Certara’s Earnings Call Highlights Growth and Optimism

Certara, Inc. ((CERT)) has held its Q1 earnings call. Read on for the main highlights of the call.

Certara, Inc. recently held its earnings call, presenting a generally positive outlook for the company. The call highlighted strong revenue and bookings growth, the successful launch of new software versions, and a favorable announcement from the FDA regarding their product offerings. Despite facing market headwinds and some segment softness, Certara’s strategic initiatives and emerging opportunities appear to outweigh these challenges, painting an optimistic picture for the company’s future.

Strong Revenue and Bookings Growth

Certara reported impressive financial results for the first quarter of 2025, with revenue reaching $106 million, marking a 10% increase compared to the same period in 2024. Bookings also saw a significant rise, totaling $118.2 million, which represents a 12% growth from the previous year. These figures underscore the company’s robust performance and its ability to capture market opportunities effectively.

Significant Software Segment Performance

The software segment of Certara demonstrated remarkable growth, with Q1 2025 software revenue hitting $46.4 million, an 18% increase from the prior year. Software bookings grew by an impressive 23%, bolstered by Chemaxon’s contribution of $5.9 million to the software revenue. This performance highlights the strength and demand for Certara’s software solutions.

FDA Announcement on Animal Testing Phase-Out

A pivotal development for Certara was the FDA’s announcement to phase out animal testing, which has generated significant interest in Certara’s Non-Animal Navigator solution. This innovative solution utilizes AI and modeling to replace animal testing in drug development, positioning Certara as a leader in this transformative shift within the industry.

Launch of Simcyp Simulator Version 24

Certara announced the launch of the 24th version of its Simcyp Simulator, which includes new drug interaction libraries and enhanced modeling capabilities. This tool has been instrumental in supporting over 120 FDA-approved novel drug applications, further solidifying Certara’s role in advancing drug development technologies.

Share Repurchase Program

Reflecting confidence in its long-term growth strategies, Certara announced a $100 million share repurchase authorization. To date, approximately $25 million has been repurchased, signaling the company’s commitment to returning value to shareholders and reinforcing its positive outlook.

Adjusted EBITDA Growth

Certara reported adjusted EBITDA of $34.8 million for Q1 2025, up from $29.1 million in the same quarter of the previous year, with a margin of 33%. This growth in EBITDA indicates strong operational efficiency and profitability.

Continued Market Headwinds

Despite the positive developments, Certara faces ongoing market headwinds, including IRA price controls, an unpredictable capital raising environment for biotechs, and potential new trade and healthcare policies. These factors present challenges that the company must navigate to maintain its growth trajectory.

Softness in Tier 1 Biosimulation Services

The earnings call noted some softness in the Tier 1 customer base for biosimulation services, which has impacted growth in this segment. Addressing this issue will be crucial for Certara to sustain its momentum in the biosimulation market.

Lower Software Net Retention Ratio

Certara reported a software net retention ratio of 102%, which is below its historical average. This decline is attributed to the expected timing of software revenue achievement, and the company will need to focus on improving this metric to enhance its software segment performance.

Forward-Looking Guidance

Certara provided detailed guidance for the full year, projecting total revenue between $415 million and $425 million. Chemaxon is expected to contribute $23 million to $25 million to this revenue. Adjusted EBITDA margins are anticipated to be between 30% and 32%, with adjusted EPS ranging from $0.42 to $0.46. The company emphasized strategic investments in AI integration and biosimulation model development, particularly in light of the FDA’s move to phase out animal testing, which is expected to drive future growth.

In summary, Certara’s earnings call conveyed a positive sentiment, driven by strong financial performance, strategic initiatives, and favorable industry developments. While challenges remain, the company’s proactive approach and innovative solutions position it well for continued success in the evolving market landscape.