Summary
Certara's fiscal 2023 third quarter carried a large non-cash charge that overwhelmed an otherwise flat top line. Revenue was $85.6 million for the quarter, up 1% from $84.7 million in the prior-year quarter. Growth came from biosimulation software and technology-driven services and was partly offset by a decline in regulatory revenue. On a constant currency basis, revenue was relatively flat against the prior-year quarter. Bookings recovered to $84.8 million from $79.8 million a year earlier, and management pointed to a broad-based recovery in services bookings plus a strong software pipeline.
The operating line swung hard. Operating loss was $52.78 million for the quarter, compared with operating income of $10.86 million in the prior-year quarter, and the operating margin fell to -61.7% from 12.8%. Most of the damage was non-cash. A $47.0 million goodwill impairment on the legacy Regulatory reporting unit, an $8.8 million change in the fair value of contingent consideration and $1.6 million of lease abandonment expense all landed in the period. Net loss was $48.96 million, against net income of $3.94 million in the prior-year quarter. Diluted loss per share was $0.31, compared with diluted earnings per share of $0.02.
Non-GAAP results held up better. Adjusted EBITDA was $28.8 million, down $3.9 million from $32.7 million a year earlier. Adjusted net income was $17.1 million versus $16.6 million, and adjusted diluted earnings per share was $0.11 versus $0.10. Cash generation improved. Operating cash flow was $31.41 million for the quarter, up 30.9% from $24.0 million in the prior-year quarter. Capital expenditures were $0.31 million, down 20.3% from $0.39 million. Total deferred revenue was $49.22 million.
Year to date the pattern repeats with less extreme optics. Revenue was $266.33 million, up 7% from the prior-year period. Net loss was $42.90 million against net income of $5.56 million, and diluted loss per share was $0.27 versus diluted earnings per share of $0.03. Operating loss year to date was $32.31 million, against operating income of $21.14 million, and the year-to-date operating margin was -12.1% compared with 8.5%. Operating cash flow for the nine months was $59.43 million, up 4.2%, while capital expenditures fell 28.0% to $0.90 million.
Guidance was reiterated for the full year 2023, not the next quarter: 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 company also reiterated its previously reported full-year revenue outlook. The renewal rate slipped to 86% from 93% in the prior-year quarter, a metric worth watching because it tracks software customers renewing licenses at the end of the period. The risk list is familiar: continued weakness in regulatory services, competition from contract research organizations and open source tools, reliance on biopharmaceutical research and development budgets, and macroeconomic pressure from inflation, interest rates and currency moves. The balance sheet carries $295.2 million of term loan borrowings, $100.0 million of revolving credit availability and $12.7 million of future lease obligations.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q3 FY2023 | Q2 FY2023 | QoQ | Q3 FY2022 | YoY |
|---|---|---|---|---|---|
| Revenue | $85.6M | $90.5M | -5.4% | $84.7M | +1.0% |
| Gross profit | $49.7M | $54.2M | -8.3% | $51.9M | -4.2% |
| Gross margin | 58.1% | 60.0% | -1.9 pp | 61.3% | -3.2 pp |
| Research & development | $9.0M | $7.9M | +13.8% | $6.3M | +42.1% |
| Sales & marketing | $7.2M | $8.1M | -10.8% | $6.4M | +13.5% |
| General & administrative | $27.8M | $14.2M | +94.9% | $17.3M | +60.2% |
| Total operating expenses | $102.5M | $41.2M | +148.8% | $41.0M | +149.8% |
| Operating income (loss) | -$52.8M | $13.0M | -504.8% | $10.9M | -586.1% |
| Operating margin | -61.7% | 14.4% | -76.1 pp | 12.8% | -74.5 pp |
| Net income (loss) | -$49.0M | $4.7M | -1140.5% | $3.9M | -1344.0% |
| Net margin | -57.2% | 5.2% | -62.4 pp | 4.7% | -61.9 pp |
| Diluted EPS | -$0.31 | $0.03 | -$0.34 | $0.02 | -$0.33 |
| Customers | 2,014 | 2,014 | ±0.0% | 2,014 | ±0.0% |
Risks
New risk factor this filing warns that adverse developments in the financial services industry could impair access to cash, cash equivalents, 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; customer payment delays from similar liquidity issues could also hurt operations.
MD&A reports a $47.0 million goodwill impairment expense for the three and nine months ended September 30, 2023 for the legacy Regulatory and Writing reporting unit because carrying value exceeded fair value, versus no goodwill impairment in the prior-year periods. This contributed to a GAAP net loss of $49.0 million for FY2023 Q3 and $42.9 million year to date.
The MD&A key performance indicators show the renewal rate declined to 86% in Q3 2023 from 93% in Q3 2022. Bookings also vary significantly with biopharmaceutical industry health, regulatory developments, industry consolidation, and sales performance, which could pressure future revenue.
MD&A says demand for biosimulation depends on regulatory acceptance of in silico data; changes in government or regulatory policy, a reversal in the trend toward increasing acceptance, or relaxation of regulatory requirements could reduce demand for its products and regulatory services.
MD&A reports interest expense increased 13% to $5.9 million for Q3 2023 and 38% to $17.0 million for the nine months ended September 30, 2023 versus prior-year periods, primarily from higher market interest rates on floating-rate term loan debt.
MD&A reports an $8.8 million increase in general and administrative expense from the change in fair value of contingent consideration for Q3 2023 and an $11.3 million increase year to date, with Vyasa contingent consideration remeasured to $31.5 million at September 30, 2023. This creates earnings volatility.
SaaS KPIs
All quarters →Renewal Rate
Bookings
Total clients
Summary, forecast, risks and KPIs are extracted from Certara, Inc.'s SEC filings for Q3 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.