Release Date: November 06, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Certara Inc (CERT, Financial) reported a 11% year-over-year increase in third-quarter revenue, reaching $94.8 million.
- The company achieved a 13% increase in total bookings, indicating strong demand for its services.
- Certara Inc (CERT) successfully closed the Chemaxon acquisition, expanding its biosimulation reach into the pre-clinical market.
- The launch of Certara Cloud has provided easier access to software, reducing IT and security costs for customers.
- Certara Inc (CERT) has seen strong performance in software bookings, with a 28% increase from the prior year period.
Negative Points
- Certara Inc (CERT) experienced a lengthened decision-making process among larger customers, impacting growth predictions.
- The regulatory services market has been more challenging than expected, leading to a modest revision of 2024 guidance.
- There is a divergence in growth profiles between the regulatory services and core biosimulation businesses.
- Certara Inc (CERT) has seen further deterioration in regulatory services bookings, affecting revenue assumptions for the fourth quarter.
- The company is cautious about predicting second-half growth due to market dynamics and customer decision delays.
Q & A Highlights
Q: Can you elaborate on the current demand environment for biosimulation and how it intersects with end-of-year budget activities and your go-to-market strategies?
A: William Feehery, CEO: We typically see a budget flush from pharmaceutical customers in Q4, and we expect some of that this quarter, though it's hard to predict the extent. Our guidance doesn't rely on it. Our increased investment in our commercial team is helping, and while the market is healthier than earlier this year, the change is modest. The demand for biosimulation is driven more by our investments and its unique value.
Q: How are Certara Cloud and commercial strategies affecting customer interactions? Are you engaging with different buyers or finding it easier to unlock budgets?
A: William Feehery, CEO: Certara Cloud, launched earlier this year, acts as a platform across our products, reducing IT costs and simplifying marketing discussions. It helps with software bookings and makes it easier for customers to implement our products, reducing IT audits and security costs. The growth is driven by our unique software and new features.
Q: Can you provide details on the Chemaxon acquisition's revenue contribution and its margin profile compared to Certara's legacy business?
A: John Gallagher, CFO: Chemaxon is expected to contribute about $5 million in Q4, consistent with its $20 million annual business. It's primarily a software business, with 90% software and 10% services. Its margin profile is below Certara's, but we expect it to align with Certara's average by the end of 2025.
Q: What improvements have you seen with Tier 1 customers from Q2 to Q3?
A: John Gallagher, CFO: We saw stability in Tier 1 customers moving from Q2 to Q3, with strong performance in software across tiers. Services saw pressure in Q2, but there was improvement in Q3, especially in biosimulation services, though regulatory services saw some contraction.
Q: What is driving the demand for biosimulation compared to regulatory writing, and how are you expanding biosimulation for large molecules?
A: William Feehery, CEO: Demand is driven by sustained investment in biosimulation, regulatory agency acceptance, and cost-effectiveness compared to clinical trials. Our tools cater to both small and large molecules, reflecting pharma's research focus. Biosimulation's regulatory acceptance and cost benefits are key drivers.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
