PRINCETON, N.J.—May 5, 2022– Certara, Inc. (Nasdaq: CERT), a global leader in biosimulation, today reported its financial results for the first quarter of fiscal year 2022.
First Quarter Highlights:
- Revenue was $81.6 million, compared to $66.7 million in the first quarter of 2021, representing growth of 22% over the first quarter of 2021. Excluding Pinnacle 21, revenue was $75.6 million, representing growth of 13% over the first quarter of 2021.
- Net income was $2.2 million, compared to net income of $1.1 million in the first quarter of 2021, representing growth of 110% over the first quarter of 2021.
- Adjusted EBITDA was $27.7 million, compared to $23.9 million in the first quarter of 2021, representing growth of 16% over the first quarter of 2021.
“Certara delivered strong revenue growth in the first quarter, despite experiencing some COVID-related delays in activity,” said William F. Feehery, chief executive officer. “With compelling growth opportunities ahead, we continue to invest in our people, R&D and commercial team to drive innovation and impact. Our robust bookings growth demonstrates the ongoing adoption of our software and technology-driven services, which enable our customers to accelerate the development of crucial, new medicines for patients worldwide.”
First Quarter 2022 Results
“Certara’s solid first quarter results reflect continued strong demand for our technology-driven services and proprietary software. Our positive momentum positions us well to deliver on our 2022 outlook, and we have made investments to drive sustainable mid-teens revenue growth,” said Andrew Schemick, chief financial officer.
Total revenue for the first quarter of 2022 was $81.6 million, representing growth of 22% over the first quarter of 2021. Excluding $6.0 million revenue from Pinnacle 21, which was acquired in late 2021, revenue increased $8.9 million, or 13%. The increase in revenue was primarily due to growth in our technology-driven services and software product offerings from strong renewal rates, client expansion, and new customers as well as business acquisitions.
Total cost of revenue for the first quarter of 2022 was $32.8 million, increased $6.8 million from $26.0 million in the first quarter of 2021, primarily due to a $4.5 increase in employee-related costs resulting from billable head count growth, $1.7 million increase in intangible assets amortization.
Total operating expenses for the first quarter of 2022 were $42.6 million, increased $7.6 million from $35.1 million in the first quarter of 2021, primarily due to a $6.0 million increase in employee related costs, a $1.5 million increase in stock-based compensation costs, a $0.9 million increase in professional costs, $0.7 million increase in amortization of intangible assets, $0.7 million increase in compliance implementation costs, partially offset by $1.0 million decrease in business acquisition costs, $1.0 million increase in capitalized research and development cost.
Net income for the first quarter of 2022 was $2.2 million, compared to a net income of $1.1 million in the first quarter of 2021. The $1.2 increase in net income was primarily due to a $14.8 million increase in total revenue and $1.7 decrease in other expense, partially offset by a $6.8 million increase in cost of revenue, a $7.5 million increase in operating expenses, and $1.0 million increase in tax expense.
Diluted earnings per share for the first quarter 2022 was $0.01, as compared to $0.01 in the first quarter of 2021.
Adjusted EBITDA for the first quarter of 2022 was $27.7 million compared to $23.9 million for the first quarter of 2021, representing 16% growth. See note (1) in the section A Note on Non-GAAP Financial Measures below for more information on adjusted EBITDA. Adjusted net income for the first quarter of 2022 was $16.9 million compared to $14.4 million for the first quarter of 2021. Adjusted diluted earnings per share for the first quarter 2022 was $0.11 compared to $0.09 for the first quarter of 2021. See note (2) in the section A Note on Non-GAAP Financial Measures below for more information on adjusted net income and adjusted diluted earnings per share.
2022 Financial Outlook
Certara is reiterating its previously reported guidance for full year 2022 with the exception of an update to guidance for fully diluted shares outstanding. The Company expects the following:
Fully diluted shares for 2022 to be in the range of 159 million to 161 million;
GAAP tax rate for 2022 to be in the range of 40% to 45%; and
Cash tax rate for 2022 to be in the range of 20% to 25%
Webcast and Conference Call Details
Certara will host a conference call today, May 5, 2022, at 5:00 p.m. ET to discuss its first quarter 2022 financial results. The dial-in numbers are (833) 360-0946 for domestic callers or (914) 987-7661 for international callers, followed by Conference ID: 2728807. A live webcast of the conference call will be available on the “Investors” section of the Company’s website at https://ir.certara.com/. The webcast will be archived on the website following the completion of the call for approximately one year.
Certara accelerates medicines using proprietary biosimulation software, technology and services to transform traditional drug discovery and development. Its clients include more than 2,000 biopharmaceutical companies, academic institutions, and regulatory agencies across 62 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.
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 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; 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 due to COVID-19 or other external factors, 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 the Pinnacle 21 acquisition and any future acquisitions and our ability to successfully integrate such acquisitions; the occurrence of natural disasters and epidemic diseases, such as the recent COVID-19 pandemic; the occurrence of global conflicts, such as the conflict between Russian and Ukraine; 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, such as COVID-19; 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 backlog; 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 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, 2022. 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” that 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), and adjusted diluted earnings per share, 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), and adjusted diluted earnings per share 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 are frequently used by analysts, investors, and other interested parties to evaluate and assess 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) Adjusted EBITDA represents net income excluding interest expense, provision (benefit) for income taxes, depreciation and amortization expense, intangible asset amortization, equity-based compensation expense, acquisition and integration expense and other items not indicative of our ongoing operating performance.
(2) Adjusted net income and adjusted diluted earnings per share exclude the effect of equity-based compensation expense, amortization of acquisition-related intangible assets, 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.
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