Q3 2021 Certara Inc Earnings Call
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Good day, ladies and gentlemen, thank you for sending by and.
And welcome to the third quarter 2021 earnings conference call. At this time, all participants on a listen only mode. I finished because presentation there'll be a question and answer session. So that's a question during the session you will need to pass this bartender one key on your touchdown telephone.
If you were gonna offer you assistance. Please first of all I didn't know I.
Now like tender conflicts of what you speak of house.
Hi, Claire Please go ahead.
Afternoon, everyone. Thank.
Thank you all for participating in today's conference call on the call from so far we have William theory, Chief Executive Officer, and Andrew stomach Chief Financial Officer.
Earlier today, so retardedly spinach results for the quarter ended September 30th 2021.
Copy of the press release is available on the company's 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 federal securities laws, which would be pursuant to the safe Harbor provisions of the private Securities litigation format 1995, and your statements contained in this call that relate to expectations are predictions of future events results or performance are forward looking statements.
Actual results may differ materially from those expressed or implied and forward looking statements due to a variety of factors for listing description of the Redskins 13 associated with this Sars business. Please refer to the risk factors section of our Form 10-K that'll the Securities and Exchange Commission on March 15th 2021.
<unk> you to consider these factors and you should be aware that these statements should be considered estimates only and are not a guarantee of future performance.
Also in the remarks of responses to questions management name mentioned, some non-GAAP financial measures reconciliations of adjusted EBITDA adjusted net income adjusted EPS and certain other non-GAAP financial measures to the most directly comparable GAAP measures are available in the <unk> in the recent earnings press release, which is available on the company's website. This cough.
For his call contains time sensitive information is accurate only as as the live broadcast today November 9th 2021 <unk>.
Retard disclaims any attention or obligation, except as required by law to update a revised any financial projections were forward looking statements, whether because of new information future events or otherwise and with that I will turn the call over toy.
Thank you David.
Good afternoon, everyone. Thank you for joining streetcars third quarter earnings call.
Andrew and I will start with prepared remarks, and then we will take questions.
I'm very pleased with how this entire business reform in the third quarter of 2021, as we continue to successfully execute on a strategic and financial objectives.
And the third quarter, we continued to grow our position as a global leader in by stimulation by delivering strong financial results.
And you grew 23% compared with the third quarter of 2020, adjusted EBITDA grew 28% compared with the same period a year ago.
And the third quarter, we set a new record for the number of new customers, we experienced strong double digit revenue growth across all geographic regions, including North America, Europe and Asia Pacific.
Overall, we're pleased with our performance, which has been ahead of our expectations forecasted earlier in the year.
In early October we announced the closing of the clinical 21 acquisition consistent with our previous expectations for fourth quarter closing.
The integration is going smoothly and early feedback from employees and customers has been positive.
As well as a reminder, political 21 is an industry, leading data standardization software platform used by the biopharmaceutical industry and regulatory agencies for managing compliance with a C. This standards.
Political 21 advanced SaaS fee solutions are used by the USA FDA and Japan's PM da to validate all incoming clinical submission data.
The FDA recently awarded a five year contract with clinical 21 for software and related services for the data fit program.
The clinical 21 team is now part of our body simulation and regulatory software business as newly combined entity, we see opportunities for expansion within existing customers and landing you new customers worldwide.
The political 21 enterprise software is complementary to sitars existing software and technology driven services and we are optimistic about cross selling opportunities overtime.
As we look to the future with clinical 21, we are confident that the technology solid position and a growing market lead not only to increase revenue and profitability, but also an advancement of our shared goal to innovate tools to accelerate life saving therapies for patients.
And other exciting news, we received our fourth FDA grant to verify and expand by a simulation models for assessing virtual bioequivalence for development of generic thermal drugs.
Final equivalent studies ensure that the rate and extent of absorption of the investigational drug is not significantly different from those of the comparable reference products, which is often a brand new truck.
Demonstrating bioequivalence as a regulatory hurdle for generic drug approvals and buy a simulation can significantly enhance the efficiency of generic drug development by streamlining where even waiving some of the clinical studies.
For example, so tardy since it Meg Djerma model was used to demonstrate file virtual while equivalents for a topical gel classified as a complex generic.
We're also very pleased to share that sitars Simpson COVID-19 vaccine model was named a winter of an R&D 100 Award.
Guitarist COVID-19 vaccine model uses by a simulation to optimize dosing regimens and helps inform the design of clinical studies involving COVID-19 vaccine candidates.
Example, the model can be used to to investigate potential differences in vaccine responses associated with age and ethnicity or to optimize the time interval between doses by predicting the expected duration of antibody response.
It was also named a finalist in the inform a farmer intelligence says 2021 Sightline awards for its contribution to COVID-19 clinical activities Sightline winners will be announced next spring.
The external recognition of our sense of COVID-19 vaccine model is a testament to the utility of this product in a global effort to combat the Covid.
Epidemic.
More broadly so tired as vaccine simulator covers a range of applications and is now being used to help develop vaccines and oncology and respiratory syncytial virus.
As outlined in our strategy, we continue to invest in the business and to add to our expertise worldwide at.
At the end of the third quarter prior to the clinical 21 closing, we had more than a thousand employees representing growth of nearly 14% year to date.
Following the critical 21 close and we have approximately 1100 employees we.
We continue to expand our commercial footprint worldwide with a new chief commercial officer, an additional business development hires worldwide.
Nearly half of our new hires in the third quarter, where scientists and subject matter experts and now we have approximately 350 employees with doctorate degrees.
In a recent study by February and Stanford University.
Seven hours or Tars scientists were ranked in the top 2% based on standardized citation metrics.
We are incredibly proud that the seven scientific leaders were featured in this list in the fields of pharmacology toxicology pediatrics, Dr chronology, and and metabolism as well as my current microbiology and chemistry.
It is a sitar culture and commitment to innovation and customer partnerships that attract top talent and a very competitive environment.
We continue to Prioritise, making <unk> a great place to work.
Yesterday, we announced that James Cashman will be our new chairman of the board of directors.
He is succeeding Shirley Mccoy, who has decided to step down from her board to focus on other professional commitments.
On behalf of the board I would like to thank Sherri for contributions and I wish her all the best in her future endeavors.
I'm excited to continue working closely with Jim Who's been an independent board member of <unk> since 2018.
Jim has a proven track record at the previous CEO, an executive chairman that answers the global leader of engineering simulation software.
His passion for simulation driven product development will help continue to advance retards innovation and global expansion.
Finally, I'm pleased that we will be hosting our inaugural investment day at the NASDAQ market site to New York City on December 15th.
Our Investor Day will feature presentations from surcharge leadership team, including our business unit President's with a focus on our proprietary technologies and positioning to further grow the company.
We're excited to meet you in person next month, if you cannot join in person you can be utilized stream of our Investor day online on our Investor Relations Web site.
In summary, so Tara had a strong third quarter, which demonstrated accelerated progress towards our goals and expectations.
Looking forward, we are focused on delivering on our strategic and financial objectives.
I will now turn it over to our CFO, Andrew to discuss third quarter for natural results and the financial impact of clinical 21.
Thank you William Hello, everyone.
Before getting into the third quarter I'd like to touch on the financial highlights of our acquisition of political 21.
As Williams stated earlier, we are excited to work with the Pinnacle 21 team and the integration is off to a smooth start.
Clinical 21 is a strong financial and cultural fit with so Tara and the transaction is expected to be immediately accretive to our key financial metrics.
As previously discussed we are currently forecasting pinnacle 21, 2022 revenue to be in the range of 30 to 32 million <unk>.
Exclusive of purchase accounting adjustments.
We are currently forecasting revenue of approximately $6 million in the fourth quarter of 2021 out of unexpected full year pro forma revenue of 23 to 24 million exclusive of the purchase accounting adjustments.
To that point, we will have a purchase accounting adjustment and reported revenue related to political software deferred revenue in the fourth quarter and throughout 2022.
The impact of the deferred revenue valuation adjustment is expected to be in the range of $4 million to $5 million in the fourth quarter.
We also expect the political 21 acquisition to have adjusted EBITDA margins modestly higher than the sitar corporate average in the fourth quarter of 2021 and look for them to expand in calendar year 2022.
Now to base so tar results.
Total revenue for the three months ended September 30th 2021 was $73.9 million Rep.
[noise] representing year over year growth of 23%.
Year to date bookings were two 229.2 million up 12% year over year and up 15% on the trailing 12 bumps basis.
The general business environment for bookings was slow during the first two months of the quarter, but the recent trends in pipeline for the fourth quarter position as well to achieve our guidance to maintain high visibility.
Astro October results, the trailing 12 months bookings were up 18% versus the same period last year.
As a reminder, I continued to look at trailing 12 months bookings as a predictor of for 12 months bookings and on this metric so targeted delivering in line with our long term forecast of mid teens organic revenue growth.
Software revenue was $19.3 million, which increased 9% over the prior year period as a result of strong third quarter bookings, new logos and expansion on renewals.
Software bookings were $29 million, which increased 28% from the prior year period in the aggregate renewal rate with 87%.
The aggregate renewal rate was below our target primarily due to read time for duels.
Year to date software bookings grew 19% in the aggregate renewal rate was 90%.
The growth in the quarter and year to date was driven by our Biostimulant. The software seems to have been Phoenix, which are up 17% year to date.
Services revenue was 54.7 million, which increased 28% over the prior year period the.
The growth in services revenue was driven by the recognition of delayed tech driven regulatory services as well as strong growth in bio simulation offerings.
Services bookings were $51.4 million, which decreased 10% from the prior year period.
If you recall.
Q3 of last year benefited from a bolus of bookings that were delayed from the first half of the year during the start of the COVID-19 pandemic.
Year to date services bookings are up 10% and we have seen services bookings pick up in September and October after a couple of slow months during the summer.
Looking forward the pipeline as strong in Q3 performance is mostly reflective of timing.
Total cost of revenue for the third quarter of 2021 was $28.8 million, an increase from $23 million in the third quarter of 2020.
Primarily due to increases in employee related costs, resulting from billable headcount growth and stock based compensation.
Total operating expenses for the third quarter of 2021 were 45 $9 million, an increase from $26.9 million in the third quarter of 2020.
The components of operating expenses are as follows.
Sales and marketing expenses were $5.1 million compared to 3.1 million for the third quarter of 2020 do.
Due to a $1.1 million increase an employee related costs, resulting from headcount growth.
And zero point $6 million in stock based compensation.
R&D expenses were $4.5 billion compared to $3.3 million for the third quarter of 2020.
The increase in R&D expenses was primarily do $2.9 million increase an employee related costs, resulting from headcount growth.
And the 0.5 increase in stock based compensation.
Both of which were partially offset by smaller reductions another line items.
G&A expenses were $26.2 million compared to 13.4 million for the third quarter of 2020.
The increase was primarily due to $7.4 million of acquisition costs $4 5 billion increase in stock based compensation costs and 0.7 million increase in insurance expenses.
Also contributing to the increase where public company costs, which year to date have added approximately 4 million to our cost structure.
Intangible asset amortization was nine 6 million and depreciation and amortization expense was zero point $5 million for the third quarter.
No significant changes in either lineup.
Continuing down the P&L interest expense during the third quarter was $3.3 million compared to 5.9 million for the third quarter of 2021.
The year over year reduction in interest expense is due to the repayment of our holdco loan last year.
Income tax benefit was $1.6 million due to the tax effects of use pretax loss non-deductible items. The effects of tax elections made on UK earnings and the relative mix of domestic and international earnings and discrete tax items.
Net loss for the third quarter of 2021 was $1.8 million compared to net income of $1.2 million in the third quarter of 2020, due primarily to the increase in stock based compensation expense and acquisition costs, which were partially offset by higher revenue and lower interest expense.
Diluted loss per share for the third quarter of 2021 was one as compared to earnings per share of one set in the third quarter of 2020.
Adjusted EBITDA for the third quarter of 2021 was $26.1 million compared to $25 million for the third quarter of 2020, representing 28% growth.
We continue to perform well against our plan and I've made some upper to justice the guidance based on the year to date performance.
As well as the impact of political 21.
Adjusted net income for the third quarter of 2021 was $10.8 million compared to $3.3 million for the third quarter of 2020.
Adjusted diluted earnings per share for the third quarter of 2021 for seven cents compared to <unk> for the third quarter of 2020.
Now moving to the balance sheet.
We ended the quarter with $468 million of cash and cash equivalents, which includes net proceeds of $133 million from our offering earlier in the quarter.
$250 million of the cash balance was planned for the Pinnacle 21, one acquisition and post closing our cash position and balance sheet remained strong after the effect of the acquisition.
As of September 30th 2021, we had $301.2 million of outstanding borrowings on the term loan.
And $100 million of availability under the revolving credit facility under the credit agreement.
Regarding financial outlook, we are increasing our previously reported guidance for full year 2021 revenue adjusted EBITDA and adjusted EPS, including Pinnacle 21.
Gap revenue in the range of 288 $291 million.
Adjusted revenue in the range of 292 to 295 million.
Which excludes the political 21 deferred revenue valuation adjustment of approximately four to 5 million.
Adjusted EBITDA in the range of 106 to 108 million, including $2 million to $3 million from Pinnacle 21.
Adjusted EPS in the range of 20 to 26 cents per share.
Fully diluted chair in the range of 155 to 156 million.
Which includes the impact of the 4.5 million shares sold in our secondary offering the third quarter and approximately 2.2 million shares relating to the vehicle 21 acquisition.
Thank you now I'll turn it back to our CEO William theory.
Thank you Andrew.
Summary, so Tara had a strong third quarter highlighted by our robust financial results operational performance and we hit the ground running in queue for with the acquisition of vehicle 21.
Ah So tar team continues to focus on our commitments to customers and to delivering strong growth for our shareholders.
We believe that our end to end platform is well positioned to continue benefiting from solid market trends.
We expect to continue 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 will open up the call for questions.
Operator can you open up the line.
Thank you ladies and gentlemen at this time you would like to ask a question you will need to pass. This by then just one key on your Touchtone telephone can we try a question pressed upon key please stand by while the composite Kenny last time.
Okay. My first question coming from the lineup, Dave Lindley with Jeffrey Steele on this topic.
Hi, good afternoon. Thanks for taking my questions I wanted to ask on on political 21, you kind of alluded to.
I appreciate the guidance numbers, there and taking from those you alluded to margins above your corporate average in the fourth quarter and then expanding in 22 could you talk a little bit about.
That trajectory of expansion what investments do you believe you need to make in that platform.
If any.
Is that something that your existing salesforce can sell things like that would be helpful. Thank you.
Yeah. Thanks I appreciate the question.
Started then.
Maybe Andy wants to chime in on this so.
Largely the it's a pretty healthy company that's.
Growing nicely.
We believe that our sales force.
Is.
Capable of offering this more broadly to our customers than they have been able 21 was doing before we bought it.
So we are making some investments in sales training and an expanding our sales force a little bit too.
Accommodate additional revenues that were.
Putting on on their plate there, but overall.
We think there's a lot of opportunities to expand the the product set a bit.
And to tie it in in a more integrated fashion too.
To some of our bias simulation products and some of our regulatory products.
And they'll add or do you have any comments you want to bring up about their growth no.
No I would just I would just comment that the.
The EBITDA margins this year will be.
Modestly higher than this entire overall average EBITDA margin, we expect those margins to expand next year, it's a function of the complimentary businesses and synergies not related to additional investments the leveraging our our broader quite a range of resources, we have the sales and marketing et cetera.
Okay and then.
I'd Love for you to touch on maybe provide a little bit more color about the cadence of of the bookings environment in the third quarter I'm sure. Other people are going to ask about that I'll ask a little more specific.
You've talked about your biologic simulator.
And and kind of carving that out and making that available on a on a more standalone basis have you seen.
Adoption on that yet is it still too early or.
Or is it still too early and and is that is.
Is that big enough or important enough to cause some of your clients.
To pause and evaluate that biologic simulator as an alternative to what they're already doing.
Yeah. Thanks.
It's still.
Really days for that product so it was only.
Something we announced relatively recently, we do have customers for it so it's a real product.
But we believe that there's a lot more.
Opportunity for the product right now.
So we'll see see how that goes as we go forward and grill it.
I don't think that.
I think customers are going to continue I do think customers are going to continue to develop their biologics that kind of positive programs.
Because we have a new product, but I do think that <unk>.
Provide some valuable insight that can.
Go along with their ties.
General theme of reducing the time and the cost of.
Drug development or in this case biologics development.
Okay and do you actually have two questions that you asked about bookings so maybe 101.
I want to take that one.
Yeah. So the date of the book I think we talked about it we felt a little bit of at the end of the second quarter, but.
Coming out of the the pandemic environment.
Saw lengthening of trying to close on booking pipeline remained healthy moving into September.
Really thought picked up pick up we maintained a T T M about approximately 15%.
Through the third quarter and then following through.
Momentum continued into October and the expanded the TTM growth to 18% in the pipeline looks healthy for Q4.
Oh, sorry, so 18% is the measure through walk through October does that yeah. That's that's a <unk>.
Got it thank you I'll leave it at that thank you.
Thanks, David.
Thank you.
Our next question coming from the lineup Micromachines with Bank of America. Your line is topping.
Great. Thanks, I want to follow up on Dave's question on Pinnacle. It just started talking through some of the synergies and across there obviously very strong profile. If you look at 22 I.
I wonder how much of it is sort of.
New customers or maybe different customers are using that software versus what you are currently offering or is it. So it was just better exposed to particular part of the market. Just curious and then in terms of future investment in <unk> and adding more capabilities. There could you talk to any opportunities on that.
Yeah. So look I think well I think last quarter, we talk when we.
When we acquired political 21, they had a very small.
Sales and marketing forces it was really just one person.
I think speaks to the strength of the products they have.
This is something that's very complementary to what.
So talking about does with lots and lots of our customers. So and obviously, we have a sales and marketing forces quite quite a lot larger than that so that's one significant opportunity for us in the near term.
And we you know.
Expect to see some some success in that as we go into next year.
Second piece of it is we do.
Believe that there's opportunities for additional products.
Technical 21 line.
Not ready to talk about that right now, but look watch watch as we go into next year and.
I think we'll see some some interesting developments there.
Thanks, and if I heard you correctly when you were talking about software revenue in the quarter and booking I thought you said that aggregate by yourself for software was 87%.
You indicated retirement renewables could you clarify what you mean by that is that just renewable if they were pushed into four Q or happened earlier at two Q and.
And just how often does it happen well it gives you confidence that that's not something that.
Software question, but it went away and that's it's still going to be there later this year.
Yes.
I think I can take that bill that specifically, we have clients who over the years have.
Acquired our products at different different term and dates and from time to time, they like to consolidate their their renewal to a single period.
What happened was we saw that.
Renewables that was scheduled for Q3 wherever neutral to combine them renewed in queue too.
And this is why if you look at the year to date, rather 90% aggregate renewal rate and we were a little bit about the benchmark in queue to a little bit below in Q3.
Okay, Alright, I appreciate it thanks.
Yep.
Our next question coming from Glenna ton Craighead with Marion Blair, Yeah on a shopping.
Hi, Thanks, very much hey, guys I wanted to come back to the staffing comment.
How are you feeling about your staffing availability at this point in are you able to sort of handle the work that you are trying to convert into revenue right. Now is there any constraints there.
Well we've.
I think it was said and the and the call we've grown our headcount by about 14% year to date. So we're actively recruiting as you would expect since we're growing growing nicely.
I'd say overall, we're pretty busy right now, but not to the point, where we're turning away work or anything like that so I think.
It's a it's a competitive environment out there are lots of companies and talked about it but I think so ty has a very good.
Proposition for for employees to join Us and so we've been keeping out of it.
Thanks, Bill and then.
And I want us to give us under from your Investor day, but any any sort of.
Comments, you could give us on the 22 outlook relative to some of the longer term targets you've talked about.
Mmm well, Andrew do you Wanna do you want to comment on that or.
I would prefer to address.
The address that an investor day, what we can see though and we've talked about is that we've got to look at a high visibility approach to forecasting.
The way that the guidance came out or organic growth rate.
Excluding pinnacle 21 is is is is closer to the high teens as opposed to the mid teens.
So we're optimistic for next year, and what we'll talk about guidance that'd be investor day.
Great. Thanks, and maybe just one last quick one if you think about the bookings experience you had in Q3 sounds like it was a little light overall, particularly in services as you look across the portfolio Folio does anything stand out to you in terms of.
Type of work that was awarded type of client and any any kind of takeaway beyond just sort of.
Lumpiness through the summer.
Go ahead and take that I was I was gonna say I was gonna say from from my perspective, It was lumpiness from the summer one.
Key highlight that Bill mentioned earlier is it both.
Software and on the services side.
We were derived a larger percentage of our revenue from new clients.
Then we had to start with the increasing number of new logos has been.
Positive was part of our plans going into the year, but we're delivering on that plan, so slightly higher mix of revenue from new clients.
And I think.
I think overall, we just saw.
A lot of a lot of clients taken some vacation in July and August.
So things slowed down and then they they picked up was when we went into the fall.
Got it thank you.
No sorry, mindless on gentlemen to ask a question. Please press for one now.
Our next question coming from the lineup second with Barclays hold on or something.
Everybody. Thank you for taking my question.
On the political 21 with the new five year contract ordered the FDA can you give us a sense of if that is really what's taking your estimated growth next year from that mid teens to high teens and if not just give us a sense of how this work is actually going to pay <unk> just try I wanted to get a sense of that.
Our ability of the magnitude that's available to you guys.
Well clinical told me one of the five year.
Contract from the FTA the SCA uses clinical 21 to evaluate.
All of the submissions of command for compliance with C disc and.
And they started.
It started enforcing compliance so that's the that's the tools they use.
It's not the.
It's not the majority by any not even anywhere close to the majority of clinical 20 one's revenues. The primary source of revenues are pharmaceutical companies that are using their software well before they get to the FDA.
And we believe that there is a big a bigger market in that area right. So.
There's a lot of data that gets.
Transmitted through the pharmaceutical development process as you moved from clinical.
Through regulatory and.
Rather than simply tried to put that in <unk> format as the last step before we go to the FDA, there's a lot of opportunity.
It serves of cost and labor savings for that to happen earlier in the process and we're seeing customers that do that and we believe there's a bigger opportunity.
<unk> pharmacy across pharma to use the software and that way so.
It's.
It's a very attractive product they have clinical 21 to solve it.
It solves the problem that exists across the pharmaceutical industry, it's not an easy problem to solve from a software perspective. So it's.
Kelly complex piece of software that requires.
Pretty pretty good team to to develop and manage it.
But we don't believe it's fully penetrated in the industry and.
Probably the first the first step as we as we complete our integration of the product.
Alright that makes sense.
And the last one here on the on the guide the implied <unk> can you give us a sense of the step up here, where it's coming from software versus services.
Fourth quarter software versus services.
Keep that out.
It's it's coming from boats. So I do expect a pick up in the software growth rate in the fourth quarter.
To push it up push it into the low teens as we had.
Except for our goal earlier in the year.
So I would say the big driver of the fourth quarter is.
Is software growth and then incremental growth in the services.
As well.
Okay, well thanks, yeah.
Yeah.
Now next question coming from the lineup victim for I'll head with Morgan Stanley. Your line is shopping.
Great. Thanks for taking my questions.
So first staying on political 21 I was wondering if you could just remind us what the mix of that business is on a standalone basis across software and services is primarily a software business or is there a meaningful services component to it as well.
90%, Yeah, you got it.
It's 90, well able that it was going to say, it's 90% software at about 10% services. The services are.
Things like training and installation.
For understanding costs.
Okay. So primarily software got it and and now that the transactions closed I was wondering if you could speak any further detail about.
A couple of the more interesting areas that you're looking at for cross selling opportunity.
Looking into 2022.
So just in general for surcharges on your question.
Oh, Yeah cross selling opportunities between Tara and critical 21.
Yes, so we.
Sir Tar does a lot of work where we are.
Working early on too.
Helped design the clinical strategy for a company for a pharmaceutical project rather.
And.
You know if you integrate the data strategy and with that you can save a lot of money for our clients down the line. So that's one very obvious thing that actually I was on we were we were all planning on even earlier today.
I think we do a fair amount of regulatory work, where we are.
Working too.
Create and then submit.
All NDA, including.
Clean.
The bias that data so there's an opportunity right there to combine Pinkel 21 is technology with the work we're doing it for quite a number of clients.
And I think we'll find other ones as we continue to go forward I think the thing about clinical 21 is.
Data standardization across the pharma development process.
Would save tremendous amounts of time and money. If it was really broadly implemented and I think a lot of a lot of our client notice.
And the easiest way to standardize around.
Is to go with see this because everybody is going to have to basically comply to that when you go to the FDA anyway. So that's why we believe that clinical 20 one's got a lot of opportunity beyond just that final step where they're going from going for that split under the FDA.
Okay. That's helpful. Thanks for that and then.
Maybe one more question from my side so related to.
Some of the recent.
Product updates a product watches that you've announced I was wondering from a business cycle standpoint.
Talk to us a little bit about how long it takes and in your experience for these kinds of product releases to gain some uptake start driving sales growth.
For example, recently launched a new regulatory writing software.
The base case market access software was updated several months ago.
I was just curious to see how long it takes for releases like this to start generating kind of Ah Ah.
Sales lift.
Yeah. So it depends on the type of software.
For a lot of our software what we're doing.
Update.
For example, since that we have and eagerly await a list of customers who want the next features and we'll upgrade almost immediately that's not entirely true because when.
Particularly insensitive if you.
If you do your drugs the middle with a specific version you need to stay out you stay with that so we do have people that will not everybody will upgrade but people are are really pushing for new features and new.
Modalities for that.
For other products like we've talked about secondary intelligence, which is really a very innovative and new product for toxicology now I'd, probably take a little bit longer because we've got to go in.
Evangelize, a new market and explain how this works so those products historically have taken a.
A year or two before they build up.
So it really it really depends.
The pharmaceutical industry is.
Pretty sophisticated but also it's a highly regulated industry and so.
You do have to.
Demonstrate how your software is accepted by the FDA and fits available process. So.
I think I think over a two year period is probably it may be the most typical number I can give you.
Okay. That's helpful. I appreciate that thank you.
Thanks Baker.
And I'm showing no further questions at this time I would now like to kind of call back over to Mr. <unk> finally closing by Mike.
Yeah, Thanks for joining our third quarter conference call.
I said earlier <unk> had a very good quarter, we're very pleased with a growth and we're very excited about.
Future opportunities that we have with pinnacle 21, and with a lot of the technology and products that we are continuing to launch and develop thank you for joining and I hope everybody has a good evening Goodbye now.
Ladies and gentlemen that that some kind of conference for today. Thank you for your participation you may now disconnect.
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