Summary
Certara closed fiscal 2022 with fourth quarter revenue of $86.6 million, up 15.0% from $75.3 million in the fourth quarter of 2021. Constant currency growth was 18%, and management attributed part of the reported gap to the negative impact of foreign currency exchange rates. Profitability improved much faster than sales. Operating income rose to $11.4 million from $3.4 million, and operating margin was 13.1% for the quarter against 4.6% a year earlier. Net income of $9.2 million replaced a net loss of $9.7 million.
The full year followed the same shape. Revenue was $335.6 million, up 17.3% from $286.1 million in 2021. Operating income rose 139.5% to $32.5 million from $13.6 million, and full year operating margin was 9.7% versus 4.7%. Net income of $14.7 million compared with a net loss of $13.3 million, and diluted earnings per share for the year was $0.09 against $(0.09). Software revenue grew 33% for the year while services revenue grew 10%, and the 10-K ties part of the mix to acquisitions and to a decline in regulatory and access revenue. On the non-GAAP side, fourth quarter adjusted EBITDA was $31.9 million, up 13% from $28.2 million, and full year adjusted EBITDA was $120.2 million, up 16% from $103.7 million. Adjusted net income was $25.2 million in the quarter against $9.8 million a year earlier, and adjusted diluted earnings per share was $0.16 versus $0.06. For the full year, adjusted diluted earnings per share was $0.46 against $0.34.
Cash generation was the standout. Operating cash flow was $35.5 million in the fourth quarter, up 70.3% from $20.8 million, and $92.5 million for the full year, up 53.2% from $60.4 million. Capital expenditures stayed small at $1.43 million for the year, up 25.1% from $1.14 million, which fits an asset-light software and services model. Deferred revenue was $55.0 million at December 31, 2022, up 17.0% from $47.0 million a year earlier, and remaining performance obligations were $335.6 million, up 17.3% from $286.1 million.
Demand signals were mixed. Fourth quarter bookings were $120.4 million, and full year bookings reached $409.0 million against $341.7 million in 2021. Bookings can swing widely from period to period, and the company says they depend on the health of the biopharmaceutical industry, regulatory developments, consolidation and sales execution. Management tracks bookings and renewal rates as its two key indicators of customer retention and expansion. The client base now runs to more than 2,300 clients across 70 countries, including 39 of the top 40 biopharmaceutical companies by research and development spending in 2021.
Certara spent December reshaping its shareholder and technology base. The company closed the Vyasa Analytics acquisition on December 28, 2022 for total estimated consideration of $29.3 million, which includes contingent consideration carried at an estimated fair value of $19.8 million; payouts tied to revenue thresholds for 2023, 2024 and 2025 could range from $0 to $60 million. Days earlier, Arsenal bought 29,954,521 shares from EQT at $15.00 per share, agreed not to transfer them before December 8, 2024, and received conditional rights to nominate up to two directors. The company also completed a secondary offering in August 2022 in which selling stockholders sold 7,000,000 shares and Certara received no proceeds.
Guidance for the full year 2023 puts the top line at $370 million to $385 million, adjusted EBITDA at $131 million to $137 million, and adjusted diluted earnings per share at $0.50 to $0.55 on 159 million to 162 million fully diluted shares. The company has not reconciled those forward adjusted figures to GAAP, citing the variability of acquisition, financing and stock compensation costs.
Risks have not gone away. Currency movements reduced reported revenue in 2022, and the 10-K flags a drop in regulatory and access revenue. New COVID-19 variants slowed clinical trial closeouts and delayed regulatory services projects. Competition is fragmented, from in-house teams at biopharma companies to contract research organizations and open source tools such as R and PK-Sim. The term loan balance of $297.5 million carries floating rate interest, which makes the interest line sensitive to rate moves, and the credit agreement carries financial and nonfinancial covenants the company must keep. Management did report that its fourth quarter goodwill impairment assessment produced no impairment.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q4 FY2022 | Q3 FY2022 | QoQ | Q4 FY2021 | YoY |
|---|---|---|---|---|---|
| Revenue | $86.6M | $84.7M | +2.3% | $75.3M | +15.0% |
| Gross profit | $54.9M | $51.9M | +5.7% | $46.1M | +19.1% |
| Gross margin | 63.3% | 61.3% | +2.1 pp | 61.1% | +2.2 pp |
| Research & development | $6.6M | $6.3M | +4.4% | $6.5M | +1.2% |
| Sales & marketing | $7.8M | $6.4M | +22.3% | $6.7M | +16.1% |
| General & administrative | $18.3M | $17.3M | +5.8% | $18.7M | -2.2% |
| Total operating expenses | $43.5M | $41.0M | +6.0% | $42.6M | +2.0% |
| Operating income (loss) | $11.4M | $10.9M | +4.8% | $3.4M | +230.6% |
| Operating margin | 13.1% | 12.8% | +0.3 pp | 4.6% | +8.6 pp |
| Net income (loss) | $9.2M | $3.9M | +133.1% | -$9.7M | +194.6% |
| Net margin | 10.6% | 4.7% | +5.9 pp | -12.9% | +23.5 pp |
| Diluted EPS | $0.06 | $0.02 | +$0.04 | -$0.06 | +$0.12 |
| Customers | 2,014 | 2,014 | ±0.0% | 2,014 | ±0.0% |
Risks
Deceleration in or resistance to model-informed biopharmaceutical discovery and development by regulatory authorities or academic institutions could reduce demand. MD&A states support from regulators such as the FDA and EMA has been critical to adoption, and a reversal in reliance on in silico data could decrease demand for products and services.
Changes or delays in government regulation relating to the biopharmaceutical industry could decrease the need for regulatory services. MD&A warns that relaxation of regulatory requirements or streamlined approval procedures could eliminate or substantially reduce demand for regulatory strategy services.
Renewal rates and customer retention are critical. MD&A reports renewal rate decreased to 88% in Q4 2022 from 96% in Q4 2021, and full-year renewal rate was 91% in 2022 versus 92% in 2021. Existing customers have no obligation to renew and may renew at lower prices.
A significant percentage of revenues comes from a concentrated group of customers, and the loss of more than one major customer could materially adversely affect results. MD&A states the platform was used by 39 of the top 40 biopharmaceutical companies by R&D spend in 2021, increasing exposure to large-customer losses.
Reduction in customer R&D spending due to economic, competitive, regulatory, demand or funding pressures could reduce demand. MD&A notes revenues depend on customers' R&D expenditures and their ability to raise capital on acceptable terms.
Bookings may not accurately predict future revenue and may not be realized. MD&A states bookings have varied and will continue to vary significantly; full-year bookings were $409.0 million in 2022 versus $341.7 million in 2021, while Q4 2022 bookings were $120.4 million versus $112.4 million in Q4 2021.
Dependence on key personnel and specialized scientific talent is acute. As of December 31, 2022, 380 employees held PhDs, and the risk factor notes wage inflation and competition for qualified personnel could impair retention, recruitment and growth.
The recently acquired Vyasa Analytics AI-powered deep learning platform must be integrated into existing software products. Risk factors state integration may be delayed or may not achieve sufficient market acceptance to justify price increases, and contingent consideration with a $19.8 million fair value depends on eligible revenue thresholds for 2023 through 2025.
Certara competes in a competitive and highly fragmented biosimulation market against scientific software providers, technology companies, in-house development, open source solutions such as R and PK-Sim, academic and government institutions, and contract research organizations. MD&A repeats this competitive landscape.
As customers increase utilization, procurement departments may demand discounts, rebates, price freezes or less favorable payment terms, adversely affecting profitability. MD&A also notes smaller biotechnology companies and customers in less developed economies may not afford customary rates.
Many technology-driven service contracts can be terminated immediately or after short notice without penalty, and fixed-fee contracts expose Certara to underpricing or cost overruns. MD&A notes contract delays, terminations and scope reductions occur regularly in the normal course of business.
MD&A states new COVID-19 variants caused a slowdown in closing out clinical trials and delays in regulatory services projects as of December 31, 2022. Risk factors note the pandemic could cause customers to delay or cancel projects and limit their use of third parties.
Global operations expose Certara to foreign currency and geopolitical risk; 26% of 2022 revenues were transacted in foreign currencies versus 29% in 2021. Risk factors note the Russia-Ukraine conflict could affect operations in Poland and use of consultants in the region.
Recent growth rates may not be sustainable or indicative of future growth. Revenue increased from $286.1 million in 2021 to $335.6 million in 2022, but the risk factor states historical growth may not continue and failure to sustain growth could adversely affect margins and profitability.
SaaS KPIs
All quarters →Summary, forecast, risks and KPIs are extracted from Certara, Inc.'s SEC filings for Q4 FY2022 (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.