Certara, Inc. ((CERT)) has held its Q4 earnings call. Read on for the main highlights of the call.
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Certara’s latest earnings call painted a cautiously balanced picture for investors. Management highlighted solid full-year metrics, including healthy revenue growth, expanding software sales and improved adjusted EBITDA, while also acknowledging disappointing Q4 profitability and weaker software bookings. The tone was pragmatic, framing 2026 as a transition year with both execution risk and potential upside.
Full-Year Revenue Growth Shows Resilient Top Line
Certara delivered full-year 2025 revenue of $418.8 million, up 9% year over year, or 8% in constant currency, underscoring steady demand across its portfolio. This performance signals that the company’s core markets remain intact despite macro headwinds and internal execution issues that pressured the fourth quarter.
Software Remains Growth Engine Despite Q4 Bumps
Software revenue in Q4 rose 10% to $46.4 million, with full-year software sales climbing 18% to $183.3 million, highlighting robust demand for Certara’s platforms. Management emphasized that software continues to outpace services growth and anchors the long-term strategy, even as Q4 software bookings fell short of expectations.
Bookings Momentum Supports Medium-Term Visibility
Total bookings reached $155.2 million in Q4, up 7% year over year, while trailing 12‑month bookings grew 8% to $482.1 million, pointing to a solid underlying pipeline. These figures suggest that, despite recent conversion challenges, Certara has sufficient contracted business to support moderate revenue expansion as execution improves.
MIDD and Tech-Driven Services Gain Traction
Technology-driven services bookings increased 17% in Q4, and model-informed drug development bookings posted double-digit quarterly growth and 8% growth for the full year. Management framed this as evidence that MIDD use cases are gaining broader adoption in pharma workflows, positioning Certara well in a key strategic growth area.
Adjusted EBITDA Improves for the Full Year
For 2025, adjusted EBITDA rose to $134.5 million, up from $122 million, with margins improving to 32%, showing better full-year operating leverage. This improvement came despite a softer Q4, supporting management’s view that the business model remains fundamentally profitable even as they invest for future growth.
High Software Net Retention Underscores Customer Stickiness
Software net retention reached 107% in Q4 and 105% for the year, indicating that existing customers are expanding their spend with Certara. Such levels of net retention are a strong indicator of product value and create a recurring growth tailwind, an important anchor while new bookings temporarily slow.
Balance Sheet Strength and Capital Returns
The company ended the year with $189.4 million in cash and full availability on its revolving credit facility, alongside $295.5 million of term-loan borrowings. Certara also repurchased about 3.3 million shares for $43 million in 2025, signaling confidence in long-term prospects and providing a modest boost to per-share metrics.
New CEO’s Strategy and AI Product Push
The new CEO laid out three priorities: sharpening the portfolio, boosting customer-centricity and driving operational improvements, while accelerating AI integration across products. Initiatives include CertaraIQ and AI-enabled Phoenix modules, alongside roughly $10 million of identified 2026 cost avoidance, aiming to enhance both innovation and efficiency.
Q4 Software Bookings Miss Weighs on Outlook
Q4 software bookings declined 6% to $56.1 million and fell short of internal targets, pressured by customer reorganizations and slower clinical trial completions. Management also cited weaker pipeline conversion, signaling that near-term growth will depend heavily on fixing execution issues and navigating pharma decision delays.
Quarterly Profitability and EPS Under Pressure
Certara reported a Q4 net loss of $5.9 million versus a $6.6 million profit a year ago, reflecting softer revenue and higher costs. Adjusted net income dropped to $14.9 million from $24.7 million, with adjusted diluted EPS sliding to $0.09 from $0.15, underscoring the profitability challenges in the quarter.
Services Revenue Growth Lags Behind Software
Services revenue in Q4 slipped 1% to $57.3 million on a constant currency basis, and full-year services revenue rose only 3%, well below software’s pace. This divergence suggests that while software remains vibrant, the services segment faces demand and mix pressures that management will need to address.
Regulatory Writing Under Strategic Review
Revenue from regulatory writing and operations fell to $50.4 million in 2025 from $54.7 million in 2024, highlighting a contracting niche. Management has launched a strategic review of this business, which could include portfolio actions and adds uncertainty but may ultimately simplify the company and refocus capital.
Acquisition Skews Recurring Revenue Mix
Ratable and subscription revenue declined to 61% of software revenue in 2025 from 65% in 2024, largely due to the Chemaxon acquisition contributing roughly $22.9 million. As a result, the headline 18% software growth overstates organic recurring growth, which management pegged at about 7%, a key nuance for investors.
Operating Expenses Rise with Investment Cycle
Total operating expenses climbed to $63.6 million in Q4 from $56.1 million a year earlier, driven mainly by higher employee-related R&D spending. Management cautioned that planned investments in 2026, particularly in AI and product development, will keep margins under short-term pressure before benefits materialize.
Execution and Pipeline Conversion Challenges Admitted
Leadership acknowledged internal execution gaps that contributed to weaker Q4 bookings and slower pipeline conversion, especially among Tier 1 and Tier 2 customers. They outlined operational fixes and increased commercial focus as priorities, effectively admitting that growth is as much about discipline as it is about market demand.
Guidance Signals a Transition Year With Modest Growth
For 2026, Certara guided revenue to flat to up 4% versus 2025’s $418.8 million, with Q1 expected near the low end before improving later in the year as execution stabilizes. Adjusted EBITDA margin is projected at 30%–32%, with adjusted EPS of $0.44–$0.48, and about $10 million of cost avoidance helping offset investment-related margin pressure.
Certara’s earnings call left investors with a nuanced story of solid fundamentals and growing software momentum, offset by near-term execution and profitability headwinds. With 2026 marked as a transition year and conservative guidance, the stock will likely hinge on whether management can convert a strong bookings base and AI-led strategy into durable, higher-margin growth.