |
30,818 |
|
$ |
28,392 |
|
$ |
2,939 |
|
|
10 |
% |
|
$ |
(513 |
) |
|
9 |
% |
|
Services |
|
|
54,245 |
|
|
53,756 |
|
|
56,308 |
|
|
(2,063 |
) |
|
-4 |
% |
|
|
(489 |
) |
|
-5 |
% |
|
Total Revenue |
|
$ |
85,576 |
|
$ |
84,574 |
|
$ |
84,700 |
|
$ |
876 |
|
|
1 |
% |
|
$ |
(1,002 |
) |
|
— |
% |
| |
|
NINE MONTHS ENDED SEPTEMBER 30, |
|
CHANGE |
| |
|
2023 |
|
2023 |
|
2022 |
|
$ |
|
% |
|
$ |
|
% |
| |
|
Actual |
|
CC |
|
Actual |
|
Actual |
|
Actual |
|
CC Impact |
|
|
| |
|
(GAAP) |
|
(non-GAAP) |
|
(GAAP) |
|
(GAAP) |
|
(GAAP) |
|
(non-GAAP) |
|
(non-GAAP) |
| |
|
(in thousands except percentage) |
|
Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Software |
|
$ |
98,058 |
|
$ |
98,513 |
|
$ |
86,309 |
|
$ |
11,749 |
|
14 |
% |
|
$ |
455 |
|
14 |
% |
|
Services |
|
|
168,269 |
|
|
168,598 |
|
|
162,702 |
|
|
5,567 |
|
3 |
% |
|
|
329 |
|
4 |
% |
|
Total Revenue |
|
$ |
266,327 |
|
$ |
267,111 |
|
$ |
249,011 |
|
$ |
17,316 |
|
7 |
% |
|
$ |
784 |
|
7 |
% |
(a) Represents amounts as determined under
GAAP.
(b) Represents expense related to
equity-based compensation. Equity-based compensation has been, and
will continue to be for the foreseeable future, a recurring expense
in our business and an important part of our compensation
strategy.
(c) Represents amortization costs
associated with acquired intangible assets in connection with
business acquisitions.
(d) Represents expense associated with
remeasuring fair value of contingent consideration of business
acquisition.
(e) Represents expense associated with
goodwill impairment charge.
(f) Represents costs associated with
mergers and acquisitions and any retention bonuses pursuant to the
acquisitions.
(g) Represents integration costs related
to post - acquisition integration activities.
(h) Represents costs associated with our
public offerings that are not capitalized.
(i) Represents charges for severance
provided to former executives.
(j) Represents expense related to
reorganization, including legal entity reorganization and lease
abandonment cost associated with the evaluation of our office space
footprint.
(k) Represents the gain/loss related to
disposal of fixed assets.
(l) Represents recruiting and
relocation expenses related to hiring senior executives.
(m) Represents the first-year
Sarbanes-Oxley costs for accounting and consulting fees related to
the Company's preparation to comply with Section 404 of the
Sarbanes-Oxley Act, as well as implementation cost of adopting ASC
842.
(n) Represents the income tax effect of
the non-GAAP adjustments calculated using the applicable statutory
rate by jurisdiction.
(o) Represents potentially dilutive shares
that were included from our GAAP diluted weighted average common
shares outstanding.
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