Q4 2020 Certara Inc Earnings Call
Ladies and gentlemen, and thank you for standing by and welcome to the surcharge on fourth quarter 2000, and 'twenty earnings Conference call. At this time all participants are in a listen only mode. After the speaker presentation and there'll be a question and answer session to ask a question. During the session you will need to press star one on your telephone please be advised that today's conference maybe recorded.
You require any further assistance. Please press star zero and I would now like to turn the conference over to your Speaker today, David <unk> Investor Relations. Please go ahead Sir.
Good afternoon, everyone. Thank you for participating in today's conference call.
On the call feature Tara, we Havent William theory, Chief Executive Officer, and Andrew <unk>, Chief Financial Officer.
Earlier today, <unk> released financial results for the quarter and year end and at December 31, 2020.
A copy of the press release, along with a supplementary presentation is available on the company's IR website.
Before we begin I'd like to remind you that management will make statements. During this call that include forward looking statements within the meaning of the federal Securities laws, which are made pursuant to the safe Harbor provisions on the.
Private Securities Litigation Reform Act of 1995.
Any statements contained in this call that relate to expectations or predictions of future events results or performance are forward looking statements.
Be aware that these statements should be considered estimates on me and are not a guarantee of future performance and.
Actual results may differ materially from those expressed or implied and the forward looking statements due to a variety of factors.
For a list and description of the risks and uncertainties associated with certain <unk> business. Please refer to the risk factors section of our prospectus filed with the Securities and Exchange Commission on subs.
And on December 14th 2020.
Also in their remarks or responses to questions.
Management may mention non-GAAP financial measures.
Reconciliations.
Certain non-GAAP financial measures such as adjusted EBITDA, adjusted net income and adjust.
And EPS to the most directly comparable GAAP measures are available in today's earnings release, and the appendix to the supporting presentation.
Both of which are posted on the company's IR website.
This conference call contains time sensitive information and is accurate only as of the life broadcast today March 4th 2021, surcharge disclaims any intention or obligation except as required by law to update or revise any financial projections or forward looking statements, whether because of new information future events or otherwise.
And with that I will turn the call over to William.
Thank you David Good afternoon, everyone and thank you for joining <unk> fourth quarter earnings call.
Andrew and I will start with prepared remarks, and then we will take questions.
On December 11, 2020, we successfully completed our IPO and listed on the NASDAQ, we raised $768 $5 million and gross IPO proceeds, including $316 $3 million and net proceeds for the company.
And we have officer, Tara I would like to thank everyone, who is involved with the IPO.
With the investment community support we are now better positioned to deliver on our mission to accelerate the drug development process with our Biosimilars and software and tech enabled services.
We're also pleased to note the sitar will be joining the Russell 1000 index effective March 19.
And 2020, so Tara had another strong year on financial performance with 17% year over year revenue growth, including record revenue and the fourth quarter, which grew 20% over the same quarter in the previous year.
We were also very pleased with our growth and profitability. Our 2020, adjusted EBITDA increased by 28% for the full year and by 36% in the fourth quarter.
Full year 2020 bookings grew 11% and we had solid bookings and the fourth quarter with 21% growth.
And while it was child challenging to recruit during the pandemic, we grew our employee base by 8%, surpassing 900 employees and 2020.
So tarek is a global leader and Biosimilars.
Well I have stimulation is a powerful and proven technology that uses computer models to simulate and predict how a drug effects the body and how the body affects the drug.
So taras customers worldwide use our bias stimulation software and expertise to conduct computer based trials using virtual patients.
By doing this they can answer critical questions that save significant time and money, while also advancing drug safety and efficacy.
Additionally, surcharge by a simulation software is used by 17 global regulatory agencies to advance to evaluate regulatory submissions.
Including 12 divisions of the FDA.
And 2020, there was no better example of Biosimilar <unk> impact and the global effort to develop therapeutics and vaccines for COVID-19.
When many in the biopharmaceutical industry pivoted to fighting COVID-19, and they chose to partner with us on more than 30 programs.
We believe that the pace of development of many COVID-19 programs would not have been possible without the use of biosimilars and we couldnt be prouder or more passionate about contributing to this global effort against the pandemic. It's.
It is important to note, though that Covid was only one of the many therapeutic areas. So Tara worked on in 2020 with significant amounts of work in areas like oncology and rare diseases.
So Tara offers and differentiated end to end platform, which is powered by buyers simulation and integrate technology enabled services and our platform stands the entire R&D continuum from drug discovery through regulatory science and market access.
Key to our platform, our surcharge, leaving scientists and experts who not only partner closely with our customers, but also make important contributions to advancing the science and technology of Biosimilars.
Of our more than 900 employees, one third have doctorate degrees and in 2020, they collectively published more than 100 scientific manuscripts to help advance the biosimilars and field.
The technology enabled services. These scientists provide significantly increase the adoption of Biosimilars <unk> due to the capability of our group and the fact that the number of bio stimulant and projects at <unk> and of course of a year is likely larger and even the largest pharma companies work on.
Furthermore, as the biotechnology industry grows rapidly so does the demand for our technology enabled services because biotech companies may not always have the need or the ability to hire scientists with our extensive buyer simulation expertise.
And regulatory science, we deliver writing and operations support to advance our customers' global regulatory submissions, often and incorporating results from bio stimulant and analysis.
We have best in class technology, and global regulatory experts to improve efficiency and quality and expert lead navigate regulatory pathways.
Furthermore, we provide market access solutions, which are underpinned by advanced analytics.
And market access we help our customers understand the real world impact of therapies, and compute and communicate this effectively to payers and health authorities.
We are proud to say that since 2014 to this past year customers have used sitars bias simulation software and tech enabled services have received more than 90% of new drugs and biologics approvals by the FDA.
As we are known to be the industry standard for Biosimilar <unk> and at the forefront of innovation, we continue to gain new customers. We ended the year with more than 650 customers worldwide.
We also expanded our customers' adoption of surcharge and to end platform by selling more licenses by cross selling and by introducing new solutions.
In 2020, we had 53 customers with an annual customer value greater than $1 million growing 20% year over year.
Additionally, we had 261 customers with an annual customer value greater than $100000, which was a 14% growth year over year.
And so the needs of our customers drive our passion for innovation.
As an example, we partnered with many of the leading global biopharmaceutical companies to introduce a new version of our <unk> simulator and 2022 advanced safer and more efficient clinical studies we.
We developed additional models for testing drugs with virtual patients and complex populations such as pregnant women.
We also invested and new features to improve drug delivery and drug formulation.
As of the end of 2020 assumes hip simulator has informed approximately 250 label claims for more than 75 FDA approved novel drugs.
And <unk> expands we are focused on penetrating new markets and.
And the fourth quarter, we opened our new office and Shanghai, China's epicenter for biopharmaceutical R&D.
And 2020, our revenue from China and more than doubled.
We also recently renewed our centre of excellence partnership with Peking Union Medical College Hospital, one of the most selective medical colleges and China.
They use our Phoenix platform to train their emerging scientists.
We are enthusiastic about our direct presence in China. So that we can fully support our rapidly growing customer base there.
In addition to organic growth <unk> completed the acquisition of in silicone Biosciences modeling and simulation platform for neuro degenerative diseases in 2020.
And 2021 were actively looking for the right technology people and capabilities to increase the depth and breadth of our and platform.
Our most recent acquisition just a few days ago is author a regulatory and bias statistics services firm based in Europe.
When we discuss our M&A strategy, it's important to reflect on <unk> demonstrated history of executing a disciplined acquisition process or.
Our focus on technology and capabilities to help our customers has been deliberate shareholder value creation, we will continue to be the top priority etc.
In summary.
2020 was another solid and exciting year for <unk> and we're enthusiastic about the companys prospects over the coming year and beyond.
I will now turn it over to our CFO, Andrew <unk> to discuss our financial results and provide guidance for 2021.
Thanks, William Hello, everyone.
First we will go through the fourth quarter results, followed by the full year results and I will finish the prepared remarks with the guidance for the full year 2021.
As William mentioned earlier, the fourth quarter was a record quarter for us Vitaros.
Total revenue for the three months ended December 31, 2020, with $64 6 million representing year over year growth of 20%.
Software revenue was $17 5 million, which increased 4% over the prior year period.
We saw 12% growth and revenue from subscription and software, but its rytary and migrate certain products from license to subscription. This growth was offset by lower software maintenance and timing of software license revenue recognition.
Notwithstanding the software maintenance and timing software revenues grew consistent with historical levels.
Services revenue was $47 1 million, which increased 27% over the prior year period.
The growth and services revenue reflects the trend of increased adoption of our end to end platform from both our installed base of customers and new logos.
I will provide the full year net revenue repeat rate on services later in the discussion.
In addition to revenue we also monitor two key performance indicators to evaluate retention and expansion new bookings and aggregate renewal rates.
Software bookings were $21 million, which decreased 3% from the prior year period due to several large renewals booked early during the third quarter.
I'll mention here that bookings can vary from quarter to quarter dependent in part on the timing of signing larger renewal contracts.
Software aggregate renewal rate was 89% as compared to 95% and the fourth quarter of 2019.
The renewal rate, which is revenue based was negatively impacted by approximately approximately 200 basis points due to the increased mix of subscription revenues.
Services bookings were $63 3 million and increase of 32% from the fourth quarter of 2019.
I categorized on the growth in this area is broad base, but it is important to note that the demand was particularly strong for Biosimilars and solutions.
Before I discuss the details on expenses I'd like to make the general point that as a result of the IPO, we incurred 62 million of stock based compensation expense and the fourth quarter, which accounts for the majority of the increase in expenses during the quarter and for the year.
Total cost of revenues were $34 9 million and increase from 22 million and the fourth quarter of 2019, primarily due to an increase of $8 5 billion and stock based compensation as well as increased billable head count and performance based compensation.
Total operating expenses were $83 3 million and increased from 27 9 million and the fourth quarter of 2019.
The increase was primarily due to a $53 1 million increase and stock based compensation expenses.
Operating expenses also included a $1 4 million increase from.
And from transaction related costs.
The components of operating expenses are as follows.
Sales and marketing expenses were $10 4 million compared to $2 8 million for the fourth quarter of 2019.
The increase was primarily due to a $7 3 million increase and stock based compensation expenses.
R&D expenses were $10 5 million compared to 3 million from the fourth quarter of 2019 the.
The increase was primarily due to a $6 9 million increase and stock based compensation expenses.
G&A expenses were $52 4 million compared to $12 3 million from the fourth quarter of 2019.
The increase was primarily due to a $38 7 million increase and stock based compensation expenses.
Intangible asset amortization was $9 4 million from the fourth quarter and depreciation and amortization expense was <unk>.
$6 million during the quarter.
Continuing down the P&L interest expense during the fourth quarter was $5 5 million, which reflects about $1 6 million related to our holdco term loan, which we repaid and its entirety late in December with proceeds from our IPO.
Our effective tax rate was nine 1% from the fourth quarter.
Given the complexities here I will revisit this later during the discussion of the full year results, including a discussion of our cash tax rate.
Net loss for the fourth quarter was $54 4 million and increased from 6 billion and the fourth quarter of 2019.
The increase was the result of a $61 4 million increase and stock based compensation expense offset by an income tax benefit of $5 5 million.
Net loss per share was <unk> 40, compared to <unk> for the fourth quarter of 2019.
<unk> EBITDA was $22 2 million compared to $16 3 million and the fourth quarter of 2019. Adjusted net income was $11 8 million as compared to an adjusted net loss of $3 7 million for the fourth quarter of 2019.
Adjusted EPS was <unk> <unk> compared to a loss of <unk> <unk> for 2019.
Overall, we're pleased with the company's performance and improved level of profitability on a year over year basis.
Turning to the full year results total revenue for the full year ended December 31, 2020 was $243 5 million, representing 17% growth over 2019.
Software revenue was $73 5 million, which increased 7% over the prior year period, due to 10% growth and software license revenue and 8% growth and subscription revenue, partially offset by a decline and software and maintenance revenue.
In addition, our previously known runoff contract relating to an acquisition in 2017 expired in 2020 affecting the comparison against 2019.
Overall, we are pleased with this performance given that the organic growth rate was 11% when factoring out the run off contracts.
Services revenue was $170 1 million, which increased 21% over the prior year period and the growth was attributable to both expansion within our existing base of customers and new logos.
The expansion and impact of new clients is evident and the ACD metrics that William discussed earlier as well as and the 116% net revenue repeat rate for the year.
On the performance metrics software bookings were $73 3 million, which increased 9% from 2019.
Software aggregate renewal rate was 90% for the full year 2020, as compared to 93% for 2019.
We achieved our goal of 90% plus aggregate renewal rates. Despite the previously mentioned runoff contracts.
The full year net retention rate for software was 105%.
Services bookings for 2020 were $215 million and increase of 12% from 2019.
As a reminder, the majority of our bookings result, and revenues that will be recognized within a forward 12 month period and and the second quarter of 2019, we recorded a large multiyear bookings that impacts the comparison year over year.
The overall result of the strong bookings performance for both software and services is that we have high visibility going into 2021.
The visibility is at a level consistent with prior years and supports our financial guidance, which I will discuss shortly.
Total cost of revenues were $100 8 million and increased from $79 8 million from the full year of 2019.
Due to increased billable head count and.
And and $8 6 million increase and stock based compensation expense.
Total operating expenses were $167 2 million and.
And increase from $109 1.002 million 19, primarily due to increases of $54 million and stock based compensation expense from.
$8 million of employee related costs, and $1 9 million of transaction related costs.
The components of operating expenses are as follows sales.
Sales and marketing expenses were $19 2 million compared to $10 7 million from 2019.
The increase was primarily due to a $7 3 million increase and stock based compensation expenses.
R&D expenses were $19 6 million compared to $11 6 billion for 2019 the increase.
And was primarily due to a $7 million increase and stock based compensation expenses.
G&A expenses for the year were $88 5 million compared to $47 9 million for 2019 again, the increase was primarily due to an increase of $39 8 million and stock based compensation expenses.
Intangible asset amortization was $37 4 million and depreciation expense was $2 4 million during the year.
Continuing down the P&L interest expense was $25 3 million, which reflects about $7 6 million related to our holdco term loans, which we repaid and its entirety late in December using proceeds from our IPO.
Our effective tax rate was a benefit of one 6% for 2020.
Our cash tax rate was 33% from 2020.
The difference between the cash and effective tax rate is driven by the impact of net operating loss and tax credit carryforwards valuation allowance and other components of deferred tax expense that are excluded from the calculation of cash taxes.
Net loss for the full year of 2020 was $49 4 million and.
And increase from from $8 9 million and the full year of 2019, primarily driven by the increase and stock based compensation expense.
Net loss per share for the full year 2020 was 37.
Compared to seven for the full year of 2019.
Adjusted EBITDA was $87 9 million compared to $68 4 million for 2019, representing 28% growth.
Adjusted net income was $22 million compared to <unk> 8 million for 2019.
Adjusted EPS was <unk> 17, compared to <unk> for 2019.
Now moving to the balance sheet, we ended the year with $271 4 million of cash and cash cash equivalents. Our total debt outstanding was $298 8 million. After the voluntary repayment of $80 million of our long term debt and the fourth quarter with a portion of the proceeds from our IPO.
The current debt structure does not include any significant maturity until 2024.
Now turning to our full year outlook for 2021, the following our exit expectations.
Revenue to be and the range of 272 million to $285 million, representing 12% to 17% growth.
Adjusted EBITDA to be and the range of <unk> 98 to 102 million adjusted EPS to be and the range of 20 to 24 per share the cash tax rate to be and the range of 25% to 30% the effective tax rate to be between 45% and 50% and finally fully diluted shares to range between 150.
And $3 million and 155 million at year end.
Now I'll turn it back to our Chief Executive Officer William theory.
Thank you Andrew and summary, 2020 was a very strong year for saqqara challenging environment.
<unk> team continues to focus on our commitments to customers and deliver strong growth for our shareholders. Despite the COVID-19 pandemic.
We believe that are and to end platform is well positioned to continue benefiting from solid market trends.
We expect to capture a larger share of overall biopharmaceutical R&D spend as we continue to innovate acquire and add new solutions to our end to end platform.
At this point we.
We will open up the call for questions.
Operator can you please open up the line.
Thank you as a reminder to ask a question Chris Star one on your telephone.
Withdraw your question Crystal balance sheet, please stand and Paul.
<unk>.
Our first question comes from.
From Peru it with.
Morgan Stanley and we proceed with your question.
Great. Thanks for taking my question.
First one from me is.
On the topic of seasonality could you talk a little bit about how buying patterns.
Trend throughout the year, both for the software business and for the services business and how we should.
And I think about.
Any possible lumpiness and revenues on a quarter to quarter basis going forward.
Hi, Victor.
Go ahead and thankfully.
Okay, so regarding seasonality.
I really look at that at three levels the bookings it tends to be less of a seasonal pattern.
More dependent on client behavior, if you look at 2019.
We had 54% of our bookings and the first half, 46% and the second half that was related to one large multiyear booking we had and the second quarter. If you look at 2020, 45% and the first half 55% and the second half we had a very strong bookings year and momentum for the second half.
The revenues.
We're growing company we.
Grow quarter over quarter.
There can be some seasonality and the software, particularly around Q1 and Q4 on where we have a heavy renewal season.
Seasonality is generally offset by growing tech enabled services business and the revenues for the previous two years have been split about 49% and the first half, 51% and the second half.
EBITDA tends to follow the revenues.
Historically and 2020, we had a lower percentage of EBITDA and the second half that was entirely driven by.
The timing of our performance compensation accruals, given the lack of visibility into the full year the lack of.
Uncertainty with regards to the early stages of Covid, we caught up on those accruals in the fourth quarter and third quarter.
If you push it put those back and into the into the first and second quarter.
Exactly follows the same seasonality as the revenue trend.
Got it that's helpful.
And.
Follow up if I could just wanted to see if you could talk a little bit about.
How much COVID-19 contributed to 2020.
Our revenues in terms of again both software.
And for the services business and.
How much of a COVID-19 contribution would you expect going forward throughout 2021, and beyond and understanding it's a bit of a fluid situation, but just any thoughts you have there would be helpful.
Sure. So we definitely saw.
And acceleration.
From Covid.
Not necessarily overall.
Overall impact on the financial statements specifically for Covid, our revenues tend to track the work that's ongoing in the industry.
So if it was it a priority for our clients it was a priority for us.
Did see some surge of work and the second quarter.
At the early stages of Covid, but.
But we don't expect.
A major impact and expect that going forward to kind of follow the trend of investment and R&D and the biopharmaceutical industry.
William anything that.
Yes.
I think that's the best way to look at this is that Covid for us is an important.
We're very proud of work, we did but from a financial standpoint.
More or less of a wash.
Teams that were working on other things rollover to work on Covid and then they move back as the pharmaceutical industry move so and the.
The second quarter, we probably lost a few projects and then we gained a few COVID-19 projects and then on those projects came back later and later in the year. So I don't think that it was.
Particularly it financially.
A big impact one way or the other really for us and.
In 2019, although certainly did affect us.
The projects, we worked on and.
And the mix a little bit there.
Okay understood.
Thank you.
Thank you.
Thank you. Our next question comes from Michael <unk> with Bank of America. You May proceed with your question.
Hey, guys. Thanks for taking the question I appreciate it congrats on quarter on.
2021.
I wanted to start with.
Focusing on cross selling opportunity between the Biosimilars and software and services could you give us an update on some and how that progressed over the course of 2020 and particularly in the fourth quarter and sort of your thoughts on on how that could accelerate in 2020, one and then youre seeing any from a meaningful step up.
Yes.
Michael.
The questions. So.
Look we've been accelerating our efforts to do cross selling.
And in.
And 2020.
We increased our.
Percentage of customers that are.
And are buying more than one solution from <unk>.
Bye.
If you look at our top 300 customers and moved from about two thirds up to about 72%. So a couple a couple of points increase.
And obviously, we have more than two two solutions and the third tier and so theres more opportunities as we go forward.
So.
I'd say that we think that we are.
Tapping and do an important strategy versus Tara.
And.
Certainly a growing opportunity through the year, but.
But we also don't think we're quite recently and there so theres lots and certainly a lot of customers. We have that we believe would benefit from other solutions as their drugs moved through the development pipeline and.
And we've been organizing ourselves and and.
And tapping into our internal.
Data systems to track drug so that we're able to bring the right solution to the brink customer at the right time.
Okay and can I ask a follow up I mean, you discussed a little bit some of the COVID-19 impact on on the revenues, but I was more curious and how we should think about your sales and marketing approach and our sales force out there, especially with new customers.
Outside of sort of the renewable parts of the business what was the impact of Covid in 2020, how should we think about potentially going back to prior ways of doing business in 2021 in terms of being able to do more more visits with potential customers.
Are there any headwinds that you observed throughout the year and how were you able to adapt their.
Yes, Thanks, good question and let.
Look like every company around the World we've had too.
Make adaptations and adjust.
In the past we.
Used a number of large conferences.
Marketing events and marketing tools, and then and although a lot of them went through a virtual format and its really not the same.
So we.
And a much bigger investment and digital Mark marketing and digital meetings, and then than we had in the past and we saw a lot of success over that.
It's not discuss migrating obviously the cash.
US migrating how we market and how we sell it's also customers are migrating how they learn about solutions and how they buy at the same time. So I think we're we've tapped well into.
What I think will be a continuing trend and the industry about how it comes from.
Some of this.
Happens.
We have also increased.
Investment in 2020, and we're continuing to do that as we go into 2021 and our commercial footprint globally.
And we see opportunities to expand our sales marketing and business development teams.
And software and China, and Europe in particular and.
And we did that through the year, particularly.
Particularly in the second half of 2020 is because.
When Covid hit we had it was low.
And with a little bit of a slowdown in hiring I think al and lots of industries.
And the second half, we started to accelerate that and we're continuing to.
Make what we think are.
Good investments and expanding that as we go into this year.
Thanks, so much.
Thank you.
Thank you. Our next question comes from David Windley with Jefferies. You May proceed with your question.
Hi, Thanks, a lot thanks for taking my question.
Got a few on on the.
<unk> models that debt, you've talked about being and development and and progressed this year.
And I believe some of the at least some of those maybe all of those are through your consortium model and so I was wondering just kind of and update on the progress of those are they now kind.
Kind of.
Fully fully vetted fully.
Commercial and commercial ready and are you able to immediately sell those to clients outside the consortium or is it or is it limited to the consortium here for a while I just kind of want to understand the cadence of that.
Okay.
So the answer is there is there are a number of QC models okay.
The.
And in general.
Without getting into.
All of the specifics.
We certainly provided and advantage to the consortium members and.
In terms of some sort.
On some.
Lead in terms of accessing the technology.
And but in the long run and we do have the ability to sell them and.
And we do outside of the consortium and when they are ready. So generally the consortium has put together we work on it with just those customers. They get early access and then when the consortium has gone a couple of years down the line and that those models become become available.
So.
Occasionally from the consortiums.
Go on for multiple terms, we are planning some interest and renewal in our immuno oncology consortium right now.
For example.
And.
And the early stages of a neuro degenerative nor a day.
General diseases consortiums.
And the idea of some others some of them are different diseases.
And then some of our <unk> modeling is done on our own investment and we don't do it and consortium and depending on the.
On the area, we might do it with one customer where we might simply do it with their own on investment and.
And create products from that.
So it's kind of it okay.
Great.
And thinking of the fall.
So up to one of the last questions about.
Youre kind of land and expand strategy and selling multiple products to clients.
And I noted in and Andy's prepared remarks, and emphasis on Biosimilars are you seeing.
Uptake predominantly there or are you also.
And kind of.
And I'm pretty balanced fashion scene.
Regulatory and market access uptake as well.
So we saw and particularly in the fourth quarter.
<unk>.
Particularly strong uptake and biosimilars, but.
Our growth was pretty broad based and included market access.
And regulatory as well and they both did quite well.
In 2020, and and in the fourth quarter.
So I guess I guess the answer is.
It's strong and both of them.
Okay and.
Then last question and I'll pass it on is on.
I noted on note that your your bookings balance is increasingly shifting toward your tech enabled services I think that's fairly consistent with what you thought maybe a little bit more so than the 70 30.
Mixed debt that we're seeing and the recent past.
Do you expect that that mix shift to services in.
In 2021 to continue and how is the labor market.
For the clinical pharmacologist and pharma come and attrition that you hire to support that service provision.
Great. So thanks for the question, maybe Andy you want to take the first part and then I'll talk about the labor market.
Sure happy to so.
We do see slightly.
Slightly higher growth rate and the services relative to the software, which is causing a mix shift.
We expect the mix next year to be consistent with the mix this year based on our projections.
The net effect of that though is that if you look at the numbers and a little bit more detail. Our services are tech enabled services and many cases.
They are related to our software in terms of customization or implementations.
Leveraging leveraging our software to provide the service. We also have other other technology fees.
The mix shift while we did have a mix shift this year.
And bookings and also on revenue.
And once you exclude the.
The noncash stock based compensation, we had a modest decline and cost of revenues. So we had.
Increased efficiency, if you will.
Look at that more on a revenue per head count basis.
So we're comfortable with our forward guidance with that respect.
Is that helpful.
Yes. It is thank you.
Alright, and then just to comment on alumina and the labor market.
Look we hire.
Clearly.
On extra group of people and we have pretty high standards. So certainly it's never an easy situation on the market.
However, we would point out we have done quite well we believe there is.
A lot of room for growth.
And in some ways the new post pandemic.
And what we've learned through the pandemic is helping us.
Yes.
The increased ability to.
Work virtually and have confidence in that model.
And sort of expanded the number of places we can recruit from.
We're a global company.
And we find people all over the world.
And our ability to do that has gotten better over the last year. So I think we.
We're never going to we're never going to feel like we have.
No no company ever feel that they've hired.
And everybody they want.
And as always we're always going to be working on that but I think we are we are feeling confident about our ability to continue to grow this model.
Got it very good thank you.
Thank you Dave I appreciate it thank you.
Thank you and our next question comes from and Wright from Credit Suisse and proceed with your question.
Great. Thanks.
Various models in terms of bio simulation and I guess, how are you thinking about the long term mix dynamics in terms of drug development stage.
And it primarily largely all going to be overweight on the clinical side longer term or do you anticipate any sort of shifting and strategy there.
Yes, thanks for the question.
Look the the roots of.
And as you pointed out were and the clinical phases, where we started.
And I think that the original idea was thats really where.
Most of the dollars are spent and pharmaceutical development. So it makes sense and we're certainly not.
Certainly.
Not regretting that choice, but we have made it part of our strategy to expand and end to end solution throughout all our pharmaceutical development. We do have solutions across as we said between discovery and market access.
But we think there's additional opportunity to kind of fill that out.
So, we're certainly going to keep investing and the development and clinical stage part of our business but.
Maybe the mix will shift a bit over time as we add as we add additional solutions going forward.
Okay, great and on that note and many of our capital deployment priorities and we've discussed a little bit about it during the prepared remarks, but anything and debt.
And in particular that you would be kind of targeting here and.
At this point any holes and itself from a portfolio perspective, that'd be great. Thanks.
Yes so.
Sure.
As you know the Sentara has a.
Fairly long history of a disciplined acquisition strategy.
We look at acquisitions from both.
From a strategic lens in terms of does this.
And our end to end solution and it gets more relevant to our customers as they move their drug true development and from a financial perspective, and I think.
To my knowledge looking back we've had a very successful track record and doing that.
In the second half of last year, we were effectively out of the M&A market as we focused on our IPO, but on.
Our business.
Our corporate development team was still very active and monitoring things.
And so we are tracking quite a number of interesting opportunities of technologies that we think.
And could expand our offering.
We've made one acquisition and the fourth quarter. It was a company called author which is a.
Okay, and regulatory on biostatistics firm and Europe.
And we will.
And we'll happily report back when we have something else something new to report as we go forward.
Yes.
Okay, great. Thank you.
Yes.
Thank you. Our next question comes from John Kreger with William Blair. You May proceed with your question.
Hi, Thanks, very much Hey, Bill could you just elaborate a little bit more on the author deal I think you said it just closed a few days ago should we view that as sort of a template of the kinds of things you're looking for and perhaps if you could give us any and put on price or or revenue contribution.
We.
Arthur deal was a small deal so we didn't reveal those numbers.
We can say is that we are interested in.
Paul Bolt ons, where we typically find them at very attractive prices.
And as well as larger more transformative deal. So this would fit basically and the former category.
We think we've got a.
On a group of.
Very smart accomplished people that will help us expand our European regulatory biostatistics business, which is one of our priorities.
Got it. Thank you and then Andy I think of the 20% revenue growth that you reported and in the fourth quarter was that all organic or did you have any sort of an acquisition benefit and that numbers.
That was all organic.
Great. Thanks, and then maybe just a couple of follow ups on the guidance I think at the midpoint here it sounds like youre guiding to about 15% topline growth.
Should we assume services and software are kind of comparable around 15% or do you expect services to grow faster.
Yes.
Based on this.
We forecast based on kind of visibility and looking at our prior period trends. So looking back we've seen and we've I think we've talked about this the software and they are looking at the organic growth rate when I when I exclude for example, the runoff contracted and the low teens.
Low to mid teens, and then the services and the mid to high teens.
Okay. So thats your expectation for 'twenty, one as well.
And then one last one on similar.
If you.
Would you expect <unk> to grow a little bit faster than regulatory and market access and 21 or should we assume those three buckets are similar.
The Biosimilar <unk>.
Has been performing at a higher growth rate with a higher level of pre sold work and that area.
Okay. So that'll be great. Thank you.
Thank you.
Thank you and as a reminder to ask a question you will need to press star one on your telephone. Our next question comes from Luke share with Barclays. You May proceed and your question.
Hey, guys. Thanks for the question.
So it looks like your EBITDA margins take a step down a bit and 21 can you just give us a little more color on what's going on there and kind of the pacing throughout the year on that Opex step up.
Yes.
On.
The EBITDA margin for next year, Yeah, we target mid 30%.
EBITDA margin range.
<unk>.
We factor in the ability to make additional investments as we see fit one of the areas Bill discussed earlier was kind of our approach to sales and marketing also have investments in R&D.
And that can impact.
The EBITDA margin a bit we also are seeing and increase this year in some costs as it relates to being a public company. So for example, D&O insurance was a big change.
So expecting that.
And the costs to kind of mirrored that the revenue mix I discussed earlier in terms of.
Seasonality, so we do have some.
Phasing of costs as cost as the business growth throughout the year.
Alright, that's helpful. And then as you guys build out and China is the business mix mirror, what you guys have here and the west or is there any discrepancies or not discrepancies, but theres differences and demand among the different software and services.
Yes look thanks for the question.
We think that ultimately it will and will mirror. This however, the industry and China is in a slightly different stage of development.
So.
We are seeing I think initially more demand on the software side.
And thats, partly a function of.
And we still have the buildup.
A significant amount of.
The capability to do the Tech services side Tech services, there, but we do believe debt.
Those companies are.
Growing and.
There's a lot of investment going in and there's a lot of western pharmaceutical companies there as well. So we think that ultimately we're going to see the same needs.
From those companies as we see.
And from pharmaceutical companies and other parts of the world.
Alright makes sense.
And then I guess lastly from me you guys put a nice startup there 72% on your top 300 customers are buying two plus solutions can you give us a sense of the ACB and of those customers on those two solutions or are just somehow.
Some direction on how that ACB has grown.
And you want to take that one in here.
Yes, I think the.
The majority of the top 300 are captured and the ATB over 100000 category.
Okay.
<unk> hundred 61 of the 300.
So it helps okay, 14% growth.
And count.
Okay, and if I can pull that up.
Yes, I think thats the answer.
Yes.
Okay.
Thank you Luke.
Sure. Thank you.
Thank you and I'm not showing any further questions. At this time I would now like to turn the call back over to William for any further remarks.
And I would like to thank everybody for joining <unk> first.
Earnings call.
Appreciate you all dialing in and with that we will close this and say good evening. Thank you.
Thank you.
Thank you ladies and gentlemen. This concludes today's conference call. Thank you for participating you may now disconnect.
Okay.
[music].
Yes.
And.