Summary
Certara posted second quarter fiscal 2023 revenue of $90.5 million, up 9.3% from $82.76 million in the prior-year quarter. The quarter ended June 30, 2023. Software revenue grew 17% and services revenue grew 5%. On a constant currency basis, total revenue grew 10%. The software renewal rate was 93% in the quarter, against 90% in the first quarter of 2023 and 92% in the prior-year quarter. Software led the platform again while services lagged.
Profitability improved far more than the top line. Operating income was $13.04 million, up 214.3% from $4.15 million a year earlier, and operating margin rose to 14.4% from 5.0%. Net income was $4.71 million, compared with a net loss of $0.59 million in the prior-year quarter, so the company swung to a profit. Diluted earnings per share was $0.03 against $0.00. Non-GAAP results followed the same path with smaller swings. Adjusted EBITDA was $32.4 million, up 16%, adjusted net income was $18.4 million, up 26%, and adjusted diluted earnings per share was $0.12 versus $0.09. The gap between GAAP and adjusted profit comes largely from equity-based compensation and amortization of acquisition-related intangibles.
Interest expense rose 46% as higher market rates hit the floating-rate term loan, although interest income also climbed. Foreign currency remeasurement losses widened. The effective income tax rate was 44% for the quarter. Cash generation cooled. Operating cash flow was $18.06 million, down 22.4% from $23.26 million a year earlier, and $28.02 million for the first six months, down 15.3% from $33.06 million. Management tied the six-month decline to more cash tied up in prepaid and other assets, lower deferred revenue receipts and lower cash-based net income, partly offset by better collection of receivables. Capital expenditures were $0.27 million in the quarter, down 23.2%, and $0.59 million year to date, down 31.5%. Deferred revenue was $54.84 million at June 30, 2023.
Bookings pointed to the same split in demand. Software bookings grew 17% while services bookings declined, and management described softer spending among smaller biotech customers and a slow recovery in the regulatory business. Full year fiscal 2023 guidance came down. For the full year, Certara now expects revenue of $345 million to $360 million, adjusted EBITDA of $120 million to $128 million, adjusted diluted earnings per share of $0.44 to $0.48, and fully diluted shares of 159 million to 162 million. The reset reflects services softness rather than any crack in software.
First-half results still ran ahead of the prior year on most lines. Revenue was $180.75 million, up 10.0%. Operating income was $20.48 million, up 99.2%. Net income was $6.06 million, up 274.1%, and diluted earnings per share was $0.04 versus $0.01. Operating margin was 11.3% against 6.3%. The list of risks is familiar. Smaller biotech customers may keep spending cautiously. Services bookings declined. Foreign exchange swings and higher interest costs on $296.0 million of term loan borrowings weigh on results. Competition comes from in-house development and open source software. Certara also closed the purchase of Drug Interaction Solutions from the University of Washington for about $8.3 million in June 2023 and carries a Vyasa contingent consideration liability remeasured to $22.4 million.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q2 FY2023 | Q1 FY2023 | QoQ | Q2 FY2022 | YoY |
|---|---|---|---|---|---|
| Revenue | $90.5M | $90.3M | +0.2% | $82.8M | +9.3% |
| Gross profit | $54.2M | $55.4M | -2.2% | $47.6M | +14.0% |
| Gross margin | 60.0% | 61.4% | -1.4 pp | 57.5% | +2.5 pp |
| Research & development | $7.9M | $9.3M | -15.1% | $7.7M | +1.9% |
| Sales & marketing | $8.1M | $8.0M | +1.4% | $7.1M | +13.9% |
| General & administrative | $14.2M | $19.8M | -28.0% | $17.8M | -19.9% |
| Total operating expenses | $41.2M | $48.0M | -14.2% | $43.4M | -5.1% |
| Operating income (loss) | $13.0M | $7.4M | +75.3% | $4.1M | +214.3% |
| Operating margin | 14.4% | 8.2% | +6.2 pp | 5.0% | +9.4 pp |
| Net income (loss) | $4.7M | $1.4M | +246.5% | -$589.0K | +899.0% |
| Net margin | 5.2% | 1.5% | +3.7 pp | -0.7% | +5.9 pp |
| Diluted EPS | $0.03 | $0.01 | +$0.02 | $0.00 | +$0.03 |
| Customers | 2,014 | 2,014 | ±0.0% | 2,014 | ±0.0% |
Risks
New risk factor highlights that adverse developments in the financial services industry, including liquidity concerns or bank failures like Silicon Valley Bank, could impair access to cash and investments. The company maintains substantially all cash and cash equivalents in accounts with U.S. and multi-national financial institutions and deposits exceed insured limits, so any bank failure could cause loss of funds and delay customer payments.
MD&A states uncertain macroeconomic conditions, including higher inflation, rising interest rates, instability in the financial system, geopolitical conflicts, and residual effects of COVID-19, may pose challenges, though management believes impacts would be transitory.
Interest expense increased 46% to $5.7 million for the three months ended June 30, 2023 and 57% to $11.1 million for the six months ended June 30, 2023, primarily due to higher market interest rates on the term loan floating rate debt. The company also adopted SOFR to replace LIBOR in June 2023.
MD&A notes bookings vary significantly from quarter to quarter and from year to year. Q2 2023 bookings were $85.9 million compared with $100.3 million in Q2 2022, while Q1 2023 bookings were $112.7 million compared with $108.5 million in Q1 2022.
MD&A states changes in government or regulatory policy, or a reversal in the trend toward increasing acceptance of in silico data in drug approval, could decrease demand for products and services; relaxation of regulatory requirements or expedited approval procedures could reduce demand for regulatory services.
Summary, forecast, risks and KPIs are extracted from Certara, Inc.'s SEC filings for Q2 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.