Certara, Inc. Q1 FY2026 earnings

Certara opened fiscal 2026 with total revenue of $106.9 million in the first quarter, up 1% from $106.0 million in the prior-year quarter. The top line held steady, but the mix kept shifting. Software bookings rose 20% to $48.7 million, while services bookings fell 14% to $66.6 million. Total bookings were $115.3 million, down 2% from $118.2 million. The net retention rate was 106.1%, compared with 102.4% a year earlier. Existing software customers are expanding; new services contracts are not.

Profitability moved sharply lower. Operating loss was $4.3 million, compared with operating income of $7.6 million in the prior-year quarter, and operating margin was negative 4.0%, down 11.2 percentage points from 7.2%. Net loss was $8.8 million, against net income of $4.7 million a year earlier, and diluted loss per share was $0.06, against diluted earnings per share of $0.03. Management pointed to higher operating expenses, increased tax expense, and higher other expenses, partly offset by higher revenue. The single largest expense driver was a $7.4 million increase in business acquisition contingent consideration expense, alongside higher employee-related costs and executive recruiting and retention costs. Adjusted EBITDA was $31.7 million, down 9% from $34.8 million. Adjusted net income was $14.5 million, compared with $22.2 million, and adjusted diluted earnings per share was $0.09, compared with $0.14.

Cash generation slowed. Operating cash flow was $11.7 million, down 32.6% from $17.4 million. Capital expenditures were $0.63 million, up 5.2% from $0.60 million. The decline in operating cash flow came from lower cash-adjusted net income, more cash used for prepaid and other assets, and less cash collected on accounts receivable, partly offset by lower cash outflows to settle liabilities and higher cash inflows from deferred revenues. Deferred revenue was $79.6 million, up 8.5% from $73.3 million, and remaining performance obligations were $152.5 million, up 9.5% from $139.2 million. Backlog keeps building even as current-period profit and cash flow weakened.

Management used the quarter to reset the portfolio. On May 8, 2026, Certara completed the sale of its global medical writing and related regulatory services business to Veristat for cash consideration of $85.0 million, plus $15.0 million placed in escrow and contingent consideration of up to $35.0 million. The company is reorganizing around two focused growth areas and accelerating an enterprise-wide AI program. Full year 2026 guidance was updated to reflect the divestiture, which closed in the second quarter. Growth excluding the Regulatory and Medical Writing Business is expected to be 0% to 4%. Full year 2026 adjusted EBITDA margin is expected to be approximately 30% to 32%. Adjusted diluted earnings per share for the full year is expected to be $0.35 to $0.41, and fully diluted shares are expected to be in a range of 157 million to 159 million.

The quarter also exposed execution gaps. Management called services performance mixed, citing execution and go-to-market challenges expected to resolve in the second half of the year. Services bookings fell on the timing of contract recognition and execution. The filing lists risks including changes in government regulation of the biopharmaceutical industry, pullbacks in government funding for drug development, competition in biosimulation, macroeconomic uncertainty, consolidation among customers, and the loss of more than one major customer. Regulatory acceptance of model-informed drug development remains central to demand. The divestiture adds transition and execution risk. With adjusted EBITDA margin guided at approximately 30% to 32%, the open question for the rest of fiscal 2026 is whether software momentum can offset services softness and whether cost discipline can move the business back to GAAP profitability.