Summary
Certara posted revenue of $70.1 million for the fiscal 2021 second quarter, up 14.7% from the prior-year quarter. Growth came from client expansion across technology-enabled services and software, with subscription renewals contributing a large part of the software gain. For the first six months of fiscal 2021, revenue was $136.8 million, up 15.4%. Bookings were $75.1 million in the second quarter, up from $70.1 million a year earlier, while the renewal rate slipped to 90% from 96%.
Profitability moved the other way. Operating income was $5.3 million in the quarter, down 61.2%, and operating margin was 7.5%, down 14.7 percentage points. Year to date, operating income was $10.9 million, down 49.6%. The quarter swung to a net loss of $2.9 million from net income a year earlier, and diluted EPS swung to -$0.02 from $0.02. Over the six months, the net loss was $1.8 million and diluted EPS was -$0.01 versus $0.03 in the prior-year period. Certara tied the swing mainly to a $7.0 million increase in stock-based compensation expense.
Expenses explain most of it. Cost of revenues rose 33% to $27.5 million, including a $1.4 million increase in stock-based compensation costs. General and administrative expense climbed 61% to $18.0 million on a $4.4 million increase in stock-based compensation costs, higher insurance costs and acquisition costs. Research and development rose 56% to $4.6 million, and sales and marketing rose 68% to $4.6 million.
Non-GAAP results held up better. Adjusted EBITDA was $25.5 million, up 1% from the prior-year quarter, a comparison management described as challenging because the year-ago period benefited from high-margin project completions and lower SG&A costs early in the pandemic. Adjusted net income was $5.6 million versus $3.8 million, and Adjusted Diluted EPS was $0.03 versus $0.02. Cash generation improved. Operating cash flow was $14.6 million in the quarter, up 87.0% from the prior-year quarter, and $19.6 million for the six months, up 17.5%. Capital expenditures were $0.3 million in the quarter. The current portion of deferred revenue stood at $29.1 million at June 30, 2021.
Guidance and deal news framed the quarter. Certara raised its full-year 2021 outlook and said the update excludes the pending Pinnacle 21 acquisition. For the full fiscal year 2021, revenue is guided to $283 million to $289 million, Adjusted EBITDA to $101 million to $103 million, and Adjusted Diluted EPS to $0.21 to $0.25. The prior full-year ranges were $277 million to $285 million, $100 million to $102 million, and $0.20 to $0.24. Fully diluted shares are expected at 153 million to 155 million, and the effective annual tax rate at 40% to 45%. The company agreed to buy Pinnacle 21, a clinical data standardization software provider, for $310 million in cash and stock, with closing expected in early fourth quarter of 2021.
Management pointed to trailing twelve-month bookings growth of 26% as evidence of visibility into the rest of the year. The risks are the familiar ones for this business: competition from scientific software vendors, technology companies and in-house biopharma teams, the pace at which regulators accept model-informed drug development, consolidation and shifts in biopharmaceutical R&D spending, and the work required to integrate acquisitions such as Pinnacle 21. Certara also amended its credit agreement on June 17, 2021, pushing the revolver maturity to August 2025 and the term loan maturity to August 2026 and lifting revolver commitments to $100 million. The balance sheet remains leveraged, and interest costs, deal integration and public-company expenses weigh on GAAP results even as adjusted profit grows.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q2 FY2021 | Q1 FY2021 | QoQ | Q2 FY2020 | YoY |
|---|---|---|---|---|---|
| Revenue | $70.1M | $66.7M | +5.1% | — | — |
| Gross profit | $42.6M | $40.7M | +4.6% | — | — |
| Gross margin | 60.7% | 61.0% | -0.3 pp | — | — |
| Research & development | $4.6M | $4.7M | -1.7% | — | — |
| Sales & marketing | $4.6M | $3.8M | +22.3% | — | — |
| General & administrative | $18.0M | $16.6M | +8.9% | — | — |
| Total operating expenses | $37.3M | $35.1M | +6.3% | — | — |
| Operating income (loss) | $5.3M | $5.6M | -6.2% | — | — |
| Operating margin | 7.5% | 8.4% | -0.9 pp | — | — |
| Net income (loss) | -$2.9M | $1.1M | -371.6% | — | — |
| Net margin | -4.1% | 1.6% | -5.7 pp | — | — |
| Diluted EPS | -$0.02 | $0.01 | -$0.03 | — | — |
| Customers | 2,014 | 2,014 | ±0.0% | — | — |
Risks
Customer retention and expansion depend on renewal rates and new bookings, which the MD&A notes can vary significantly. The quarterly renewal rate was 90% in Q2 2021 versus 96% in Q2 2020, and bookings were $75.1 million in Q2 2021 versus $70.1 million in Q2 2020.
GAAP operating margin fell to 7.5% in Q2 2021 from 22.3% in Q2 2020, down 14.7 percentage points, and net income swung to a loss of $2.9 million in the quarter. The MD&A attributes the loss primarily to a $7.0 million increase in stock-based compensation expense versus the prior-year quarter.
Demand depends on continued regulatory acceptance of biosimulation. A reversal in the trend toward reliance on in silico data, or streamlined approval procedures that make regulatory strategy services less competitive, could reduce demand for products and services.
The biosimulation and technology-enabled services market is competitive and highly fragmented, with competition from larger-resource scientific software providers, CROs, in-house customer development, and open source initiatives such as R and PK-Sim.
The continued spread of COVID-19 and a recession or prolonged period of depressed economic activity could materially and adversely affect the business. The MD&A states that as of June 30, 2021 there have been no material adverse impacts on financial condition, results of operations or cash flows.
SaaS KPIs
All quarters →Renewal Rate
Bookings
Total customers
Adjusted EBITDA
Summary, forecast, risks and KPIs are extracted from Certara, Inc.'s SEC filings for Q2 FY2021 (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.