Q4 2021 Certara Inc Earnings Call

March 1, 2022

Today's conference is scheduled to begin shortly please continue to standby. Thank you for your patience.

[music].

Good day, and thank you for standing by and welcome to <unk> fourth quarter 2021 earnings Conference call. At this time all participants are in a listen only mode. After the speaker presentation, there will be a question and answer session.

Ask a question during the session you will need to press star one on your telephone. Please be advised that today's conference is being recorded.

If you require any further assistance please press star zero.

I would now like to hand, the conference over to your first speaker today to Mr. David Clair Investor Relations you may begin.

Okay.

Yes.

Good afternoon, everyone.

You all for participating in today's conference call on the call from so far we have William theory, Chief Executive Officer, and Andrew <unk>, Chief Financial Officer earlier today <unk> released financial results for the quarter ended December 31, 2021 copy of the press release is available on the Companys website before.

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 are made pursuant to the safe Harbor provisions of 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 actual results may differ materially from those expressed or implied in the forward looking statements due to a variety of factors.

For a list and description of the risks and uncertainties associated with <unk> business. Please refer to the risk factors section of our Form 10-K filed with the Securities and Exchange Commission on March one 2022, which will be filed shortly after this call. We urge you to consider these factors you should be aware that these statements should be considered estimates only and are not a guarantee of future performance.

Also in their.

Our remarks or responses to questions management May 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 on our recent earnings release, which is available on the company's web site the.

The conference call contains time sensitive information and is accurate only as of the live broadcast today March one 2022, sitar 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.

Afternoon, everyone. Thank you for joining <unk> fourth quarter and full year earnings call, Andrew and I will start with prepared remarks, and then we will take questions.

2021 was a milestone year for <unk>. It was our first full year as a public company and we made progress on a number of key priorities and initiatives. We are very excited about the opportunities ahead and as we continued delivering on our mission to accelerate the drug development process with our proprietary by simulation software.

Their technologies and services.

Our strategy is to <unk>.

<unk> form the drug R&D process with our end to end platform powered by innovative technology and our global team of leading experts, we not only speed up the process, but also help to advanced safety and efficacy of drugs for millions of patients worldwide.

For the full year, we reported total revenue of $286 million growing 17% year over year, including clinical 'twenty one.

And 15%, excluding pinnacle 21 contribution in the fourth quarter.

2021 revenue growth was in the double digits in every region of the world.

Fourth quarter total company revenue was $75 3 million growing 17% versus the same period a year ago.

Let me go to 'twenty, one and contributed $6 $1 million in the quarter excluding.

Excluding pinnacle 'twenty, one revenue was $69 2 million growing 7% compared with the same period a year ago.

Excluding political 21 fourth quarter software revenue was in line with expectations growing 13% compared with the fourth quarter of 2020.

Technology, driven services came in below our expectations growing 6% compared with the fourth quarter of 2020.

Our technology driven services performance in the fourth quarter was driven by two issues, both of which impacted the timing of work being executed.

First as we commented in our third quarter earnings call in November we.

We have been experiencing variability in the timing of our regulatory services projects due to COVID-19 related delays.

We did not have cancellations and our bookings and regulatory services projects continued to be strong.

As you recall in Q3, 2021, we experienced significant growth, 28% year over year and technology driven services due to the recognition of delayed regulatory services projects in Q4, the COVID-19 related slowdown in closing out clinical trials impacted timing of.

<unk> and revenue recognition and regulatory which resulted in a shortfall in Q4 and services.

In the back half of the year technology, driven services revenue grew 16% year over year, and we expect it to continue growing in the mid teens in 2022.

We expect these delays will moderate in 2022, and we will recapture most of this regulatory services revenue over the course of the year.

We continue to work hard to manage consistent conversion of our bookings billings to smooth out our revenue recognition throughout the year.

Second the surge in COVID-19 cases, resulting from the omicron varian reduce the capacity of our employees and clients in the back half of the fourth quarter.

We believe that these are transitory factors that we are well equipped to manage in 2022.

As we look forward to the coming year, we remain optimistic about activity returning to more normal levels as the year progresses with conferences coming back and more people back in the office.

Turning to software we were pleased with our performance during the fourth quarter, which grew 46%, including Pinnacle 'twenty, one and 13% excluding pinnacle 'twenty one.

The growth was driven by a 96% software renewal rates and strong demand for our proprietary bio stimulation software are Phoenix and Simpson platforms and political 'twenty. One also delivered according to our expectations.

As we mentioned at our December Investor Day, we see a number of compelling opportunities ahead for <unk> and software and we've increased our investment to support those R&D activities in 2022.

Specifically, we're focused on expanding the use cases of our sincere simulator, which continues to grow and adoption to reduce or waived drug drug interaction and bio equivalent studies as well as support better dosing for special patient populations.

Looking to 2022, we expect strong momentum in software to continue and we believe the transitory headwinds experienced in regulatory services projects during the fourth quarter, we will subside over the course of the year.

Bookings trends in both software and technology driven services remained strong.

Fourth quarter bookings grew 30% year over year.

And trailing 12 months bookings grew 18% over the prior period, including the contribution from vehicle 'twenty one.

As such we remain well positioned to achieve our long term financial and strategic plans.

Moving to performance for the year in 2021, we drove strong growth in new customers and we now serve more than 2000 customers, including more than 350, additional software and customers, who engage with us through our distributors in Asia Pacific.

Our land and expand strategy has also delivered solid growth among existing customers. We ended the year with 299 customers with annual contract value of more than $100000 representing growth of 15% year over year.

The integration of Pinnacle 'twenty, one into our software group was an important focus in the fourth quarter.

We are now beginning to execute on the promise of the compelling opportunities identified when we acquired clinical 'twenty one.

In December we released the latest version of the Pinnacle 21 enterprise software, which offers immense value to experts and bio statistics, and biometrics and ensuring that submissions to regulatory agencies comply with data standards requirements.

The feature rich release proactively supports the new Dubai define XML to one data standards.

This is the first of many growth milestones, we expect to emerge from the Pinnacle 'twenty one platform.

Updating certain higher software remains a top priority for our team and we continue to innovate during the fourth quarter with the release of <unk> simulator verge in 'twenty, one and <unk> hundred 60 scientific Informatics software version 21 five.

The latest update to the Simpsons simulator aligns with recent regulatory guidance and it includes other updates to support customers' development priorities, including additions to the compound library to facilitate drug drug interaction analysis and updates to our renal and hepatic impaired population models.

<unk>.

The latest version of <unk> hundred 60 software increases efficiency in analyzing and guiding the design of small molecule drugs and biologics.

We remain very encouraged by the growing pipeline and opportunity for our software to advanced Discovery research.

During the quarter, we announced that the FDA has renewed and expanded licenses of surcharge Biosimilars <unk> software with more than 400 user licenses of Sims and Phoenix platforms across 12 divisions and offices.

The FDA also recently licensed our Immunogenicity simulator for the first time to research and evaluate immunogenicity and regulatory submissions for biologics.

Immunogenicity or.

Where the tendency of protein based therapeutics to trigger an immune response is a major problem in drug development.

Our immunogenicity simulator predicts.

The immunogenicity incidents of Therapeutics to guide dosing in study design for medical clinic for better clinical outcomes for patients.

It continues to be a privilege for us to provide software that global regulatory agencies can rely on to inform their reviews of regulatory submissions.

2021 was also the eighth consecutive year that surcharge customers received 90% of the novel drug approvals by the FDA.

Excluding diagnostic products.

The sensitive stimulators using 13 of these approvals to inform the drug label.

We are excited by the recent launch of the Fda's project, Optimus initiative, which aims to reform the dose optimization and dose selection paradigm in oncology drug development.

This is important for drug developers in patients because the current approach of maximum tolerated dose may lead to selection of a dose that provides more toxicity without additional efficacy.

<unk> is well positioned to address these upcoming changes in dose finding and the evolving regulatory landscape with our extensive experience in call. It in oncology as well as dose optimization trial design regulatory strategy and submissions.

As outlined in our strategy, we continue to invest in the business and add to our expert team worldwide.

Towards the end of the year, we experienced an increase in attrition due to a variety of factors.

Our attrition was fairly low in 2020, so now we're getting back to more normal levels of attrition that we had experienced pre COVID-19 we.

We continue to prioritize adding top talent and in 2021, we hired leading scientists and subject matter experts to support our ongoing growth.

We ended the year with approximately 1100 employees, including more than 350 employees with doctorate degrees.

<unk> culture and commitment to innovation and customer partnerships continue to attract top talent.

And the competitive hiring environment.

We remain focused on making sure Tara the employer of choice in the industry.

In summary, I am pleased with the performance of the company in 2021.

Delivering double digit growth in software and services advancing the adoption of biosimilars and acquiring and integrating pinnacle's <unk> 'twenty one.

While revenue from our regulatory services business in the fourth quarter did not meet our expectations, our bookings growth and our momentum remains strong.

I'm confident in our sitar team to execute our plan.

I'll now turn this over to our CFO , Andrew Schmidt to discuss the fourth quarter and full year financial results in more detail.

Thank you William Hello, everyone.

Total revenue for the three months ended December 31, 2021 was $75 3 million.

Representing year over year growth of 17%.

Excluding pinnacle 21 fourth quarter revenue growth was 7%.

Full year 2021 reported revenue was $286 1 million, which represents 17% year over year growth.

Excluding pinnacle 21 full year revenue grew 15%.

In line with our long term plan. Despite the unexpected performance of our technology driven services business in the fourth quarter.

We are very well positioned for 2022 with trailing 12 months bookings coming in at $341 7 million up approximately.

19% year over year on a reported basis.

And up approximately 16% excluding pinnacle 'twenty one.

I continue to look at trailing 12 months bookings as a predictor of forward 12 months revenues.

Okay.

Book to Bill has been stable ending the year at $1, one nine times and the annual bookings in 2021 as a percentage of forward revenue supports of the visibility into our guidance for the year.

Software revenue was $25 5 billion in the fourth quarter, which increased 46% over the prior year period.

Excluding $5 $7 million in Pinnacle 'twenty, one software revenue contribution year over year growth was 13%.

The growth in the quarter, excluding Pinnacle 21 was driven by our Biosimilars and software.

In Phoenix.

For the full year software revenue was $86 8 million, representing 18% growth as compared to 2020.

Excluding political 21 year over year growth for the full year software revenue was 10% driven by Phoenix and integral.

Software bookings were $32 3 million in the fourth quarter, which increased 54% from the prior year period.

Pinnacle 'twenty, one contributed $8 $2 million to software bookings in the fourth quarter.

So <unk> year over year software bookings growth, excluding clinical 'twenty, one was 15%.

Trailing 12 months software bookings were $94 5 million up 29% over the 2020 software bookings.

Software aggregate renewal rate was 96% in the fourth quarter and 92% for the full year in 2021.

Services revenue was $49 8 million in the fourth quarter, which increased 6% over the prior year period.

As William mentioned relative weakness in technology, driven services was due to the delays in closing clinical trials impacting regulatory services projects and lower employee utilization rates and technology driven services towards the end of the quarter.

For the full year.

Services revenue was $199 3 million representing growth of 17% year over year and.

And looking at the second half of the year services revenue was $104 4 million up 16% over the same period last year.

Technology, driven services bookings in the fourth quarter were $80 2 million, which increased 27% from the prior year period.

Services bookings for the full year were $247 2 million, which increased 15% as compared to 2020.

Moving further down the P&L from our fourth quarter results.

Total cost of revenue for the fourth quarter of 2021 was $29 3 million.

The decrease from $34 9 million in the fourth quarter of 2020.

Primarily due to a $7 $2 million decrease in stock based compensation expense.

Total operating expenses for the fourth quarter of 2021 were $42 6 million a decrease from $83 3 million in the fourth quarter of 2020.

The components of operating expenses are as follows.

Sales and marketing expenses were $6 7 million compared to $10 4 million for the fourth quarter of 2020.

Lower due to a $6 $7 million decrease in stock based compensation, partially offset by employee related costs, resulting from increased investments in the commercial operations and sales force expansion.

R&D expenses were $6 5 million compared to $10 5 million for the fourth quarter of 2020.

The decrease in R&D expenses was primarily due to a $5 $7 million decrease in stock based compensation, partially offset by increases in employee related costs, resulting from headcount growth.

G&A expenses were $18 7 million compared to $52 4 million for the fourth quarter of 2020.

The decrease was primarily due to a $34 million decrease in stock based compensation expense.

Intangible asset amortization was $10 2 million compared to $9 4 million in the fourth quarter of 2020.

Higher due to acquired intangible assets.

Depreciation expense was <unk> $5 million down slightly compared to last year.

Continuing down the P&L interest expense during the fourth quarter was $3 3 million compared to $5 5 million for the fourth quarter of 2021.

A decrease due primarily to lower average outstanding principal balance on our credit facilities.

Income tax expense was $9 5 million as compared to an income tax benefit of $5 5 million in the prior year.

Due primarily to the relative mix of domestic and international earnings as well as the impact of rate changes in foreign jurisdictions and the impact of nondeductible items.

Net loss for the fourth quarter of 2021 was $9 7 million compared to a net loss of $54 4 million in the fourth quarter of 2020.

Diluted loss per share for the fourth quarter was <unk>.

As compared to <unk> 40 in the fourth quarter of 2020.

Adjusted EBITDA for the fourth quarter of 2021.

Was $28 2 million compared to $22 2 million for the fourth quarter of 2020, representing 27% growth.

For the full year, adjusted EBITDA was $103 7 million, representing 18% growth over 2020.

Adjusted net income for the fourth quarter of 2021 was $1 4 million compared to $10 3 million for the fourth quarter of 2020.

A decrease due to the increase in provision for income taxes and acquisition amortization.

Adjusted diluted earnings per share for the fourth quarter of 2021 was <unk> <unk> compared to <unk> <unk> for the fourth quarter of 2020.

Now moving to the balance sheet we.

We ended the quarter with $185 8 million of cash and cash equivalents.

As of December 31, 2021, we had $295 billion of net outstanding borrowings on our term loan and full availability under our revolving credit facility.

We are making an adjustment to our guidance based on what William discussed earlier around transitory COVID-19 related impacts to our regulatory services business.

We are lowering the top end of the range for revenue from $370 million to $360 million and lowering the top end of the range for EBITDA from $135 billion to $131 million.

We are maintaining the low end of the ranges for revenue and EBITDA, reflecting our continued confidence in the strong growth in bookings and our dedication to delivering on our strategic and financial plans.

Revenue in the range of 300 $350 million to $360 million, which represents growth of 22% to 26% year over year, and 15% to 18% year over year growth, excluding pinnacle 'twenty one.

Adjusted EBITDA in the range of $127 million to $131 million.

Adjusted EPS in the range of 48 to <unk> 53 per share.

Fully diluted share in the range of $156 million to $159 million.

GAAP tax rate in the range of 40% to 45% and cash tax rate in the range of 20% to 25%.

Thank you now we will open up the line for questions. Operator can you open the line.

Thank you Sir.

As a reminder to ask a question you will need to press star one on your Touchtone telephone.

Your question. Please press the pound key.

Please stand by while we pause for Q&A Rob.

I show our first question comes from the line of Luke.

Sir got from Barclays. Please go ahead.

Hey, guys. Thanks for the questions.

I guess, given the duration of the business and the visibility you guys have.

We had the step down in <unk> in the bookings and then kind of I guess that flowed through into <unk> I'm just wondering.

You talked about getting this business back throughout the year why wouldn't come back earlier are.

Are you still seeing some weakness due to omicron I'm just trying to get.

To get a better understanding of the dynamics.

Yeah look thanks for the question.

We saw weakness.

How about quite suddenly at the end of the fourth quarter.

It continued into January although it seems like we are through that now.

So our view is that.

No.

Two things happened to us in the fourth quarter, one was due to the Amazon our own internal capacity and then the other one is.

We saw some lengthening of time between.

When.

Particularly in regulatory customers have booked are.

I've done bookings with us.

Actually I've gotten the data ready for us to do work.

So all things considered.

As we look forward to the year based on what we know for the first.

Two months now we think.

We think our guidance of $3 50 to 360 makes it makes no sense.

Yeah, and then just kind of just a follow up on that because it's really early in the year.

And it just to not think that youre going to get it back what gives you the like what's the is it getting pushed out to 'twenty three now due to the regulatory stuff or is this business that was lost.

No we didn't lose any bookings, but we have seen the lengthening of time.

From particularly from a number of customers from their database lock, which is really what.

Kit kicks off this type of work for us.

It's possible this will reverse during the year, but.

We're kind of have to call. It the way we see it with the two months of data that we've got so far.

I don't know Andy if you want to comment on any of this.

That's <unk>.

Consistent with my view.

Okay. Thanks ill jump back in the queue.

Alright, Thanks Luke.

Thank you I show. Our next question comes from the line of John Kreger from William Blair. Please go ahead.

Hey, Thanks, very much just following up on that.

Andy can you remind us what's the percent of your revenue that is regulatory services related as opposed to the other buckets, maybe now that you've got a full another full year. If you could just sort of give us some of those main categories. As you have in the past that would be helpful.

Sure. Thank you for the question the mix this year in terms of revenues was 30.

30% software, 40% <unk> services, 30% regulatory and access services.

So it's fairly consistent with last year slight mix shift towards <unk> services.

Got it. Thank you and then should we be thinking about.

The slowing that you had in Q4 as sort of a push into Q1 in other words would you assume your Q1 might be even a little bit elevated.

Should we assume that kind of given the.

Serge carried through a chunk of January Q1 would be sort of slower and then momentum liability as you move through the year.

In putting together.

Our guidance, we incorporated the second point of view given the data that we've seen so far in January and mid February were starting to see some pickup, but certainly not a push into Q1.

Got it thanks, and then one more.

Dave for you.

There's been a lot of anxiety about kind of smaller biotech oriented clients being under pressure and not having the same sort of funding momentum can you remind us how big of a chunk of revenues coming from biotech and are you seeing any change in behavior from them to date.

Yes, we've been aware of a lot of comments about that but.

We haven't seen it in our business so our biotech business was.

Grew quite nicely through 2021, and even in even in the fourth quarter in terms of our bookings.

And I think our view is that.

There was a couple of quarters of slowdown in biotech funding that came after a couple of years of of quite healthy biotech funding.

So.

No.

Theres just a lot of there's a lot of well funded companies out there that that are.

Great customers for us.

And.

I think there may be some aspect of when funding gets a little bit tighter than maybe people get.

Even more interested in becoming more efficient by using by simulation.

Great Great. Thanks, and then can you give us a number about roughly what percent of revenue come from small biotechs without sales.

Okay.

Okay, Yes.

We don't.

Disclose.

That number.

But it's a small percentage of the overall company revenues.

50% of the revenues come from the top 20.

So it's not a major fraction of healthy biotech that's having some success given where given the type of work that we do becomes a more significant customer but early stage.

A small fraction.

Okay. Thank you.

Thank you.

I show. Our next question comes from the line of Dave Windley from Jefferies. Please go ahead.

Hi.

Could you talk about your success you talked about bill the enterprise.

Release on political 'twenty, one I think.

Part of your strategy was to see what conversion you could you could encourage from the free accounts the freemium accounts too to enterprise customers could you just give us.

An update on where that stands and what your outlook is for that.

Yes, Thanks, David.

Clinical 21 performed in the fourth quarter almost.

Right down the fairway with what we had expected when we did the acquisition.

We.

Obviously, you spent the quarter.

Getting to know each other and integrating.

And as we go forward this year theres opportunities for.

Cross selling with each with each other's customers.

We still have a strong premium.

Our customer base.

Particularly as some of the small biotech customers start going start becoming successful in filing to the FDA.

Some of them have converted over.

But I think there's a combination.

In terms of the strategy there in terms of what Youre talking about it as how do we convert some of the premium and then we have a.

Pipeline of some sort.

Some.

The new products that are be coming out over the next couple of months.

<unk>.

We will come back and sort of stay tuned but throughout 2021, we have some new things coming out of fiscal 'twenty, one as well.

Okay. Thank you for that.

A little bit of a corollary I suppose.

Another version of John's question on <unk>.

Mix of clients.

Could you.

It's logical to us that that your.

Biotech clients or your mid to smaller clients lean more towards services services are going to naturally be lower margin than a pure software purchase.

But if you look at apples to apples.

<unk> pharma serve as a larger client.

Services clients.

Versus a small services client similar margin or would there be differences apples to apples on those bases.

So Andy.

How do we want to.

Disclose this.

Yes.

I would say that.

For a small biotech.

It's profitable in terms of the value that we're bringing to the biotech for a large pharma company, we can run the projects more efficiently.

So I don't see.

A mix shift in terms of margins from shifting from what we'd look at it the top 50 versus versus the tier one versus tier two and tier three.

Okay.

Last question Sorry go ahead.

Go ahead, David. Thank you I was just going to say.

Related to project Optimus and.

Maximum tolerable dose.

<unk> and philosophy at the FDA.

Do you have any thoughts on I mean, I listen to your webinar the other day.

<unk> put on.

How quickly can this have an impact or an influence over.

Customers changes in the way that they pursue their early stage oncology work and dose escalation.

And that then result in potentially some some.

Bookings for your products in trying to triangulate on those on those optimal doses.

Yes, so the FDA has already started to.

Okay.

<unk> this.

And as you said, we had a quite large webinar talking about it the other day, we have already.

Started projects related to optimists, So I guess the.

The answer is that the.

Half of maybe half of drug R&D spending goes into oncology overall.

Probably a similar fraction of our effort and so Tara.

<unk> is associated with that because we tend to mirror the pharma industry. So as those customers are moving over that presents.

Sorry, I was those customers are implementing optimist that presents.

The increasing opportunity for us, but it starts now.

Okay and would you view that as new revenue, that's incremental revenue not say cannibalizing something else that you do for for those clients.

Yes, no we see this as a new revenue opportunity for us.

Look the.

A lot of Biosimilar <unk> focuses on optimizing the dose between.

Safety and efficacy.

Oncology customers had been one end of the spectrum for a long time right. So they.

If youre going to give the maximum tolerable dose then.

Then sort of the dosing calculation is easier now analysis, a little bit more complex and we have a lot of our services and our software.

Quite valuable I think for this so it should it should be a good good.

A good opportunity for the company.

Okay. That's great I appreciate the perspective, thank you.

Thank you.

I have two questions.

Thank you. Our next question comes from the line of Michael <unk> from Bank of America. Please go ahead.

Hey, good afternoon, it's Derek Brown and for Mike just a little bit of clarity on how should we think about that.

Step up in revenues from Q.

<unk> for the Q1 or are you expecting flattish I mean, historically I mean, given the two quarters, it's usually like a low single digit step up is what you've seen is that.

Is that something is that is that similar or are we looking more flattish or down Q to Q.

Well we have.

We're looking at.

I would say more like low single digit step up.

Great.

Thank you and as we look at Opex you talked about.

Retaining people and doing like that is there any <unk>.

Incremental head count.

<unk> opex spending SG&A spend that we need to sort of incorporate relative to what you had said on the analyst day.

Okay.

Yes.

We continue to.

Invest in our commercial organization and our sales and marketing efforts.

And we also.

We continue to invest in our our corporate infrastructure in terms of Opex. However, no difference from the assumptions that we provided at the Investor day.

Got it.

And just some other cleanup interest expense for.

For the year.

Interest expense for for 2022.

Yes, Sir.

<unk> $50 3 million.

Great.

Thank you and just one other one.

I mean, just reiterating no cancellations, it's all push out and you are just being very conservative based upon what you see at this point in the year.

So we had really no significant Kent, we have no no cancellations we had.

Actually quite healthy bookings in Q4.

We did see some of the same slowdown that we saw in December and early January .

As we moved into February that seems like things have picked up though.

Great.

These are healthy and we didn't lose any significant business.

Yes.

Thanks.

Thank you.

As a reminder to ask a question you would need to press star one on your telephone to withdraw.

Your question. Please press the pound key.

I show. Our next question comes from the line of Vikram <unk> from Baird. Please go ahead.

Yes. Thank you for taking the questions I just wanted to follow up on some of your comments around the workforce. I think you mentioned that there was increased attrition towards the end of the year could you just give us some more color on some of the drivers behind that dynamic and what youre seeing so far this year and then I guess going forward I am wondering if you can just put a finer point on your expectations around head count growth in fiscal 'twenty two.

And maybe what parts of the business or what geographies, you're most focused on from a hiring perspective.

Thanks Vikram.

So we saw quite low turnover.

In 2020 and through the first half of 2021.

Like a lot of companies.

We saw some increased turnover in the second half of 2021.

If you average it over 2020 , one, though it was probably at or maybe even lower than our historical average so I think might've been.

Maybe a delayed reaction to people hanging on.

In the beginning of the year.

<unk>.

Our turnover rate is always something we pay a lot of attention to it because.

We want surcharge to be a place where software developers and drug developers come in.

Innovate and do some really amazing work and so we do pay a lot of attention to this.

We've seen it.

We've seen that probably.

Improved as we've gone into the first half of this year or the first part of this year.

So the second part of your question, maybe I'll ask Andrew to comment around the <unk>.

For this year.

We've seen.

The delays that we have referenced earlier also has some impact on Q4 bookings. So we are seeing healthy bookings going into the year. This year.

And.

In line with that we're looking at expanding our our billable head count by around 18% in 2022.

Okay, great. Thank you and then I apologize if I missed this but could you clarify what the fiscal 'twenty two revenue guidance assumes core growth rates across biosimilars and market access some regulatory I think you gave some color on those different components at the Investor Day, I just want to make sure we understand the new range of <unk>.

Thanks.

Sure in terms of.

Growth rates it would be.

Hi.

High teens mid to high teens for the Biosimilar <unk> and low to mid teens for the regulatory.

The difference being historically they would grow.

It's similar growth rates, but the delays are having the greatest impact on the regulatory side.

Okay. Thank you.

Thank you.

I am showing no further questions in the queue at this time I would like to turn the call back over to Mr. William theory from CEO for closing remarks. Please go ahead.

Thanks, very much so thanks, everybody for joining us Tonight.

I think that the message I'd like to leave everybody with is we.

We had some temporary.

Lengthening of some regulatory projects, coupled with an unfortunate timing around omicron, but fundamentally we believe the company is very healthy.

And.

To support that I look at it.

The strength of our bookings which were quite good.

For a full year of 2021 and as we finished the year.

<unk>.

We've seen.

As I said earlier, we saw a continuation of the omicron delays.

Delays in the first part of January but that seems to have been ameliorated and things have been picking up as we went into February our guidance changes.

Based on.

What we see right now in terms of.

<unk>.

We haven't lost any work some things have stretched out and they have slipped but fundamentally we think as we go through 2022, we should see an acceleration the overall market is healthy company.

Company is healthy and we feel quite excited about our future.

So I'll wrap up now and say thank you to everybody for joining us Tonight.

Thank you.

Today's conference call.

Thank you for participating you may now disconnect good day.

[music].

Okay.

Yes.

[music].

Okay.

[music].

Good day, and thank you for standing by and welcome to <unk> fourth quarter 2021 earnings Conference call. At this time, all participants on a listen only mode.

So to speak of presentation, there will be a question and answer session to ask a question. During the session you would need to press star one on your telephone. Please be advised that today's conference is being recorded if.

If you require any further assistance please press star zero.

I would now like to hand, the conference over to your first speaker today to Mr. David Clair Investor Relations you may begin.

Okay.

Yeah.

Good afternoon, everyone.

You all for participating in today's conference call on the call. Since retired we have William Furry, Chief Executive Officer, and Andrew <unk>, Chief Financial Officer earlier today. So Tar released financial results for the quarter ended December 31, 2021 copy of the press release is available on the Companys website.

For a list and description of the risks and uncertainties associated with <unk> business. Please refer to the risk factors section of our Form 10-K filed with the Securities and Exchange Commission on March one 2022, which will be filed shortly after this call. We urge you to consider these factors when you should be aware that these statements should be considered estimates only and are not a guarantee of future performance.

Also in their remarks or responses to questions management May 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 on our recent earnings release, which is available on the company's website.

Conference call contains time sensitive information and is accurate only as of the live broadcast today March one 2022, so it's hard 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. Thank you for joining sitars fourth quarter and full year earnings call, Andrew and I will start with prepared remarks, and then we will take questions.

Software technologies and services.

So our strategy is to transform the drug R&D process with our end to end platform powered by innovative technology and our global team of leading experts, we not only speed up the process, but also help to advance safety and efficacy of drugs for millions of patients worldwide.

For the full year, we reported total revenue of 286 million growing 17% year over year, including clinical 'twenty one.

And 15%, excluding clinical 21 contribution in the fourth quarter.

2021 revenue growth was in the double digits in every region of the world.

Fourth quarter total company revenue was $75 3 million.

17% versus the same period a year ago.

And then it got 21 and contributed $6 1 million in the quarter.

Excluding pinnacle 'twenty, one revenue was $69 $2 million drilling, 7% compared with the same period a year ago.

Excluding political 'twenty, one fourth quarter software revenue was in line with expectations growing 13% compared with the fourth quarter of 2020.

But technology driven services came in below our expectations growing 6% compared with the fourth quarter of 2020.

Our technology driven services performance in the fourth quarter was driven by two issues, both of which impacted the timing of work being executed.

As we commented in our third quarter earnings call in November .

We have been experiencing variability in the timing of our regulatory services projects due to COVID-19 related delays.

We did not have cancellations and our bookings and regulatory services projects continued to be strong.

<unk> and revenue recognition and regulatory which resulted in a shortfall in Q4 and services.

In the back half of the year technology, driven services revenue grew 16% year over year, and we expect it to continue growing in the mid teens in 2022.

We expect these delays will moderate in 2022, and we will recapture most of this regulatory services revenue over the course of the year.

We continue to work hard to manage consistent conversion of our bookings billings to smooth out our revenue recognition throughout the year.

Second the surge in COVID-19 cases, resulting from the omicron varian reduce the cap capacity of our employees and clients in the back half of the fourth quarter we.

We believe that these are transitory factors that we are well equipped to manage in 2022.

As we look forward to the coming year, we remain optimistic about activity returning to more normal levels as the year progresses with conferences coming back and more people back in the office.

Turning to software we were pleased with our performance during the fourth quarter, which grew 46%, including Pinnacle 'twenty, one and 13% excluding pinnacle 'twenty one.

The growth was driven by a 96% software renewal rates and strong demand for our proprietary bio stimulation software are Phoenix and since it platforms and political 'twenty. One also delivered according to our expectations.

As we mentioned at our December Investor Day, we see a number of compelling opportunities ahead for <unk> and software and we've increased our investment to support those R&D activities in 2022.

Specifically, we are focused on expanding the use cases of our sincere simulator, which continues to grow and adoption to reduce or waived drug drug interaction and bio equivalent studies as well as support better dosing for special patient populations.

Bookings trends in both software and technology driven services remained strong.

Fourth quarter bookings grew 30% year over year.

And trailing 12 months bookings grew 18% over the prior period, including the contribution from vehicle 'twenty one.

As such we remain well positioned to achieve our long term financial and strategic plans.

The integration of Pinnacle 'twenty, one into our software group was an important focus in the fourth quarter.

We are now beginning to execute on the promise of the compelling opportunities identified when we acquired Pinnacle 'twenty one.

The feature rich release proactively support the new Dubai define XML to one data standard.

This is the first of many growth milestones, we expect to emerge from the Pinnacle 'twenty one platform.

Updating certain higher software remains a top priority for our team and we continue to innovate during the fourth quarter with the release of <unk> simulator version 21, and <unk> hundred 60, <unk> scientific Informatics software version 21 five.

The latest update to the <unk> stimulator aligns with recent regulatory guidance and it includes other updates to support customers' development priorities, including additions to the compound library to facilitate drug drug interaction analysis and updates to our renal and hepatic impaired population models.

<unk>.

The latest version of <unk> hundred 60 software increases efficiency in analyzing and guiding the design of small molecule drugs and biologics.

We remain very encouraged by the growing pipeline and opportunity for our software to advanced Discovery research.

During the quarter, we announced that the FDA has renewed and expanded licenses of surcharge Biosimilar <unk> software with more than 400 user licenses of <unk> and Phoenix platforms across 12 divisions and offices.

The FDA also recently licensed our Immunogenicity simulator for the first time to research and evaluate immunogenicity and regulatory submissions for biologics.

Immunogenicity or.

Where the tendency of protein based therapeutics to trigger an immune response is a major problem in drug development.

Our immunogenicity simulator predicts the.

The immunogenicity incidents of Therapeutics to guide dosing in study design for medical clinic for better clinical outcomes for patients.

It continues to be a privilege for us to provide software that global regulatory agencies can rely on to inform their reviews of regulatory submissions.

2021 was also the eighth consecutive year that surcharge customers received 90% of the novel drug approvals by the FDA.

Excluding diagnostic products.

The sensitive stimulators using 13 of these approvals to inform the drug label.

We are excited by the recent launch of the Fda's project, Optimus initiative, which aims to reform the dose optimization and dose selection paradigm in oncology drug development.

This is important for drug developers in patients because the current approach of maximum tolerated dose may lead to selection of the dose that provides more toxicity without additional efficacy.

So <unk> is well positioned to address these upcoming changes in dose finding and the evolving regulatory landscape with our extensive experience in call. It in oncology as well as dose optimization trial design regulatory strategy and submissions.

As outlined in our strategy, we continue to invest in the business and add to our expert team worldwide.

Towards the end of the year, we experienced an increase in attrition due to a variety of factors.

Our attrition was fairly low in 2020, so now we're getting back to more normal levels of attrition that we had experienced pre COVID-19 .

We continue to prioritize adding top talent and in 2021, we hired leading scientists and subject matter experts to support our ongoing growth.

We ended the year with approximately 1100 employees, including more than 350 employees with doctorate degrees.

<unk> culture and commitment to innovation and customer partnerships continue to attract top talent.

And the competitive hiring environment.

We remain focused on making sure Tara the employer of choice in the industry.

In summary, I am pleased with the performance of the company in 2021.

Delivering double digit growth in software and services advancing the adoption of Biosimilars Asian, and acquiring and integrating peninsula <unk> 'twenty one.

While revenue from our regulatory services business in the fourth quarter did not meet our expectations, our bookings growth and our momentum remains strong.

I'm confident in our sitar team to execute our plan.

I'll now turn this over to our CFO , Andrew Schmidt to discuss the fourth quarter and full year financial results in more detail.

Thank you William Hello, everyone.

Total revenue for the three months ended December 31, 2021 was $75 3 million.

Representing year over year growth of 17%.

Excluding pinnacle 21 fourth quarter revenue growth was 7%.

Full year 2021 reported revenue was $286 1 million, which represents 17% year over year growth.

Excluding pinnacle 21 full year revenue grew 15%.

In line with our long term plan. Despite the unexpected performance of our technology driven services business in the fourth quarter.

We are very well positioned for 2022 with trailing 12 months bookings coming in at $341 7 million up approximately 19% year over year on a reported basis.

And up approximately 16% excluding pinnacle 'twenty one.

I continue to look at trailing 12 months bookings as a predictor of forward 12 months revenues.

Yeah.

Book to Bill has been stable ending the year at $1, one nine times and the annual bookings in 2021 as a percentage of forward revenue supports of the visibility into our guidance for the year.

Software revenue was $25 5 billion in the fourth quarter, which increased 46% over the prior year period.

Excluding $5 $7 million in Pinnacle 'twenty, one software revenue contribution year over year growth was 13%.

The growth in the quarter, excluding Pinnacle 21 was driven by our Biosimilars and software.

In Phoenix.

For the full year software revenue was $86 8 million, representing 18% growth as compared to 2020.

Excluding political 21 year over year growth for the full year software revenue was 10% driven by Phoenix and integral.

Software bookings were $32 $3 million in the fourth quarter, which increased 54% from the prior year period.

Pinnacle 'twenty, one contributed $8 2 million for software bookings in the fourth quarter.

So <unk> <unk> year over year software bookings growth, excluding pinnacle 'twenty, one was 15%.