Release Date: February 26, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Certara Inc (CERT, Financial) achieved a 9% revenue growth in 2024, reaching $385.1 million, with strong performance in both software and services.
- Fourth-quarter bookings increased by 22% year-over-year, driven by a 38% growth in software bookings and a 12% growth in services bookings.
- The company successfully integrated recent acquisitions, including Chemaxon, which contributed $6.6 million to fourth-quarter revenue.
- Certara expanded its customer base to over 2,400 life sciences companies, with significant growth in customers with annual contract values exceeding $100,000 and $1 million.
- Certara's focus on biosimulation and model-informed drug development (MIDD) continues to gain traction, with strong adoption across the biopharmaceutical industry.
Negative Points
- Certara faced cautious spending behavior from customers due to funding constraints, Medicare drug price negotiations, and geopolitical uncertainties.
- Decision-making timelines among customers have been elongated, impacting the predictability of demand for Certara's services.
- The software net retention rate decreased to 106% in the fourth quarter, attributed to spending patterns and slower decision-making among Tier 1 customers.
- Regulatory writing revenue declined in 2024, although it showed signs of recovery in the fourth quarter.
- Certara's guidance for 2025 assumes a similar market environment to 2024, with potential challenges in clinical R&D spending and customer decision-making processes.
Q & A Highlights
Q: Can you explain the factors that could lead Certara to achieve the high or low end of its 2025 revenue guidance?
A: John Gallagher, CFO, explained that achieving the high end of the guidance would depend on improvements in end markets, particularly with Tier 1 and Tier 3 customers. Tier 1 customers are experiencing spending patterns impacted by layoffs and portfolio prioritization, while Tier 3 customers are taking longer to make decisions after receiving funding. If these conditions improve, Certara could reach the higher end of the guidance range; if they worsen, the company might hit the lower end.
Q: What are the planned R&D investments for 2025, and how do they relate to Chemaxon?
A: John Gallagher, CFO, stated that Certara plans to invest in R&D to maintain momentum in its software portfolio and AI initiatives. The integration of Chemaxon is ongoing, and the company expects to align Chemaxon's margins with Certara's by the end of the year. The investments are aimed at enhancing product development and integrating Chemaxon's capabilities with Certara's existing assets.
Q: How is Certara expanding its market share and customer wallet share?
A: William Feehery, CEO, noted that Certara's investments in new products and updates have led to positive customer feedback and increased sales. The company is focusing on expanding its software suite, particularly in AI and core products like Simcyp and Pinnacle 21, to open new market opportunities and increase its share of customer spending.
Q: What is the impact of the new administration on Certara's business?
A: William Feehery, CEO, mentioned that Certara is monitoring the new administration's policies for potential opportunities and risks. However, it is too early to make definitive plans or pronouncements as the situation is still developing.
Q: Can you provide more details on the CoAuthor product and its market potential?
A: William Feehery, CEO, highlighted that CoAuthor has multiple paying customers and a strong pipeline. The product reduces the time to create regulatory documents significantly and is expected to generate millions in revenue this year. Certara plans to expand CoAuthor's capabilities and document types, leveraging AI to enhance its functionality.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
