Summary
Certara's fiscal 2023 first quarter delivered solid top-line growth but weaker GAAP profitability. Revenue was $90.3 million, up 10.7% from $81.6 million in the prior-year quarter. Operating income rose 21.3% to $7.4 million from $6.1 million, and operating margin expanded to 8.2% from 7.5%, an increase of 0.7 percentage points. Net income moved the other way, falling 38.6% to $1.4 million from $2.2 million. Diluted earnings per share held flat at $0.01. The revenue increase came primarily from growth in technology-driven services and software product offerings, with client expansion and new customer acquisitions, though foreign currency exchange rate fluctuations partially offset the gain. Certara was added to the S&P SmallCap 600 Index effective March 22, 2023. The company serves more than 2,300 clients across 70 countries, and 20 global regulatory authorities license its biosimulation software, including the FDA, Health Canada, Japan's Pharmaceuticals and Medical Devices Agency, and the UK's Medicines and Healthcare Products Regulatory Agency.
Non-GAAP measures showed stronger momentum. Adjusted EBITDA was $32.3 million, up 17% from $27.7 million in the prior-year quarter. Adjusted net income was $19.3 million, up 14% from $16.9 million. Adjusted diluted earnings per share was $0.12 versus $0.11. On a constant currency basis, revenue grew 13% over the prior-year quarter, compared with 11% reported growth. The gap highlights the drag from foreign exchange. Bookings were $112.7 million in the quarter, up from $108.5 million a year earlier. The renewal rate was 90%, down from 92%. The company said bookings remain healthy and its balance sheet is strong.
Cash generation remained steady. Operating cash flow was $9.96 million, up 1.6% from $9.80 million in the prior-year quarter. Capital expenditures were $0.32 million, down 37.4% from $0.51 million. Deferred revenue stood at $54.43 million at quarter end. Remaining performance obligations were $90.30 million, up 10.7% from $81.55 million a year earlier. The balance sheet and bookings give management room to keep investing in growth. Certara has completed 17 acquisitions, including Vyasa Analytics in December 2022, and it continues to seek complementary businesses. It also plans to invest in scientific talent, sales and marketing, research and development, and administrative functions.
Certara reiterated its full year 2023 guidance. The company continues to expect revenue of $370 million to $385 million, adjusted EBITDA of $131 million to $137 million, and adjusted diluted earnings per share of $0.50 to $0.55. It also expects fully diluted shares of 159 million to 162 million. The guidance is for the full fiscal year, not the next quarter. Management did not reconcile forward-looking adjusted EBITDA or adjusted diluted EPS to GAAP due to variability in acquisition, financing, and stock compensation costs.
Risks remain familiar. Certara faces macroeconomic challenges including higher inflation, rising interest rates, instability in the financial system, geopolitical conflicts, and residual effects of COVID-19. The biopharmaceutical industry is competitive and highly fragmented, and customer retention and expansion are critical. The renewal rate slipped to 90% from 92%, while bookings improved. Foreign currency fluctuations reduced reported revenue growth relative to constant currency. The company also carries debt tied to floating interest rates, and interest costs have risen. Management believes existing liquidity will cover working capital, capital expenditures, and contractual obligations for the foreseeable future, but future capital needs may depend on acquisitions and other strategic opportunities. Delays or cancellations in customer projects, supply chain interruptions, and pricing pressures could weigh on results. Competition comes from other scientific software providers, technology companies, in-house development by biopharmaceutical companies, open source solutions, and contract research organizations.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q1 FY2023 | Q4 FY2022 | QoQ | Q1 FY2022 | YoY |
|---|---|---|---|---|---|
| Revenue | $90.3M | $86.6M | +4.2% | $81.6M | +10.7% |
| Gross profit | $55.4M | $54.9M | +1.1% | $48.8M | +13.7% |
| Gross margin | 61.4% | 63.3% | -1.9 pp | 59.8% | +1.6 pp |
| Research & development | $9.3M | $6.6M | +40.8% | $7.5M | +23.0% |
| Sales & marketing | $8.0M | $7.8M | +2.6% | $6.1M | +30.9% |
| General & administrative | $19.8M | $18.3M | +7.9% | $18.3M | +7.8% |
| Total operating expenses | $48.0M | $43.5M | +10.4% | $42.6M | +12.6% |
| Operating income (loss) | $7.4M | $11.4M | -34.6% | $6.1M | +21.3% |
| Operating margin | 8.2% | 13.1% | -4.9 pp | 7.5% | +0.7 pp |
| Net income (loss) | $1.4M | $9.2M | -85.2% | $2.2M | -38.6% |
| Net margin | 1.5% | 10.6% | -9.1 pp | 2.7% | -1.2 pp |
| Diluted EPS | $0.01 | $0.06 | -$0.05 | $0.01 | ±$0.00 |
| Customers | 2,014 | 2,014 | ±0.0% | 2,014 | ±0.0% |
Risks
New risk factor highlights adverse developments in the financial services industry, including the March 10, 2023 SVB receivership. Although Certara did not hold deposits at SVB, substantially all cash and cash equivalents are held at U.S. and multi-national financial institutions and deposits exceed insured limits, which could impair access to cash or customer payments.
Interest expense increased 70% to $5.5 million for FY2023 Q1 versus FY2022 Q1, primarily due to higher market interest rates on the floating-rate term loan. The company had $296.7 million outstanding on the term loan as of March 31, 2023, exposing results to further rate increases.
MD&A cites higher inflation, rising interest rates, instability in the financial system, geopolitical conflicts, and residual COVID-19 effects. It notes COVID-19 variants caused a slowdown in closing out clinical trials and delays in regulatory services projects, which could pressure revenue timing.
Renewal rate declined to 90% in Q1 2023 from 92% in Q1 2022, even as bookings rose to $112.7 million from $108.5 million. A continued decline in renewals could reduce future recurring revenue.
MD&A describes the biosimulation market as competitive and highly fragmented, with competitors that may have greater financial, technical, and marketing resources, as well as open source alternatives such as R and PK-Sim and customers' internal development efforts.
Demand depends on continued regulatory acceptance of biosimulation and in silico data. MD&A warns that relaxed requirements, expedited approval procedures, or regulatory changes that make the company's regulatory strategy services less competitive could reduce demand.
The company completed 17 acquisitions as of March 31, 2023, including Vyasa in December 2022 with estimated consideration of $29.3 million and contingent consideration remeasured to $21.1 million at March 31, 2023, resulting in a $1.3 million fair value adjustment. Integration and fair value changes could affect results.
SaaS KPIs
All quarters →Renewal Rate
Bookings
Total clients
Summary, forecast, risks and KPIs are extracted from Certara, Inc.'s SEC filings for Q1 FY2023 (10-Q / 10-K and the 8-K earnings release); GAAP figures in the summary are checked against the reported XBRL data. They can contain errors; the filings are authoritative. Processed Oct 2, 2026.