Certara, Inc. Q3 FY2025 earnings

Certara's third quarter of fiscal 2025 showed top-line growth and a swing to profitability. Revenue rose 10.3% to $104.6 million. Total revenue grew 10% on a reported basis and on a constant currency basis. Operating income was $3.0 million, up 15.8%. Net income was $1.5 million, a swing from a prior-year quarter loss. Diluted earnings per share was $0.01, also a swing to a profit. Operating margin was 2.9%, up 0.1 percentage points. On a non-GAAP basis, adjusted EBITDA was $35.2 million, up from $33.1 million. Adjusted net income was $22.2 million, up from $20.3 million. Adjusted diluted earnings per share was $0.14, compared with $0.13. Adjusted EBITDA grew 7% year over year.

The quarter's growth came with mixed demand signals. Total bookings were $96.6 million, up 1% year over year. Software bookings were $40.8 million, up 17%, while services bookings were $55.8 million, down 9%. Net retention rate was 103.9%, down from 107.6% in the prior-year quarter. Certara attributed software bookings strength to core biosimulation software and Chemaxon, which contributed $4.5 million of bookings. The services bookings decline was mainly due to softer trends among tier-one customers, predominantly in the Regulatory services business. Management also noted spending hesitancy in other parts of the services business. That hesitancy is a key risk for the near term, especially if it continues.

Management pointed to higher employee-related costs, stock-based compensation, and equipment and software expenses. Those increases were partially offset by higher capitalized research and development costs and lower facility and lease related expense. Despite the cost pressure, the company delivered positive GAAP operating income and net income. Operating cash flow was $32.3 million in the quarter, up 90.2%. Year to date, operating cash flow was $67.5 million, up 117.1%. Capital expenditures were $0.22 million in the quarter, up 34.8%. Year to date, capital expenditures were $0.76 million, down 37.4%. Deferred revenue was $65.9 million, up 8.9%. Remaining performance obligations were $147.6 million, up 19.6%.

For the first nine months of fiscal 2025, revenue was $315.2 million, up 10.7%. Operating income was $20.2 million, up 360.9% and a swing to a profit. Net income was $4.3 million, up 123.1% and a swing to a profit. Diluted earnings per share was $0.03, up 125.0% and a swing to a profit. Operating margin was 6.4%, up 9.1 percentage points. These results benefited from revenue growth and lower operating expenses year to date. The company said the increase in net income was primarily due to higher revenue, tax benefits, and net other income, partially offset by higher operating expenses. The company also completed the Chemaxon acquisition in October 2024, which contributed to the year-over-year comparisons.

Certara updated its full-year 2025 guidance. The company narrowed revenue guidance to a range of $415 million to $420 million. It raised profitability targets. Full-year adjusted EBITDA margin is expected to be approximately 32%. Full-year adjusted diluted earnings per share is expected to be $0.45 to $0.47. Management said it is investing in R&D and commercial efforts to support long-term growth, including the recent launch of CertaraIQ for QSP modeling. The company has not reconciled forward-looking adjusted EBITDA margin or adjusted diluted earnings per share to the most directly comparable GAAP measures because it cannot do so without unreasonable effort.

Risks remain. The services business faces softer tier-one customer spending, especially in Regulatory services. Services bookings fell 9% in the quarter. A U.S. federal government shutdown that began October 1, 2025 could disrupt regulatory agencies, including the FDA and SEC. The company said it has not experienced material impacts but continues to monitor the situation. A prolonged shutdown could delay regulatory reviews, approvals, or filings. The company also said a prolonged shutdown could increase uncertainty in the overall economic environment and adversely impact business operations across multiple industries, including the pharmaceutical industry. Other risks include regulatory changes, competition, macroeconomic uncertainty, and the strategic review of the regulatory services business. Certara also completed the Chemaxon acquisition in October 2024, and integration remains a factor.