Certara, Inc. (Nasdaq: CERT), a global leader in model-informed
drug development, today reported its financial results for the
third quarter of fiscal year 2024.
Third Quarter Highlights:
- Revenue was $94.8 million, compared to $85.6 million in the
third quarter of 2023, representing growth of 11%.
- Software revenue was $35.9 million, compared to $31.3 million
in the third quarter of 2023, representing growth of 15%.
- Services revenue was $58.9 million, compared to $54.2 million
in the third quarter of 2023, representing growth of 9%.
- Net loss was $1.4 million, compared to a net loss of $49.0
million in the third quarter of 2023.
- The $47.6 million increase was primarily due to a $47.0 million
decrease in goodwill impairment expense.
- Adjusted EBITDA was $33.1 million, compared to $28.8 million in
the third quarter of 2023, representing growth of 15%.
"Certara’s results demonstrated strength in
biosimulation software and services which are the result of our
continued investment in biosimulation," said William F. Feehery,
Chief Executive Officer. “Following the close of the Chemaxon
transaction, we are focused on integrating our software
capabilities to generate a best-in-class, lab-to-clinic
biosimulation platform."
"We are pleased with the growth in our software
business. Our services business was mixed, with biosimulation
services growing 13% offset by weaker performance in our regulatory
services business. In the second half of the year, we will continue
to diligently manage our expense structure to support demand for
core biosimulation software and services," said John Gallagher,
Chief Financial Officer.
Third Quarter 2024 Results
Total revenue for the third quarter of 2024 was
$94.8 million, representing year-over-year growth of 11% on a
reported basis and 10% on a constant currency basis. The overall
increase in revenue was primarily due to growth in our
biosimulation software portfolio. Please see note (1) in the
section A Note on Non-GAAP Financial Measures below for more
information on constant currency revenue.
Software revenue for the third quarter of 2024
was $35.9 million, representing year-over-year growth of 15% on a
reported basis and 14% on a constant currency basis. Software
growth was driven by biosimulation software and Pinnacle 21.
Services revenue for the third quarter of 2024
was $58.9 million, representing year-over-year growth of 9% on a
reported basis and 8% on a constant currency basis. Services growth
was impacted by cautious spending among large biopharma
customers.
Total Bookings for the third quarter of 2024
were $96.1 million representing a year-over-year growth of 13% on a
reported basis.
Software Bookings for the third quarter of 2024
were $34.8 million, representing a year-over-year growth of 28%.
The increase in software bookings was primarily due to strength in
Certara’s core biosimulation software and Pinnacle 21.
Services Bookings for the third quarter of 2024
were $61.3 million, representing a year-over-year growth of 6% on a
reported basis.
Total cost of revenue for the third quarter of
2024 was $37.2 million, an increase of $1.3 million from
$35.9 million in the third quarter of 2023, primarily due to
increases in employee-related expenses and software
amortization.
Total operating expenses for the third quarter
of 2024 were $55.0 million, which decreased by
$47.4 million from $102.5 million in the third quarter of
2023. Lower operating expenses were primarily due to a $47.0
million decrease in goodwill impairment expense, as well as a
strategic re-allocation of resources made during the second quarter
of 2024 to optimize Certara’s cost structure.
Adjusted EBITDA for the third quarter of 2024
was $33.1 million compared to $28.8 million for the third
quarter of 2023, an increase of $4.2 million. See note (2) in
the section A Note on Non-GAAP Financial Measures below for more
information on adjusted EBITDA.
Diluted loss per share for the third quarter
2024 was $0.01, as compared to a diluted loss per share of $0.31 in
the third quarter of 2023.
Net loss for the third quarter of 2024 was
$1.4 million, compared to a net loss of $49.0 million in
the third quarter of 2023. The $47.6 million increase was
primarily due to lower operating expenses.
Adjusted net income for the third quarter of
2024 was $20.3 million compared to $17.1 million for the
third quarter of 2023, an increase of $3.2 million. Adjusted
diluted earnings per share for the third quarter 2024 was $0.13
compared to $0.11 for the third quarter of 2023. 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.
| |
|
THREE MONTHS ENDED SEPTEMBER 30, |
NINE MONTHS ENDED SEPTEMBER 30, |
|
|
|
|
2024 |
|
|
|
2023 |
|
|
2024 |
|
|
|
2023 |
|
| Key Financials |
|
(in millions, except per share data) |
| Revenue |
|
$ |
94.8 |
|
|
$ |
85.6 |
|
$ |
284.8 |
|
|
$ |
266.3 |
|
| Software revenue |
|
$ |
35.9 |
|
|
$ |
31.3 |
|
$ |
113.4 |
|
|
$ |
98.1 |
|
| Service revenue |
|
$ |
58.9 |
|
|
$ |
54.2 |
|
$ |
171.4 |
|
|
$ |
168.3 |
|
| Total bookings |
|
$ |
96.1 |
|
|
$ |
84.8 |
|
$ |
300.8 |
|
|
$ |
283.4 |
|
| Software bookings |
|
$ |
34.8 |
|
|
$ |
27.2 |
|
$ |
109.8 |
|
|
$ |
93.6 |
|
| Service bookings |
|
$ |
61.3 |
|
|
$ |
57.6 |
|
$ |
191.0 |
|
|
$ |
189.8 |
|
| Net income (loss) |
|
$ |
(1.4 |
) |
|
$ |
(49.0 |
) |
$ |
(18.6 |
) |
|
$ |
(42.9 |
) |
| Diluted earnings per
share |
|
$ |
(0.01 |
) |
|
$ |
(0.31 |
) |
$ |
(0.12 |
) |
|
$ |
(0.27 |
) |
| Adjusted EBITDA |
|
$ |
33.1 |
|
|
$ |
28.8 |
|
$ |
88.5 |
|
|
$ |
93.5 |
|
| Adjusted net income |
|
$ |
20.3 |
|
|
$ |
17.1 |
|
$ |
48.2 |
|
|
$ |
54.7 |
|
| Adjusted diluted earnings per
share |
|
$ |
0.13 |
|
|
$ |
0.11 |
|
$ |
0.30 |
|
|
$ |
0.34 |
|
| Cash and cash equivalents |
|
|
|
|
$ |
233.0 |
|
|
$ |
272.3 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
2024 Financial Outlook
Certara is updating its 2024 outlook, and expects the
following:
- Full year 2024 revenue to be in the range of $380 million to
$385 million.
- Full year adjusted EBITDA to be in the range of $120 million to
$124 million.
- Full year adjusted diluted earnings per share is expected to be
in the range of $0.41 - $0.44.
- Fully diluted shares are expected to be in the range of 160
million to 162 million.
Webcast and Conference Call
Details
Certara will host a conference call today,
November 6, 2024, at 5:00 p.m. ET to discuss its third quarter
2024 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
nearly 2,400 biopharmaceutical companies, academic institutions,
and regulatory agencies across 66 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; risks related
to the mischaracterization of our independent contractors; 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;
risks relating to the use of artificial intelligence and machine
learning in our products and services; 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 February 29, 2024,
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.
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:Alyssa HorowitzPan
Communicationscertara@pancomm.com
| |
|
CERTARA, INC. AND SUBSIDIARIESCONSOLIDATED
STATEMENTS OF OPERATIONS(UNAUDITED) |
| |
|
(IN THOUSANDS, EXCEPT PER SHARE AND SHARE
DATA) |
|
THREE MONTHS ENDED SEPTEMBER 30, |
|
NINE MONTHS ENDED SEPTEMBER 30, |
| |
|
2024 |
|
|
|
2023 |
|
|
|
2024 |
|
|
|
2023 |
|
|
Total revenue |
|
$ |
94,820 |
|
|
$ |
85,576 |
|
|
$ |
284,787 |
|
|
$ |
266,327 |
|
| Cost of revenues |
|
|
37,189 |
|
|
|
35,876 |
|
|
|
116,253 |
|
|
|
106,956 |
|
| Operating expenses: |
|
|
|
|
|
|
|
|
|
Sales and marketing |
|
|
11,347 |
|
|
|
7,238 |
|
|
|
34,247 |
|
|
|
23,351 |
|
|
Research and development |
|
|
8,271 |
|
|
|
8,980 |
|
|
|
29,333 |
|
|
|
26,155 |
|
|
General and administrative |
|
|
22,030 |
|
|
|
27,760 |
|
|
|
73,080 |
|
|
|
61,777 |
|
|
Intangible asset amortization |
|
|
12,950 |
|
|
|
11,155 |
|
|
|
38,286 |
|
|
|
32,272 |
|
|
Depreciation and amortization expense |
|
|
439 |
|
|
|
367 |
|
|
|
1,322 |
|
|
|
1,139 |
|
|
Goodwill impairment expense |
|
|
— |
|
|
|
46,984 |
|
|
|
— |
|
|
|
46,984 |
|
|
Total operating expenses |
|
|
55,037 |
|
|
|
102,484 |
|
|
|
176,268 |
|
|
|
191,678 |
|
|
Income (loss) from operations |
|
|
2,594 |
|
|
|
(52,784 |
) |
|
|
(7,734 |
) |
|
|
(32,307 |
) |
| Other income (expenses): |
|
|
|
|
|
|
|
|
|
Interest expense |
|
|
(5,187 |
) |
|
|
(5,903 |
) |
|
|
(16,516 |
) |
|
|
(17,046 |
) |
|
Net other income |
|
|
932 |
|
|
|
5,078 |
|
|
|
4,886 |
|
|
|
6,594 |
|
| Total other expenses |
|
|
(4,255 |
) |
|
|
(825 |
) |
|
|
(11,630 |
) |
|
|
(10,452 |
) |
|
Loss before income taxes |
|
|
(1,661 |
) |
|
|
(53,609 |
) |
|
|
(19,364 |
) |
|
|
(42,759 |
) |
|
Provision (benefit) for income taxes |
|
|
(290 |
) |
|
|
(4,644 |
) |
|
|
(736 |
) |
|
|
142 |
|
| Net loss |
|
$ |
(1,371 |
) |
|
$ |
(48,965 |
) |
|
$ |
(18,628 |
) |
|
$ |
(42,901 |
) |
| |
|
|
|
|
|
|
|
|
| Net income (loss)
per share attributable to common stockholders: |
|
|
|
|
|
|
|
Basic |
|
$ |
(0.01 |
) |
|
$ |
(0.31 |
) |
|
$ |
(0.12 |
) |
|
$ |
(0.27 |
) |
|
Diluted |
|
$ |
(0.01 |
) |
|
$ |
(0.31 |
) |
|
$ |
(0.12 |
) |
|
$ |
(0.27 |
) |
| Weighted average common shares
outstanding: |
|
|
|
|
|
|
|
|
|
Basic |
|
|
160,642,052 |
|
|
|
159,165,206 |
|
|
|
160,225,375 |
|
|
|
158,769,638 |
|
|
Diluted |
|
|
160,642,052 |
|
|
|
159,165,206 |
|
|
|
160,225,375 |
|
|
|
158,769,638 |
|
| |
|
CERTARA, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED) |
| |
|
|
|
|
|
(IN THOUSANDS, EXCEPT PER SHARE AND SHARE
DATA) |
|
SEPTEMBER 30,2024 |
|
DECEMBER 31,2023 |
|
Assets |
|
|
|
|
| Current assets: |
|
|
|
|
|
Cash and cash equivalents |
|
$ |
233,023 |
|
|
$ |
234,951 |
|
|
Accounts receivable, net of allowances for credit losses of $1,556
and $1,312 |
|
|
95,956 |
|
|
|
84,857 |
|
|
Prepaid expenses and other current assets |
|
|
21,630 |
|
|
|
20,393 |
|
|
Total current assets |
|
|
350,609 |
|
|
|
340,201 |
|
| Other assets: |
|
|
|
|
|
Property and equipment, net |
|
|
2,554 |
|
|
|
2,670 |
|
|
Operating lease right-of-use assets |
|
|
12,070 |
|
|
|
9,604 |
|
|
Goodwill |
|
|
718,483 |
|
|
|
716,333 |
|
|
Intangible assets, net of $323,609 and $273,522 respectively |
|
|
453,225 |
|
|
|
487,043 |
|
|
Deferred income taxes |
|
|
4,236 |
|
|
|
4,236 |
|
|
Other long-term assets |
|
|
2,052 |
|
|
|
3,053 |
|
|
Total assets |
|
$ |
1,543,229 |
|
|
$ |
1,563,140 |
|
| Liabilities and
stockholders' equity |
|
|
|
|
| Current liabilities: |
|
|
|
|
|
Accounts payable |
|
$ |
2,494 |
|
|
$ |
5,171 |
|
|
Accrued expenses |
|
|
53,294 |
|
|
|
56,779 |
|
|
Current portion of deferred revenue |
|
|
59,336 |
|
|
|
60,678 |
|
|
Current portion of long-term debt |
|
|
3,000 |
|
|
|
3,020 |
|
|
Other current liabilities |
|
|
4,581 |
|
|
|
4,375 |
|
|
Total current liabilities |
|
|
122,705 |
|
|
|
130,023 |
|
| Long-term liabilities: |
|
|
|
|
|
Deferred revenue, net of current portion |
|
|
1,177 |
|
|
|
1,070 |
|
|
Deferred income taxes |
|
|
37,554 |
|
|
|
50,826 |
|
|
Operating lease liabilities, net of current portion |
|
|
10,420 |
|
|
|
6,955 |
|
|
Long-term debt, net of current portion and debt discount |
|
|
293,053 |
|
|
|
288,217 |
|
|
Other long-term liabilities |
|
|
24,915 |
|
|
|
39,209 |
|
|
Total liabilities |
|
|
489,824 |
|
|
|
516,300 |
|
| 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, 2024 and December
31, 2023, respectively |
|
|
— |
|
|
|
— |
|
|
Common shares, $0.01 par value, 600,000,000 shares authorized,
161,791,989 and 160,284,901 shares issued,160,900,211 and
159,848,286 shares outstanding as of September 30,2024 and December
31, 2023, respectively |
|
|
1,618 |
|
|
|
1,603 |
|
|
Additional paid-in capital |
|
|
1,209,196 |
|
|
|
1,178,461 |
|
|
Accumulated deficit |
|
|
(134,858 |
) |
|
|
(116,230 |
) |
|
Accumulated other comprehensive loss |
|
|
(5,013 |
) |
|
|
(7,593 |
) |
|
Treasury stock at cost, 891,778 and 436,615 shares at September 30,
2024 and December 31, 2023, respectively |
|
|
(17,538 |
) |
|
|
(9,401 |
) |
|
Total stockholders' equity |
|
|
1,053,405 |
|
|
|
1,046,840 |
|
|
Total liabilities and stockholders' equity |
|
$ |
1,543,229 |
|
|
$ |
1,563,140 |
|
| |
|
CERTARA, INC. AND SUBSIDIARIESCONSOLIDATED
STATEMENTS OF CASH
FLOWS(UNAUDITED) |
| |
| |
|
NINE MONTHS ENDED SEPTEMBER 30, |
|
(IN THOUSANDS) |
|
|
2024 |
|
|
|
2023 |
|
|
Cash flows from operating activities: |
|
|
|
|
| Net loss |
|
$ |
(18,628 |
) |
|
$ |
(42,901 |
) |
| Adjustments to reconcile net
loss to net cash provided by operating activities: |
|
|
|
|
|
Depreciation and amortization of property and equipment |
|
|
1,322 |
|
|
|
1,139 |
|
|
Amortization of intangible assets |
|
|
48,495 |
|
|
|
40,099 |
|
|
Amortization of debt issuance costs |
|
|
891 |
|
|
|
1,146 |
|
|
(Recovery of) provision for credit losses |
|
|
393 |
|
|
|
52 |
|
|
Equity-based compensation expense |
|
|
27,043 |
|
|
|
20,798 |
|
|
Change in fair value of contingent considerations |
|
|
8,092 |
|
|
|
11,316 |
|
|
Goodwill impairment |
|
|
— |
|
|
|
46,984 |
|
|
Deferred income taxes |
|
|
(12,626 |
) |
|
|
(18,532 |
) |
| Changes in assets and
liabilities: |
|
|
|
|
|
Accounts receivable |
|
|
(10,973 |
) |
|
|
6,441 |
|
|
Prepaid expenses and other assets |
|
|
(2,473 |
) |
|
|
85 |
|
|
Accounts payable, accrued expenses, and other liabilities |
|
|
(9,774 |
) |
|
|
(1,851 |
) |
|
Deferred revenues |
|
|
(2,122 |
) |
|
|
(6,978 |
) |
| Other operating activities,
net |
|
|
1,457 |
|
|
|
1,631 |
|
|
Net cash provided by operating activities |
|
|
31,097 |
|
|
|
59,429 |
|
| Cash flows from
investing activities: |
|
|
|
|
| Capital expenditures |
|
|
(1,210 |
) |
|
|
(899 |
) |
| Capitalized software
development costs |
|
|
(13,995 |
) |
|
|
(10,000 |
) |
| Investment in intangible
assets |
|
|
— |
|
|
|
(54 |
) |
| Business acquisitions, net of
cash acquired |
|
|
— |
|
|
|
(7,550 |
) |
|
Net cash used in investing activities |
|
|
(15,205 |
) |
|
|
(18,503 |
) |
| Cash flows from
financing activities: |
|
|
|
|
|
Proceeds from borrowings on term loan debt |
|
|
6,305 |
|
|
|
— |
|
|
Payment of debt issuance costs |
|
|
(1,216 |
) |
|
|
— |
|
|
Payments on long-term debt and finance lease obligations |
|
|
(1,505 |
) |
|
|
(2,290 |
) |
|
Payments for business acquisition related contingent
consideration |
|
|
(15,156 |
) |
|
|
— |
|
|
Payment of taxes on shares withheld for employee taxes |
|
|
(8,135 |
) |
|
|
(5,905 |
) |
|
Net cash used in financing activities |
|
|
(19,707 |
) |
|
|
(8,195 |
) |
| Effect of foreign exchange
rate on cash and cash equivalents, and restricted cash |
|
|
1,887 |
|
|
|
(107 |
) |
|
Net increase (decrease) in cash and cash equivalents, and
restricted cash |
|
|
(1,928 |
) |
|
|
32,624 |
|
| Cash and cash equivalents, and
restricted cash, at beginning of period |
|
|
234,951 |
|
|
|
239,688 |
|
| Cash and cash equivalents, and
restricted cash, at end of period |
|
$ |
233,023 |
|
|
$ |
272,312 |
|
|
|
|
NON-GAAP FINANCIAL MEASURES |
| |
| The following
table reconciles net loss to adjusted EBITDA: |
| |
| |
|
THREE MONTHS ENDED SEPTEMBER 30, |
NINE MONTHS ENDED SEPTEMBER 30, |
|
|
|
|
2024 |
|
|
|
2023 |
|
|
2024 |
|
|
|
2023 |
|
| |
|
(in thousands) |
| Net loss(a) |
|
$ |
(1,371 |
) |
|
$ |
(48,965 |
) |
$ |
(18,628 |
) |
|
$ |
(42,901 |
) |
| Interest expense(a) |
|
|
5,187 |
|
|
|
5,903 |
|
|
16,516 |
|
|
|
17,046 |
|
| Interest income(a) |
|
|
(2,609 |
) |
|
|
(2,864 |
) |
|
(7,669 |
) |
|
|
(6,428 |
) |
| (Benefit from) Provision for
income taxes(a) |
|
|
(290 |
) |
|
|
(4,644 |
) |
|
(736 |
) |
|
|
142 |
|
| Depreciation and amortization
expense(a) |
|
|
439 |
|
|
|
367 |
|
|
1,322 |
|
|
|
1,139 |
|
| Intangible asset
amortization(a) |
|
|
16,353 |
|
|
|
13,813 |
|
|
48,495 |
|
|
|
40,099 |
|
| Currency (gain) loss(a) |
|
|
1,546 |
|
|
|
(2,179 |
) |
|
2,526 |
|
|
|
(165 |
) |
| Equity-based compensation
expense(b) |
|
|
8,187 |
|
|
|
8,645 |
|
|
27,043 |
|
|
|
20,798 |
|
| Change in fair value of
contingent consideration(d) |
|
|
2,431 |
|
|
|
8,757 |
|
|
8,092 |
|
|
|
11,316 |
|
| Goodwill impairment
expense(e) |
|
|
— |
|
|
|
46,984 |
|
|
— |
|
|
|
46,984 |
|
| Acquisition-related
expenses(f) |
|
|
1,364 |
|
|
|
1,392 |
|
|
4,151 |
|
|
|
3,276 |
|
| Integration expense(g) |
|
|
— |
|
|
|
33 |
|
|
— |
|
|
|
190 |
|
| Transaction - related expenses
(h) |
|
|
(128 |
) |
|
|
— |
|
|
2,625 |
|
|
|
— |
|
| Severance expense(i) |
|
|
— |
|
|
|
— |
|
|
183 |
|
|
|
— |
|
| Reorganization expense(j) |
|
|
1,730 |
|
|
|
1,602 |
|
|
3,944 |
|
|
|
1,602 |
|
| Loss on disposal of fixed
assets(k) |
|
|
— |
|
|
|
— |
|
|
13 |
|
|
|
29 |
|
| Executive recruiting
expense(l) |
|
|
222 |
|
|
|
— |
|
|
645 |
|
|
|
396 |
|
| Adjusted EBITDA |
|
$ |
33,061 |
|
|
$ |
28,844 |
|
$ |
88,522 |
|
|
$ |
93,523 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table reconciles net loss to
adjusted net income:
| |
|
|
|
|
|
|
|
| |
|
THREE MONTHS ENDED SEPTEMBER 30, |
NINE MONTHS ENDED SEPTEMBER 30, |
|
|
|
|
2024 |
|
|
|
2023 |
|
|
2024 |
|
|
|
2023 |
|
| |
|
(in thousands) |
| Net loss (a) |
|
$ |
(1,371 |
) |
|
$ |
(48,965 |
) |
$ |
(18,628 |
) |
|
$ |
(42,901 |
) |
| Currency (gain) loss(a) |
|
|
1,546 |
|
|
|
(2,179 |
) |
|
2,526 |
|
|
|
(165 |
) |
| Equity-based compensation
expense(b) |
|
|
8,187 |
|
|
|
8,645 |
|
|
27,043 |
|
|
|
20,798 |
|
| Amortization of
acquisition-related intangible assets(c) |
|
|
13,351 |
|
|
|
11,377 |
|
|
40,041 |
|
|
|
33,892 |
|
| Change in fair value of
contingent consideration(d) |
|
|
2,431 |
|
|
|
8,757 |
|
|
8,092 |
|
|
|
11,316 |
|
| Goodwill impairment
expense(e) |
|
|
— |
|
|
|
46,984 |
|
|
— |
|
|
|
46,984 |
|
| Acquisition-related
expenses(f) |
|
|
1,364 |
|
|
|
1,392 |
|
|
4,151 |
|
|
|
3,276 |
|
| Integration expense(g) |
|
|
— |
|
|
|
33 |
|
|
— |
|
|
|
190 |
|
| Transaction - related expenses
(h) |
|
|
(128 |
) |
|
|
— |
|
|
2,625 |
|
|
|
— |
|
| Severance expense(i) |
|
|
— |
|
|
|
— |
|
|
183 |
|
|
|
— |
|
| Reorganization expense(j) |
|
|
1,730 |
|
|
|
1,602 |
|
|
3,944 |
|
|
|
1,602 |
|
| Loss on disposal of fixed
assets(k) |
|
|
— |
|
|
|
— |
|
|
13 |
|
|
|
29 |
|
| Executive recruiting
expense(l) |
|
|
222 |
|
|
|
— |
|
|
645 |
|
|
|
396 |
|
| Income tax expense impact of
adjustments(m) |
|
|
(7,079 |
) |
|
|
(10,572 |
) |
|
(22,442 |
) |
|
|
(20,669 |
) |
| Adjusted net income |
|
$ |
20,253 |
|
|
$ |
17,074 |
|
$ |
48,193 |
|
|
$ |
54,748 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following tables reconciles diluted earnings
per share to adjusted diluted earnings per share:
| |
|
|
|
|
|
|
|
| |
|
THREE MONTHS ENDED SEPTEMBER 30, |
NINE MONTHS ENDED SEPTEMBER 30, |
|
|
|
|
2024 |
|
|
|
2023 |
|
|
2024 |
|
|
|
2023 |
|
| |
|
(In thousands except share and per share
data) |
| Diluted earnings per
share(a) |
|
$ |
(0.01 |
) |
|
$ |
(0.31 |
) |
$ |
(0.12 |
) |
|
$ |
(0.27 |
) |
| Currency (gain) loss(a) |
|
|
0.01 |
|
|
|
(0.01 |
) |
|
0.02 |
|
|
|
— |
|
| Equity-based compensation
expense(b) |
|
|
0.05 |
|
|
|
0.06 |
|
|
0.17 |
|
|
|
0.13 |
|
| Amortization of
acquisition-related intangible assets(c) |
|
|
0.08 |
|
|
|
0.07 |
|
|
0.25 |
|
|
|
0.21 |
|
| Change in fair value of
contingent consideration(d) |
|
|
0.02 |
|
|
|
0.05 |
|
|
0.05 |
|
|
|
0.07 |
|
| Goodwill impairment
expense(e) |
|
|
— |
|
|
|
0.30 |
|
|
— |
|
|
|
0.30 |
|
| Acquisition-related
expenses(f) |
|
|
0.01 |
|
|
|
0.01 |
|
|
0.03 |
|
|
|
0.02 |
|
| Integration expense(g) |
|
|
— |
|
|
|
— |
|
|
— |
|
|
|
— |
|
| Transaction - related expenses
(h) |
|
|
— |
|
|
|
— |
|
|
0.02 |
|
|
|
— |
|
| Severance expense(i) |
|
|
— |
|
|
|
— |
|
|
— |
|
|
|
— |
|
| Reorganization expense(j) |
|
|
0.01 |
|
|
|
0.01 |
|
|
0.02 |
|
|
|
0.01 |
|
| Loss on disposal of fixed
assets(k) |
|
|
— |
|
|
|
— |
|
|
— |
|
|
|
— |
|
| Executive recruiting
expense(l) |
|
|
— |
|
|
|
— |
|
|
— |
|
|
|
— |
|
| Income tax expense impact of
adjustments(m) |
|
|
(0.04 |
) |
|
|
(0.07 |
) |
|
(0.14 |
) |
|
|
(0.13 |
) |
| Adjusted diluted earnings per
share |
|
$ |
0.13 |
|
|
$ |
0.11 |
|
$ |
0.30 |
|
|
$ |
0.34 |
|
| |
|
|
|
|
|
|
|
| Basic weighted average common
shares outstanding |
|
|
160,642,052 |
|
|
|
159,165,206 |
|
|
160,225,375 |
|
|
|
158,769,638 |
|
| Effect of potentially dilutive
shares outstanding (n) |
|
|
323,745 |
|
|
|
742,488 |
|
|
723,301 |
|
|
|
1,078,382 |
|
| Adjusted diluted weighted
average common shares outstanding |
|
|
160,965,797 |
|
|
|
159,907,694 |
|
|
160,948,676 |
|
|
|
159,848,020 |
|
| |
|
|
|
|
|
|
|
The following tables reconcile revenues to the
revenues adjusted for constant currency:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
THREE MONTHS ENDED SEPTEMBER 30, |
|
Change |
| |
|
2024 |
|
2024 |
|
2023 |
|
$ |
|
% |
|
$ |
|
% |
| |
|
Actual |
|
CC |
|
Actual |
|
Actual |
|
Actual |
|
CC Impact |
|
Adjust for CC |
| |
|
(GAAP) |
|
(non-GAAP) |
|
(GAAP) |
|
(GAAP) |
|
(GAAP) |
|
(non-GAAP) |
|
(non-GAAP) |
| |
|
(in thousands except percentage) |
| Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Software |
|
$ |
35,912 |
|
$ |
35,632 |
|
$ |
31,331 |
|
$ |
4,581 |
|
15 |
% |
|
$ |
(280 |
) |
|
14 |
% |
|
Services |
|
|
58,908 |
|
|
58,654 |
|
|
54,245 |
|
|
4,663 |
|
9 |
% |
|
|
(254 |
) |
|
8 |
% |
| Total Revenue |
|
$ |
94,820 |
|
$ |
94,286 |
|
$ |
85,576 |
|
$ |
9,244 |
|
11 |
% |
|
$ |
(534 |
) |
|
10 |
% |
| |
|
NINE MONTHS ENDED SEPTEMBER 30, |
|
Change |
| |
|
|
2024 |
|
|
2024 |
|
|
2023 |
|
$ |
|
% |
|
$ |
|
% |
| |
|
Actual |
|
CC |
|
Actual |
|
Actual |
|
Actual |
|
CC Impact |
|
Adjust for CC |
| |
|
(GAAP) |
|
(non-GAAP) |
|
(GAAP) |
|
(GAAP) |
|
(GAAP) |
|
(non-GAAP) |
|
(non-GAAP) |
| |
|
(in thousands except percentage) |
| Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Software |
|
$ |
113,426 |
|
$ |
112,914 |
|
$ |
98,058 |
|
$ |
15,368 |
|
16 |
% |
|
$ |
(512 |
) |
|
15 |
% |
|
Services |
|
|
171,361 |
|
|
170,711 |
|
|
168,269 |
|
|
3,092 |
|
2 |
% |
|
|
(650 |
) |
|
1 |
% |
| Total Revenue |
|
$ |
284,787 |
|
$ |
283,625 |
|
$ |
266,327 |
|
$ |
18,460 |
|
7 |
% |
|
$ |
(1,162 |
) |
|
6 |
% |
|
(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, as well as debt issuance costs that are not deferred
or treated as a contra-liability directly deducted from the
carrying value of the associated debt liability. |
|
(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 income tax effect of the non-GAAP adjustments
calculated using the applicable statutory rate by
jurisdiction. |
|
(n.) |
Represents potentially dilutive shares that were included from our
GAAP diluted weighted average common shares outstanding. |
Certara (NASDAQ:CERT)
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