Q4 2023 Certara Inc Earnings Call

Operator: Hello, and thank you for standing by. Welcome to Certara's fourth quarter 2023 earnings conference call. At this time, all participants are in a listen-only mode.

Hello, and thank you for standing by.

To talk fourth quarter 2023 earnings conference call.

At this time all participants are in a listen only mode.

Operator: After the speaker's presentation, there will be a question and answer session. To ask a question during this session, you will need to press Star 1-1 on your telephone. You will then hear an automated message advising your hand is raised, or to withdraw your questions, press Star 11 again. I would now like to hand the conference over to David Deuchler, Head of Investor Relations. Sir, you may begin. Good afternoon, everyone.

After the speaker's presentation, there will be a question and answer session.

To ask a question. During this session you will need to press star one on your telephone you would then here of automated message advising your hand this race.

To withdraw your question.

Our star one again.

I would now like to hand, the coffee shop with David <unk> head of Investor Relations, Sir you may begin.

Good afternoon, everyone. Thank you all for participating in today's conference call on the call from search her we have Blaine Furry, Chief Executive Officer, and John Gallagher Chief Financial Officer.

David J. Deuchler: Thank you all for participating in today's conference call. On the call from Certara are William Feehery, Chief Executive Officer, and John Gallagher, Chief Financial Officer. Earlier today, Certara released financial results for the quarter ended December 31, 2023.

Today's to Retard released financial results for the quarter ended December 31, 2023, a copy of the press release is available on the company's website before we begin I would like to remind you that management will make statements. During this call that include forward looking statements and actual results may differ materially from those expressed or implied in the forward looking statements. Please refer to slide two and the accompanying materials for additional information.

David J. Deuchler: A copy of the press release is available on the company's website. Before we begin, I would like to remind you that management will make statements during this call that include forward-looking statements, and actual results may differ materially from those expressed or implied in such forward-looking statements. Please refer to slide two in the accompanying materials for additional information, which you can find on the company's investor relations site. In their remarks or responses to questions, management may mention some non-GAAP financial measures. Reconciliations of these non-gap financial measures to the most directly comparable gap measures are available in the recent earnings press release available on the company's website. Please refer to the reconciliation tables in the accompanying materials for additional information.

Which you can find on the company's Investor Relations site.

In our remarks or responses to questions and it shouldn't may mention some non-GAAP financial measures reconciliations of these non-GAAP financial measures to the most directly comparable GAAP measures are available on our recent earnings press release available on the company's website.

Please refer to the reconciliation tables and the accompanying materials for additional information.

David J. Deuchler: The commerce call contains time-sensitive information and is accurate only as of the live broadcast today, February 29, 2024. Certara disclaims any 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.

This call contains time sensitive information and is accurate only as of the live broadcast today February 29 2024.

Disclaims any 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.

I will turn the call over to William.

Thank you David Good afternoon, everyone. Thank you for joining <unk> fourth quarter and full year earnings call.

William F. Feehery: Thank you for joining Certara's fourth quarter and full year earnings call. John and I will start with prepared remarks, and then we will take your questions. We are pleased to finish the year with a solid fourth quarter performance in both software and in technology-enabled services. 2023 presented our industry with many challenges, pharmaceutical and biotech customers were conservative in their spending amidst macroeconomic and geopolitical pressure. Full year reported revenue growth was 6%, in line with the guidance we gave in August. This revenue growth included 14% growth in software and 1% in technology-enabled services. We had record software sales in the fourth quarter, and we were encouraged to see our technology-enabled services bookings pick up in the second half of 2020. Certara's goal is to enable model-informed drug development, or MIDD, in the Global Pharmacy by a pharmaceutical company. MIDD is an approach that utilizes biology.

John and I will start with prepared remarks, and then we will take your questions.

We are pleased to finish the year with a solid fourth quarter performance in both software and technology enabled services.

2023 presented our industry with many challenges as pharmaceutical and biotech customers were conservative in their spending amidst macroeconomic.

And geopolitical pressures.

Our full year reported revenue growth was 6% in line with the guidance. We gave in August. This revenue growth included 14% growth in software and 1% and technology enabled services.

We had record software sales in the fourth quarter and we were encouraged to see our technology enabled services bookings pick up in the second half of 2023.

So our goal is to enabled model informed drug development or <unk>.

And the global pharmacy biopharmaceutical industry.

<unk> is an approach that utilizes biological.

Statistical models derived from preclinical and clinical data to inform decision, making and drug development and commercialization.

Unknown Executive: Unknown Executive, Gaurav Goparaju, Kyle Crews, Jeffrey Garro, Daniel Leonard, Michael Ryskin, John Gallagher, Joseph Vruwink, Daniel Leonard, Michael Ryskin, Jeffrey Garro, David Deuchler, Biosimulation is a critical component of MIDD that uses computer-aided mathematical simulation of biological processes and systems to understand the action of a drug in a human body or in a population of We have an extensive and expanding list of customers within the biopharmaceutical industry, which expanded in 2023 to a count of 2,395. Within this customer base, as of December 31st, 2023, we had 389 customers with an annual contract value of more than $100,000, representing growth of 5% year over year. We also had 63 customers with annual contract values of more than $1 million, up 11% from 2020.

By our stimulation is a critical component of that might be the user's computer aided mathematical stimulation of biological processes and systems to understand the action of the drug in the human body or in a population of humans.

<unk> enables our customers to use biosimilars <unk> and <unk> to increase the probability of success in bringing a new drug to market.

And to decrease the cost of drug development.

We have an extensive an expanding list of customers within the biopharmaceutical industry, which expanded in 2023 to account of 2395.

Within this customer base as of December 31, 2023, we had 389 customers with an annual contract value of more than $100000 representing growth of 5% year over year.

We also had 63 customers with annual contract value of more than $1 million up 11% from 2022.

Okay.

During the second half of 2023, we've reorganized our commercial infrastructure to better sell our end to end solutions and the team delivered improved results in both software and services throughout the second half.

With our new enterprise sales approach, we have effectively captured as cross selling opportunities.

Turning to expanded relationships with some of our top customers.

I am very happy with the progress our team has made so far and I am confident that these improvements will support our commercial initiatives in the coming years.

Our software business growth of 14% in 2023 was driven by our Sim Sip Phoenix and Pinnacle 'twenty one platforms.

William F. Feehery: During the second half of 2023, we reorganized our commercial infrastructure to better sell our end-to-end solutions, and the team delivered improved results in both software and services. With our new enterprise sales approach, we have effectively captured cross-selling opportunities, leading to expanded relationships with some of our top customers. I am very happy with the progress our team has made so far, and I'm confident that these improvements will support our commercial initiatives in the coming years. Our software business growth of 14% in 2023 will be driven by our SimSip, Phoenix, and Pinnacle21 platforms. We have been investing in these products to add new features, a number of which launched during 2023 and will continue to gain traction as we move into 2024.

We have been investing in these products to add new features a number of which launched during 2023 and we will continue to increase traction as we move into 2024.

Some of the highlights in 2023 included the 22nd version of our <unk> PV PK simulator.

Which included several upgrades to our modeling and simulation capabilities.

We also lost launched sensitive biopharmaceutical.

New module designed to a drug formulation and expanded our presence in the early stages of drug development.

Following the acquisition of the asset last January we began to integrate AI and machine learning across our portfolio.

An early example was the release of an updated version of <unk> hundred 60, which featured deep learning models for novel chemical structure generation and automated property prediction.

We also launched co author.

A new regulatory writing tool that uses general generative AI to aid in the drafting of regulatory submissions.

Customer feedback on our AI products has been encouraging and drove customer interest in the second half of the year.

Looking ahead to 2024, we will continue to invest in our software platform.

One key area of focus is our clinical data strategy.

Last fall, we augmented the pinnacle 'twenty, one David exchange with the acquisition of <unk>, a provider of data standardization and automation software.

William F. Feehery: Some of the highlights in 2023 included the 22nd version of our SimCity PBPK Simulator, which included several upgrades to our modeling and simulation capabilities. We also launched Simstit Biopharmaceuticals, a new module designed to aid drug formulation and expand our presence in the early stages of drug development. Following the acquisition of Viasa last January, we began to integrate AI and machine learning across our portfolio. An early example was the release of an updated version of D360, which featured deep learning models for novel chemical structure generation and automated property. We also launched co-op, a new regulatory writing tool that uses generative AI to aid in the drafting of regulatory submissions.

With for medics, the tire will bring increased efficiency to clinical trial data management via an end to end solution.

In addition to clinical 'twenty, one we also plan to invest in other areas such.

Such as new models for Biosimilars <unk> new.

And product features and additional integration of AI across the platform.

As far as stimulation becomes more widespread we are broadening the range of our offerings to support additional use cases and therapeutic areas.

Confident that these investments will create new opportunities to grow our platform on a global scale and penetrate deeper into our customers' R&D organization.

Our our technology enabled services business overcame market headwinds to deliver solid performance in the second half of 2023.

In August we announced the consolidation of our Biosimilars <unk> services and regulatory services teams in order to better deliver all of the surcharges capabilities to our customers projects.

William F. Feehery: Customer feedback on our AI products has been encouraging and drove customer interest in the second half of the year. Looking ahead to 2024, we will continue to invest in our software platform. One key area of focus is our clinical data strategy. Last fall, we augmented Pinnacle21 data exchange with the acquisition of Prometix, a provider of data standardization and automation software. With Formedics, Certara will bring increased efficiency to clinical trial data management via an end-to-end solution.

Thus far we are pleased with the improved execution in the services business, which is performing better as a combined organization.

Across our technology enabled services group, we saw a pickup in new business activity, which led to sequential bookings growth in the fourth quarter.

Customers of all sizes continue to recognize the value that <unk> services can add to their modeling simulation and regulatory projects.

We look forward to building on this momentum in 2024.

As the leader in bio stimulant expanding into emerging methods of modeling and simulation is a key component of our business strategy.

In December we announced the acquisition of applied biomass, a leading provider of <unk> services.

OSP or quantitative systems pharmacology.

Combined computationally modeling and experimental data to stimulate the body will respond to a drug <unk>.

William F. Feehery: In addition to Pinnacle 21, we also plan to invest in other areas, such as new models for biosimulation, new products, and product features, and additional integration of AI across the platform. As biosimulation becomes more widespread, we are broadening the range of our offerings to support additional use cases in therapeutic areas. I am confident that these investments will create new opportunities to grow our platform on a global scale and penetrate deeper into our customers' R&D organizations. Our technology-enabled services business overcame market headwinds to deliver solid performance in the second half of 2020. In August, we announced the consolidation of our biosimulation services and regulatory services teams in order to better deliver all of Certara's capabilities to our customers.

<unk> is at the cutting edge of Biosimilars and approaches and has vast potential to improve the biopharmaceutical R&D and informed decision making across the drug development process.

Along with proprietary software applied biomass, bringing the complementary customer base, which includes clients in the discovery and preclinical stages of development by.

By combining the <unk> biomass and <unk> teams, we are proud to have the large <unk> services group in the drug development industry.

In 2023, we continue to invest in our business and expand our team worldwide.

We prioritized hiring leading scientists and subject matter experts to support our growth.

As of the end of 2023, we had about 1400 employees, including more than 400 employees with doctorate degrees.

We believe we are the employee of choice in the Biosimilars as an industry and we offer a strong culture and commitment to innovation.

We believe there is an opportunity for us to accelerate some investments in 2024 across our organization.

In particular, we intend to invest in the development of software capabilities, including AI as well as expand our commercial organization, including key account management positions.

William F. Feehery: Thus far, we are pleased with the improved execution in the services business, which is performing better as a combined organization. Across our technology-enabled services group, we saw a pickup in new business activity, which led to sequential bookings growth in the fourth quarter. Customers of all sizes continue to recognize the value that Certara services can add to their modeling, simulation, and regulatory projects.

These investments will start to yield minor benefit in 2024, but will be most impactful in 2025 and 2026.

In closing we are pleased with our 2023 results.

The growth opportunity in Biosimilars <unk> continues to strengthen as drug developers look to maximize capital efficiency and reduced pipeline risk.

I am confident that the secular adoption of Biosimilars <unk>, our improved commercial execution and the investments, we're making in our products and our team will support strong growth in 2024 and beyond.

William F. Feehery: We look forward to building on this momentum in 2020 as the leader of bio-stimulation. Expanding into emerging methods of modeling and simulation is a key component of our business strategy. In December, we announced the acquisition of Applied Biomass, a leading provider of QSP services. QSP, or Quantitative Systems Pharmacology, combines computational modeling and experimental data to simulate how the body will respond to a drug.

I will now turn it over to our CFO, John Gallagher to discuss our fourth quarter and full year financial results in more detail.

Thank you William Hello, everyone total revenue for the three months ended December 31, 2023 was $88 million representing year over year growth of 2% on a reported basis and 1% on a constant currency basis.

For the full year 2023, total revenue was $354 3 million, which represents 6% growth on a reported basis and on a constant currency basis.

William F. Feehery: QSP is at the cutting edge of biosimulation approaches and has vast potential to improve biopharmaceutical R&D and inform decision making across the drug development process. Along with proprietary software, Applied Biomath brings a complementary customer base, which includes clients in the discovery and preclinical stages of development. By combining the Applied Biomath and Certara QSP teams, we are proud to have the largest QSP services group in the drug development industry. In 2023, we will continue to invest in our business and expand our team worldwide. We prioritized hiring leading scientists and subject matter experts to support our growth.

Bookings, which provides visibility into the year ahead came in at $402 $3 million for the trailing 12 month period ended.

December 31, 2023 down 2% year over year.

Our total company book to Bill ratio ended the year at 114.

Bookings as of December 31, 2023, do not include bookings from Hermetic or applied biomass.

Software revenue was $33 6 million in the fourth quarter, which increased 15% over the prior year period on a reported basis and 14% on a constant currency basis.

The growth in the quarter was driven by bio stimulation software and clinical 'twenty one.

For the full year software revenue was $131 $7 million up 14% on a reported basis and on a constant currency basis.

William F. Feehery: As of the end of 2023, we had about 1400 employees, including more than 400 employees with doctorates. We believe we are the employer of choice in the biosimulation industry, and we offer a strong culture and commitment to innovation. We believe there's an opportunity for us to accelerate some investments in 2024 across our organization. In particular, we intend to invest in the development of software capabilities, including AI, as well as expand our commercial organization, including key account management positions. These investments will start to yield minor benefits in 2024 but will be most impactful in 2025 and 2026. In closing, we are pleased with our 2023 results. The growth opportunity in bias simulation continues to strengthen as drug developers look to maximize capital efficiency and reduce pipeline risk.

Ratable and subscription software revenue amounted to 62% of total software revenue for the year up from 60% in the prior year.

Ratable and subscription revenue accounted for 68% of fourth quarter software revenues.

Software bookings were $43 $3 million in the fourth quarter, which increased 10% from the prior year period trailing.

Trailing 12 month software bookings were $136 9 million also up 10% year over year.

The software aggregate renewal rate was 85% in the fourth quarter and 88% for the year.

I'd like to take a moment and discuss the AAR metric and how it has evolved over the past couple of years.

We had a very strong Q4 software revenue performance up 15% and on a full year performance up 14% despite <unk> being.

Being in the mid <unk> in the second half of the year and 88% for the full year.

As our software business has grown and expanded particularly with additional features and the mix conversion to a subscription or ratable software revenue.

We have found the IRR metric to be less informative of the underlying performance of the business.

John E. Gallagher: I am confident that the secular adoption of biosimulation, our improved commercial execution, and the investments we are making in our products and our team will support strong growth in 2024 and beyond. I will now turn it over to our CFO, John Gallagher, to discuss our fourth quarter and full year financial results in Ward 2. Thank you, William. Hello, everyone.

As we evaluate customer retention and growth in existing customers across the portfolio.

Our metric is not capturing the performance of the products of our business when incorporating the SaaS conversion by ASUR options and expanding political 'twenty. One features among other initiatives.

As a result, we are moving away from <unk> as the <unk> of the software business internally and we will do so externally as well.

John E. Gallagher: Total revenue for the three months ended December 31, 2023 was $88 million, representing every year growth of 2% on a reported basis and 1% on a constant For the full year 2023, total revenue was $354.3 million, which represents 6% growth on a reported basis and on a constant. Bookings, which provide visibility into the year ahead, came in at $402.3 million for the trailing 12-month period ended December 31, 2022, down 2% here. Our total company book to bill ratio ended the year at 1.14. Bookings as of December 31, 2023, do not include bookings from Promatic or Applied Biomedicine. Software revenue was $33.6 million in the fourth quarter, which increased 15% over the prior year period on a reported basis and 14% on a constant current basis. The growth in the quarter was driven by bio-simulation software and Pinnacle 21. For the full year, software revenue was $131.7 million, up 14% on a reported basis and on a constant current basis. Radical and subscription software revenue amounted to 62% of total software revenue for the year, up from 60% in the prior year.

For continuity, we will report the IRR on an annual basis going forward.

We do believe that the net retention rate, which reflects the existing customer revenue is a better metric to measure the performance of our existing business.

In the fourth quarter and for the full year 2023, the net retention rate was 109%, which is consistent with our long term growth algorithm.

The fourth quarter revenue growth of 15% and our full year revenue growth of 14% represents healthy performance and contribution from new customers on a go forward basis, we intend to provide the software and net retention ratio on a quarterly basis.

Now turning to services revenue, which was $54 4 million in the fourth quarter down 5% versus the prior year on a reported basis and down 6% on a constant currency basis.

For the full year services revenue was $222 $7 million up 1% on a reported basis and on a constant currency basis.

Technology, driven services bookings in the fourth quarter were $75 $6 million, which decreased 7% from the prior year period.

TTM services bookings were $265 $4 million also about 7% of compared to the prior year.

Total cost of revenue for the fourth quarter of 2023 was $34 $1 million, an increase from $31 8 million in the fourth quarter of 2022, primarily due to a $2 $6 million increase in stock based compensation offset by law.

Lower outside consulting costs of <unk> 4 million.

Total operating expenses for the fourth quarter of 2023 were $62 $4 million, an increase from $43 $5 million in the fourth quarter of 2022.

The components of operating expenses are as follows.

John E. Gallagher: Routable and subscription revenue accounted for 68% of fourth-quarter software revenue. Software bookings were $43.3 million in the fourth quarter, which increased 10% from the prior year period. Trailing 12-month software bookings were $136.9 million, also up 10% year-over-year. The software aggregate renewal rate was 85% in the fourth quarter and 88% for the year.

Sales and marketing expenses were $8 $7 million compared with $7 $8 million in the fourth quarter of 2022.

This increase is primarily due to zero point $6 million in employee expenses due to the expansion of the sales force and zero point $2 million increase in marketing and travel costs.

R&D expenses were $8 million compared to $6 6 million in the fourth quarter of 2022.

R&D expenses were up primarily due to $2 million in employee related costs, which were offset by lower stock based compensation and capital development cost.

G&A expenses were $33 6 million compared to $18 $3 million for the fourth quarter of 2022.

John E. Gallagher: I'd like to take a moment and discuss the ARR metric and how it has evolved over the past couple of years. We had a very strong Q4 software revenue performance, up 15%, and a full-year performance, up 14%, despite our ARR being in the mid-80s in the second half and 88% for the full year. As our software business has grown and expanded, particularly with additional features and Mixed Conversion to Subscription or Routable Software Revenue, we have found the ARR metric to be less informative of the underlying performance of the business.

The increase was primarily due to a $12 $8 million change in contingent considerations related to the bi asset acquisition.

And $1 $6 million in acquisition costs, partially offset by $1 $5 million decrease in stock based compensation.

Intangible asset amortization was $11 7 million compared to $10 3 million in the fourth quarter of 2000 to 2022.

Depreciation and amortization expense was zero point $4 million flat with last year.

Continuing down the P&L interest expense was $5 $9 million.

Compared to $5 $5 million for the fourth quarter of 2022 due to higher interest expense related to the floating portion of our term loan.

John E. Gallagher: As we evaluate customer retention and growth in existing customers across the portfolio, the ARR metric is not capturing the performance of the products or business when incorporating the Fast Conversion, Viasa options, and expanding Pinnacle 21 features, among others. As a result, we are moving away from ARR as a KPI of the software business internally, and we'll do so externally as well. For continuity, we will report the ARR on an annual basis going forward. However, we do believe that the net retention rate, which reflects the existing customer revenue, is a better metric to measure the performance of our existing customers. In the fourth quarter and for the full year 2023, the net retention rate was 109 percent, which is consistent with our long-term growth algorithm.

Miscellaneous income was $2 million compared to an expense of $2 $2 million for the fourth quarter of 2022.

Income tax expense was zero point $1 million, bringing the full year provision to zero point $2 million compared to $4 million in the prior full year.

Net loss for the fourth quarter of 2023 was $12 $5 million compared to net income of $9 $2 million in the fourth quarter of 2022.

Reported adjusted EBITDA for the fourth quarter of 2023 was $29 6 million compared to $31 9 million for the fourth quarter of 2022.

Adjusted EBITDA margin was 33, 6% for the fourth quarter of 2023.

34, 7% for the full year 2023.

John E. Gallagher: The fourth quarter revenue growth of 15% and full year revenue growth of 14% represent healthy performance, and On a go-forward basis, we intend to provide the software net retention ratio on a quarterly basis. Now turning to services revenue, which was $54.4 million in the fourth quarter, down 5% versus the prior year on a reported basis and down 6% on a. For the full year, services revenue was $222.7 million, up 1% on a recorded basis and on a constant current basis. Technology-driven services bookings in the fourth quarter were $75.6 million, which decreased 7% from the prior year period. TTM Services bookings were $265.4 million, also down 7% as compared to the prior year.

Reported adjusted net income for the fourth quarter of 2023 was $14 $3 million.

Compared to $25 $2 million for the fourth quarter of 2022.

Diluted loss per share for the fourth quarter of 2023 was eight tenths of compare.

Earnings per share of <unk> in the fourth quarter of 2022.

Adjusted diluted earnings per share for the fourth quarter of 2023 was <unk> <unk>.

Compared to <unk> 16 for the fourth quarter of 2022.

Now moving to the balance sheet, we ended the quarter with $235 million of cash and cash equivalents.

As of December 31, 2023, and we have $288 $2 million about standing borrowings on our term loan and full availability under our revolving credit facility.

Turning to the guidance for full year 2024.

We expect total revenue in the range of $385 million to $400 million representing.

Representing growth of 9% to 13% compared with 2023.

We expect to grow adjusted EBITDA on a dollar figure basis in 2024, and expect an adjusted EBITDA margin in the range of 31% to 33%.

John E. Gallagher: Total cost of revenue for the fourth quarter of 2023 was $34.1 million, an increase from $31.8 million in the fourth quarter of 2022, primarily due to a $2.6 million increase in stock-based compensation, offset by lower outside consulting costs of $0.4. Total operating expenses for the fourth quarter of 2023 were $62.4 million, an increase from $43.5 million in the fourth quarter of 2022. The components of operating expenses are as follows. Sales and marketing expenses were $8.7 million compared to $7.8 million in the fourth quarter of 2020. This increase is primarily due to $0.6 million in employee expenses. Due to the expansion of the sales force and a $0.2 million increase in marketing and travel, R&D expenses were $8 million compared to $6.6 million in the fourth quarter of 2022. R&D expenses were up primarily due to $2 million in employee-related costs, which were offset by lower stock-based compensation and capital development.

We expect adjusted EPS in the range of 41 to <unk> 46 per share.

Fully diluted shares in the range of $160 million to $162 million.

And a tax rate in the range of 25% to 30%.

I will now turn the call back over to our CEO William Ferry for closing remarks.

Thank you John.

To summarize our message today, we are pleased with our 2023 results and we look forward to executing our 2024 goals.

A lot to be excited about at <unk> as we advanced by a simulation forward with our software and our technology enabled services.

We will now open the line for questions. Operator can you open the line.

Thank you.

Ladies and gentlemen, as a reminder to ask a question. Please press star one on your telephone and then wait to hear your name announced.

Withdraw your question. Please press star one again.

Please standby, while we compile the Q&A roster.

Our first question comes from the line of David Windley with Jefferies. Your line is open.

Hi, Good evening. Thanks for taking my question I wanted to ask a couple of circle around revenue and related.

On the on the commercial progress Bill you talked about traction in the sales force and seen a nice uptick in the fourth quarter.

I also hear you talking about some of the investments being in that sales force. So maybe you could talk about what you saw in the quarter.

That helped the bookings to kind of pick up and meet your expectations.

John E. Gallagher: G&A expenses were $33.6 million compared to $18.3 million for the fourth quarter of 2022. The increase was primarily due to a $12.8 million change in contingent considerations related to the Bias Act and $1.6 million in acquisition costs, partially offset by $1.5 million decrease in stock. Intangible Asset Amortization was $11.7 million, compared to $10.3 million in the fourth quarter.

Then where you feel like you need to make those investments I guess further that traction.

Thanks, David I appreciate the question.

So what you're referring to is the Earth.

Everybody is that earlier in the year, we combined our sales forces across the company into one sales force will recover both our software and our technical technology enabled services.

The idea behind doing that was too.

Enable us to offer our clients the full suite of what we have and to retire because after all.

John E. Gallagher: 2020. Depreciation and amortization expense was $0.4 million, flat with last. Continuing down the P&L, interest expense was $5.9 million, compared to $5.5 million for the fourth quarter of 2022, due to higher interest expense related to the floating portion of our term. Miscellaneous income was $2 million, compared to an expense of $2.2 million for the fourth quarter of 2020. Income tax expense was $0.1 million, bringing the full-year provision to $0.2 million compared to $4 million in the prior full year. Net loss for the fourth quarter of 2023 was $12.5 million dollars compared to net income of $9.2 million dollars in the fourth quarter of 2020. Reported adjusted EBITDA for the fourth quarter of 2023 was $29.6 million compared to $31.9 million for the fourth quarter of 2020.

Sure.

Most of our clients are buying multiple products and services from us. So it's not it's not really efficient too.

To call on the multiple times.

And in fact.

As we as we brought this out I think the first the first investment we had to make was in the was in the training of our sales forces and we had a lot of people who are specialized in certain products or technology enabled services. So.

We went through the year, we invested a lot in training as we got into the fourth quarter. We had people who were able to go into our clients' confidently and talk not just about the product. They had been known to have been selling all along but also be able to say hey, you know well.

You probably are and having a drug at this stage and you ought to look at this.

And that started to pay off I'd.

I would say.

That investment in the sales training and just United and Salesforce.

Is probably not fully.

Realized yet we're expecting additional gains as we go through this year.

We put.

We had limited ability to do things like change compensation plans in the middle of 2023, where that we've kind of put to put in place at.

John E. Gallagher: Adjusted EBITDA margin was 33.6% for the fourth quarter of 2023 and 34.7% for the full year 2020. Reported adjusted net income for the fourth quarter of 2023 was $14.3 million, compared to $25.2 million for the fourth quarter of 2022. Diluted loss per share for the fourth quarter of 2023 was 8 cents as compared to earnings per share of six cents in the fourth quarter of 2020.

United compensation plans that are going into 2020 for us that will make more sense.

We've got more products that are launching we've got our AI products.

Investments in.

In hiring people that are focused on them and our goal in general is to kind of up the game in terms of the just the.

Enterprise sale, taking taking taking care of our key accounts and.

And moving up the value chain in terms of how our customers think about us we did benefit in the fourth quarter I think from.

Our pick up a bit in the <unk>.

End markets and then I think there were quite a number of big customers that had budgets during the year.

John E. Gallagher: Adjusted diluted earnings per share for the fourth quarter of 2023 was nine cents compared to 16 cents for the fourth quarter of 2022. Now moving to the balance sheet. We ended the quarter with $235 million of cash and cash equivalents. As of December 31, 2023, we had $288.2 million of outstanding borrowings on our term loan and full availability under our revolving credit. Turning to the guidance for full year 2024, we expect total revenue in the range of $385-400 million, representing growth of 9-13% compared with 2023. We expect to grow adjusted EBITDA on a dollar figure basis in 2024 and expect an adjusted EBITDA margin in the range of 31% to 33%. We expect adjusted EPS in the range of 41 to 46 cents per share. Fully diluted shares in the range of $160 to $162 million and a tax rate in the range of $25 to $35.

I think we referred to this earlier, but like halfway through the year, we had clients, saying, while we haven't cut our budget, but we havent spent half of our budget. So so there was there was there was a big push.

On a number of them to kind of catch up to where they were they wanted to be at the end of the year as well. So so that was that was a welcome.

Finish to the year after some of the things we've seen earlier.

Excellent okay great.

So my my follow up then on on revenue and revenue guidance really.

You've talked to really since the IPO.

In terms of Kpis, leading indicators kpis in that.

Your trailing 12 months bookings growth is generally a good indicator for revenue growth that bookings number is down a couple of percent. Your guidance is up almost I guess midpoint double digit percent.

Maybe two points there one how much of the guide the revenue guidance is inorganic from <unk> and applied biomass and then on the organic side. What gives you confidence that you can generate growth out of a trailing bookings number that did not grow.

Yes, Hi, David It's John Thanks for the question.

And the answer to your first question then.

We're looking at the revenue.

From that perspective on an organic basis and mid single digits. So 9% to 13% reported organically is mid single digits and we feel like that the spot that we're highly confident we can execute against multiple different scenarios or outcomes there.

William F. Feehery: I will now turn the call back over to our CEO, William Feehery, for closing remarks. Thank you, John. To summarize our message today, we are pleased with our 2023 results, and we look forward to executing our 2024 goals. There's a lot to be excited about at Certara as we advance biosimulation forward with our software and our technology-enabled services. We will now open the line for questions. Operator, can you open the line?

Yes as far as the second part of the question then.

We saw we.

We saw a tier one.

Performance.

Solid stepping up from Q3 into Q4, we saw a tier ones performed very well in both software and in services and so that helped us as we exited the year.

Operator: Thank you. Ladies and gentlemen, as a reminder to ask the question, please press start, 1-1 on your telephone and then wait to hear your name announced. To withdraw your question, please press star 11 again.

Okay, great. Thank you.

Thank you.

Please standby for our next question.

Our next question comes from the line of Michael <unk> with Bank of America. Your line is open.

Hi, Thanks for taking questions bolt on for Mike just picking up on guidance. It looks like your adjusted EBIT margin outlook for 2024 is a little light considering the sales growth that youre expecting clubs.

Operator: Please stand by while we compile the Q&A roster. Our first question comes from the line of David Windley with Jeffreys. Your line is open. Hi, good evening.

David Howard Windley: Thanks for taking my question. I want to ask a couple of questions around revenue and related to the commercial progress. Bill, you talked about traction in the Salesforce and seeing a nice uptick in the fourth quarter. I also hear you talking about some of the investments being in that salesforce, so maybe you could talk about what you saw in the quarter that helped the bookings to kind of pick up and meet your expectations, and then where you feel like you need to make those investments to, I guess, further that traction. Thanks, David. I appreciate the question.

Plus where you finished 2023, you touched on that a little bit in the prepared remarks, but can you give us some color on how we should be thinking about opex growth in 2024, and any areas, where you might be able to find some additional operating leverage.

Yes, Hi, Mike So yes, the couple of key areas that we're investing in there from a margin perspective, that's leading us to the 31% to 33%.

Say that R&D as a key investment area for us, especially as we're looking at software development, we have key investments across the software platforms.

William F. Feehery: So what you're referring to is, for everybody, that earlier in the year, we combined our sales forces across the company into one sales force, where we cover both our software and our technology-enabled services. The idea behind doing that was to, uh, enable us to offer our clients the full suite of what we have in Certara because, after all, most of our clients are buying multiple products and services from us, so it's not really efficient to call on them multiple times. And in fact, you know, as we brought this out, I think the first investment we had to make was in the training of our sales forces.

<unk>, new modules that Bill mentioned zinc.

Phoenix hosted and then very importantly think about AI investments so.

That's one key area, where youll see the investment come in and then the other of course is.

The sales force so bill was talking about the.

The changes that we made on the commercial model.

We're going to expand the sales force and we're expecting to be able to increase the call point.

We.

As that comes through so thats, where youre going to see I think it's really important to note though to that.

We're guiding to the margin of 31% to 33% we're committed to growing EBITDA dollars. So even though we didn't really talk about a range. There I think it's important to note that.

William F. Feehery: And we had a lot of people who were specialized in certain products or technology-enabled services. So, you know, as we went through the year, we invested a lot in training. As we got into the fourth quarter, we had people who were able to go into our clients confidently and talk not just about the product they had been known to have been selling all along but also be able to say, hey, you know, well, you know, you probably are out of the drug at this stage, and you want to look at this. And that started to pay off.

Within that guidance.

We're committed to growing EBITDA dollars on a year over year basis.

Got it. Thank you I appreciate the color and then as a follow up it looks like you logged a pretty sizable adjustment on your.

Remeasurement of contingent consideration to be offset can you give us some more color on what drove that.

What trends are you seeing in that business, particularly.

Yes so.

Yes, so youre right, what youre seeing there the adjustment is $12 $8 million in it.

It is.

Centered on bias.

It's due to the performance of the business. There. So we're pleased with the progress and its one of the key areas for investment and I think bill wants to make a couple comments on it too yes.

Yes, second what John said I'd say.

William F. Feehery: I'd say that investment in sales training and just uniting the sales force is probably not fully realized yet. We're expecting additional gains as we go through this year. We put, you know, we had limited ability to do things like change compensation plans in the middle of 2023, where that would kind of be put in place. United compensation plans are going to 2024. So that'll make more sense.

We bought by asset base.

Basically the beginning of last year.

At a really good time.

AI was role is sort of the realization of what AI can do is really rolling out.

We've been very pleased with the integration of the asset into <unk>.

As I mentioned on my script, we have already launched a couple of products.

We have.

Revenue.

Revenues from them and we expect that to be although modest in 2024.

We're getting a tremendous amount of customer interest and as we look forward, we're feeling very.

Encouraged by the progress and the.

David Howard Windley: And, you know, we've got more products that are launching; we've got our AI products, we've made investments in, and hired people that are focused on them. And our goal, in general, is to kind of up the game in terms of the enterprise sale, you know, taking care of our key accounts and moving up the value chain in terms of how our customers think about us. We did benefit in the fourth quarter, I think, from a pick-up a bit in the end markets. And then I think, you know, there were quite a number of big customers that had budgets during the year. I think we referred to this earlier, but you know, halfway through the year, we had clients saying, well, we haven't cut our budget, but we haven't spent half of our budget. So, so there was a big push on a number of them to kind of catch up to where they wanted to be at the end of the year as well. So that was a welcome finish to the year after some of the things we'd seen earlier. Excellent. Okay, great.

Possibilities of what what we can do with our products going forward and that's reflected in that and that revaluation.

Thanks, a lot.

Thank you.

Please standby for our next question.

Our next question comes from the line of Luke <unk> with Barclays. Your line is open.

Great. Thanks, just wanted to follow up on the M&A stuff. So.

Buying you guys just acquired 500 basis points can you bucket kind of what.

The contribution from for medics, and with biomass and give us any type of.

Valuation of price paid and then give us a sense of what the margin profile isn't fundamental profile of these businesses it looks like.

Yes.

Yes, hi, so.

Some of those details that you are asking about as far as like purchase price or are in the K.

That'll be that'll be something to look at but as far as like the margin is concerned then.

Companies that we purchased were purchasing underneath that.

Our profitable.

They they may operate under what our corporate margin is but we always have a pathway to be able to get them to our corporate margin and I'd say that for medics and biomass both will fall into that camp.

Alright, and then I guess just on the guide here.

Touching a little bit I guess, so when David was talking about so.

Outside of the 500 basis points from the M&A still came in.

Pretty pretty soon.

Sizable above street, and so I'm, just what's the visibility right now in the demand environment.

David Howard Windley: Um, so my follow-up question, then on revenue and revenue guidance, really, you've talked really, since the IPO, in terms of KPIs leading indicator KPIs and that you're trailing 12 month bookings, growth is generally a good indicator of revenue growth. That bookings number is down a couple of percent; your guidance is up almost, I guess, midpoint double digit percent, maybe two points there. One question: how much of the revenue guidance is inorganic from Formetics and Applied Biomass? And then on the organic side, what gives you confidence that you can generate growth out of a trailing Bookings number that does not grow? Thanks. Yeah, hi David. It's John.

Bookings perspective or Rfps.

Gives you that confidence too.

That acceleration.

Anything that you can give us on the pacing what that looks like yes, there's three things I'd call out one is.

One is around the momentum so I talk a little bit about momentum exiting the year, we were happy with the tier ones. We also saw stability in the tier threes as we were as we were coming out of the year and so that that those bookings they didn't they didn't convert to revenue in Q4 of course, and that's what we'd be looking for in 2024.

That momentum is a solid point for us the second point is around.

It's just around the backlog conversion that we experienced during 2023.

John E. Gallagher: Thanks for the question. Yeah, in answer to your first question, then we're looking at revenue from that perspective on an organic basis in the mid single digits. So nine to 13% reported organically is in the mid single digits.

Some of the bookings conversion was slowing down has a trickle over effect into 24. So that also is as a tailwind for us in being able to convert into into 2024, and so when you take those together thats spells growth and then on top of that of course, we have new products I was touching on some of those before we have new products.

John E. Gallagher: And we feel like that's a spot that we're highly confident we can execute against multiple different scenarios or outcomes there. Yeah, as far as the second part of the question, then... We saw tier one performance step up solidly from Q3 into Q4. We saw tier one perform very well in both software and in services. And so that helped us as we exited the year. Okay, great.

That we're offering across the software platforms and think AI think Phoenix hosted.

Think about the same sip modules when you take those three different <unk>.

Catalysts together is why we have confidence in the organic mid single digits.

Michael Leonidovich Ryskin: Thank you. Thank you. Please stand by for our next question. Our next question comes from the line of Michael Ryskin with Bank of America. Your line is open.

Alright. Thanks.

Thank you.

Please standby for our next question.

Our next question comes from the line of Jeff Garrow with Stephens. Your line is open.

Yes. Good afternoon. Thanks for taking the questions wanted to dive into the strong software bookings a bit I was hoping you could parse out contributions qualitatively from price increases, adding new clients the new products that launched in 2023 and then.

Operator: Thanks for taking questions and answering Wolf on for Mike. I'm just picking up on guidance. It looks like you're adjusted even the margin outlook for 2024 is a little light considering the sales growth that you're expecting plus the plus where you finish in 2023. You touched on that a little bit in the prepared remarks, but can you give us some color and how we should be thinking about operating profit growth in 2024 and any areas where you might be able to find some additional operating leverage? Yeah, hi Mike.

The kind of old standby of cross selling existing products to your large existing customer base.

I think the key thing that we'd point you to is.

Is this software net retention rate that that we think is an important metric and looking at software. So on the quarter that was it was 109%.

John E. Gallagher: So, yeah, the couple of key areas that we're investing in there from a margin perspective that's leading us to the 31 to 33%. I'd say that R&D is a key investment area for us, especially as we're looking at software development. We have key investments across the software platforms. Think SimSip new modules that Bill mentioned, think Phoenix hosted, and then, very importantly, think about AI investments. So that's one key area where you'll see the investment come in. And then the other, of course, is around the sales force. So Bill was talking about the changes that we made to the commercial model that we're going to expand the sales force, and we're expecting to be able to increase the call point as that comes through. So that's where you're going to see it.

And that is cooked into that as existing customers expanding we are pricing in that and then the build to get to the overall software growth is the addition of new logos on top of it and that's how you get to 15% on the on the quarter. So.

<unk>.

We wouldn't break out really by platform, what that looks like but 15% software growth 14% on the year.

Is a good spot for us to be as I mentioned earlier, we saw really strong tier one performance and our customers.

John E. Gallagher: I think it's really important to note, though, too, that we're guiding to a margin of 31 to 33%. We're committed to growing EBITDA dollars. So even though we didn't really talk about a range there, I think it's important to note that within that guidance, we're committed to growing EBITDA dollars on a year over year basis. Got it. Thank you. Appreciate the color.

In software and actually across the tiers for software.

As we exited the year on bookings so.

That positions us well as we approach 2024.

Excellent I appreciate that.

And then to follow up as we think about the mid single digit organic growth for 2024, how would you compare that to the market growth. It seems like the commentary on the end market is improving.

John E. Gallagher: And then as a follow-up, looks like you logged a pretty sizable adjustment on your for the remeasurement of your contingent consideration for your FIASA. Can you give us some more color on what and what trends are you seeing in that business particularly? Yeah, so, you're right. What you're seeing there, the adjustment is $12.8 million, and it is centered on Viasa.

And that's reflected in your trajectory.

What I'm really getting at is with the year 2024 guidance does that assume that that you are taking market share or is that more an upside case.

John E. Gallagher: And it's due to the performance of the business there. So we're, you know, we're pleased with the progress. And it's, you know, one of the key areas for investment. And I think Bill wants to make a couple of comments on that, too. Yeah, second, what John said. We bought Vyasa at basically the beginning of last year, at a really good time, as the realization of what AI can do is really rolling out. We've been very pleased with the integration of Vyasa into Certara.

Okay.

Thanks, Jeff.

Bill.

Sure.

I think a couple of things are going on in the market right now so one is on the.

On the larger companies, we're seeing some stabilization in demand as they reevaluate their portfolios last year, a lot of them have come out of that and decided what they want to do so we've seen.

And we've assumed that that demand.

William F. Feehery: As I mentioned in my script, we've already launched a couple of products. We have revenues from them, and we expect that to be, although modest in 2024, we're getting a tremendous amount of customer interest. And as we look forward, we're feeling very encouraged by the progress and the possibilities of what we can do with our products going forward. And that's reflected in that revaluation. Thanks a lot.

Stays at least steady as we go through the year.

We are hearing signs of a pick up in the in biotechs.

There is some.

<unk> published that indicate.

Increased funding I don't think we've really seen that come through.

Our bookings so far but based on what we're seeing we're expecting that that maybe in the second half of the year, we'll start to see that.

Little bit healthier.

Market segment, there than we had in 2023.

Great. Thanks for taking the question.

Operator: Thank you. Will you stand by for our next question? Our next question comes from the line of Luke Sergott with Barclays. Your line is open.

Thank you.

Please standby for our next question.

Our next question comes from the line of Michael Cherny with Leerink Partners. Your line is open.

Luke England Sergott: Great, thanks. I just want to follow up on the M&A stuff. So, you know, buying, you guys just acquired 500 bases for wins. Can you kind of bucket kind of what the contribution from medics and what Biomath is and give us any type of valuation or price paid, and then give us a sense of what the margin profile is and the fundamental profile of these businesses looks like. Thank you. Yeah, hi.

Okay.

Good afternoon, and thanks for all the details so far.

Appreciate the color on the organic growth can you just give us a little sense.

How you expect it to trend between software and services I know, it's almost specialty and Paul some of the bookings, but just wanted to make sure. We have a good understanding on various different growth rates, both organic inorganic contribution against the backdrop of your margin commentary for the year.

John E. Gallagher: So some of those details that you're asking about, as far as the purchase price is concerned, are in the K. So that'll be, you know, that'd be something to look at. But as far as the margin is concerned, then, you know, companies that we purchase, we're purchasing companies that are profitable. They, you know, they may operate under what our corporate margin is, but we always have a pathway to be able to get them to our corporate margin. And I'd say that Medix and Biomass both fall into that camp.

Yes, yes, so the way to think about it as a sort of cadence through the year would be that.

You would see some acceleration across.

Both software and services Q1.

Through into Q4, I'd say for software that.

There's less of that and then I think there is really more of a story on first half second half on the services side of the business.

But even when you look at that it's probably a couple of hundred basis points, North and south of 50%. When you when you look at services accelerating into the back half.

John E. Gallagher: All right. And then I guess just on the guide here, touch on a little bit of what Dave was talking about. So, you know, the outside of the 500 basis points from the M&A still came in pretty sizable above street. And so I'm just, what's the visibility right now in the demand environment, you know, from a bookings perspective or RFPs that gives you that confidence to hit that acceleration, and anything that you can give us on the pacing, what that looks like. Yeah, there are three things I'd call out. One is around the momentum.

Okay.

Coinciding with that also would be from a margin perspective.

Historically, we have had a strong Q4, then because of the ramp that we would see going.

We progress through the year, then we would expect the margin to progress in that fashion as well.

Margin progressing alongside services, which I assume would come in at a lower gross margin or some other.

John E. Gallagher: So I talked a little bit about momentum leaving the year. We were happy with the tier ones. We also saw stability in the tier threes as we were coming out of the year. And so those bookings, you know, they didn't convert to revenue in Q4, of course, and that's what we'd be looking for in 2024. So that momentum is a solid point for us. The second point is around, the backlog conversion that we experienced during 2023, when some of the bookings conversion was slowing down, has a trickle-over effect into 24. So, you know, that also is a tailwind for us and being able to convert into 2024. So when you take those together, that spells growth. And then, on top of that, of course, we have new products. You know, I was touching on some of those earlier.

I meant total I meant in that regard total company margin and the progression during the course of the year our margin would typically be lower in Q1 than it would be in Q4, where we've historically, including this past Q4 had strong revenues.

Okay got it and then when you think about where you sit right now obviously, having continued the recent M&A building into <unk>.

How do you think about that next leg of the pipeline for inorganic growth because there's obviously a business with great contributions as you built out that portfolio.

At what point in time do you feel like service wise critical mass has essentially been achieved or is this going to continually be especially as you get back into the market with more demand a perpetual growth opportunity for more and more bolt ons like we've seen recently and successfully.

Yes. So this is bill I'll take this one.

So we've been fortunate to have a history of.

John E. Gallagher: We have new products that we're offering across the software platforms. And think AI, think Phoenix hosted, think about the SimCif modules. When you take those three different catalysts together, it's why we have confidence in the organic mid-single-digit.

A fair number of very successful bolt on acquisitions to help us create the company.

But we've said from the beginning that.

The first one is we're in we're in an interesting space, where there is a lot of interesting technologies and <unk> and.

Luke England Sergott: All right, thanks. Thank you. Please stand by for our next question. Our next question comes from the line of Jeff Garro with Stevens. Your line is open. Yeah, good afternoon.

<unk> companies available, but we don't think about the world as we expect to have to do inorganic deals most of the deals. We've done have been companies that we've worked with very closely we knew them really well and it made a lot of sense for them to come into a bigger platform and we've been successful with that.

Jeff Garro: Thanks for taking the questions. I want to dive into the strong software bookings a bit. I was hoping you could help parse out contributions qualitatively from price increases, adding new clients, and the new products that you launched in 2023. And then the kind of old standby of cross-selling existing products to your large existing customer base. I think the key thing that we'd point you to is this software net retention rate, which we think is an important metric, and looking at software. So for the quarter that was, it was 109%.

As we go forward, we're always looking at things.

But.

If we do.

The way I feel like this is if we do no deals that'd be fine. There is plenty of there's plenty of organic opportunities in <unk>, but sometimes you see technologies, where you add one on one you get more than two and when we see those types of things I think it's really good that we have the ability and the track record of moving successfully to integrate them into sitar.

Got it thanks, so much.

Thank you.

Please standby for our next question.

Our next question comes from the line of by crime with Morgan Stanley. Your line is open.

Hi, Good afternoon. This is vikram, thanks for taking our questions.

John E. Gallagher: And that cooked into that is, you know, existing customers expanding, we have pricing in that. And then the build to get to the overall software growth is, you know, the addition of new logos on top of it. And that's how you get to 15%. So, you know, we wouldn't break out really by platform to see what that looks like.

We had two my first one will just follow up to your commentary on the health of the biotech markets I just wanted to clarify one item on your guidance here.

So does your current revenue guidance for 2024 contemplate a certain level of recovery in the second half of the year or would that present, 4% upside to your current guidance.

John E. Gallagher: But, you know, 15% software growth, 14% on the year, is a good spot for us to be, as I mentioned earlier. We saw really strong tier one performance across our customers in software, and actually across the tiers for software, as we exited the year on booking, so that positions us well as we approach 2024. Excellent. I appreciate that.

And then as a follow up I was hoping to get your latest thoughts on geographic expansion and whether there are any ex U S geographies that represent.

Particular areas of focus for you. Thanks.

Yes, sure so as far as the biotech market itself than we do.

We have a we have a stable.

That we.

Presented our guidance in the way that we think about it so as we exit as we looked at Q3, we saw stability there we exited Q4 with stability.

Jeff Garro: And then to follow up on the mid single-digit organic growth for 2024. How would you compare that to the market growth? It seems like the commentary on the end market is improving, and that's reflected in your trajectory. But what I'm really getting at is, with your 2024 guidance, does that kind of assume that you're taking market share, or is that more of an upside case?

Our guidance contemplates stability throughout the year of course, we read the same things everybody else does so we know that there is.

The possibility of an improving market.

And.

Perhaps that happens more in the back half, but that's not the way that we built the guidance in this case.

Jeff Garro: Thank you. Thank you. Thank you, Jeff. This is Bill.

And then the second part of your question was related to ex U S. I mean, some of the investments that we're making outside of the U S. R.

William F. Feehery: You know, I think a couple things are going on in the market right now. So one is, you know, on the larger companies, we're seeing some stabilization in demand as they re-evaluated their portfolios last year. A lot of them have come out of that and decided what they want to do.

Our areas that we see for for growth, including Asia Pacific, We have a strong base of business in Europe, but I would tell you that.

William F. Feehery: So we've seen, I think, and we've assumed that demand stays at least steady as we go through the year. We are hearing signs of a pickup in biotechs. There are some statistics published that indicate increased funding, but I don't think we've really seen that come through in our booking so far.

The growth the growth profile of what we're looking for here.

In the guidance is.

Is it centered.

Centered mainly in.

In the U S and in the European markets for 2024.

Understood. Thank you.

Thank you as a reminder, ladies and gentlemen that SAR one one to ask a question. Please.

William F. Feehery: But based on what we're seeing, we're expecting that maybe in the second half of the year, we'll start to see a little bit healthier market segment there than we had in 2023. Great, thanks for taking the question. Thank you.

Please standby for our next question.

Our next question comes from the line of Matt Max Smock with William Blair. Your line is open.

Hey, good afternoon, guys. Thanks for taking my questions, maybe just asking a little bit of a longer term one here on the margins.

Michael Aaron Cherny: Please stand by for our next question. Our next question comes from the line of Michael Cherny with Leroy Partners. Your line is open. Good afternoon. Thanks for all the details so far. I appreciate the color on the organic growth.

Getting your thoughts on the long term trajectory and particularly I know.

During the IPO process mentioned getting up to high 30% longer term I'm. Just wondering if that is still kind of a long term target here and how we should think about the margin trajectory beyond 2024.

John E. Gallagher: Just gives a little sense of how you expect it to trend between software and services. And I know in some respects we can follow some of the bookings, but just want to make sure we have a good understanding of various different growth rates, both organic and inorganic, contribution against the backdrop of your margin commentary for the year. Yeah, yeah.

Yes so.

I'll start and I'll, let I'll, let John chime in.

The way we think about this is we can easily run this company.

Mid <unk> mid <unk> EBITDA margin.

Now at this period of time, we have significant opportunities to make investments in our software and our AI some of the things we've talked about.

We're going to do that through 2024 at the end of 2024.

John E. Gallagher: So the way to think about it as a sort of cadence through the year would be that we would see some acceleration across both software and services from Q1 through to Q4. But I'd say for software that there's less of that. And then I think there's really more of a story in the first half and second half on the services side of the business. But even when you look at that, it's, you know, it's probably a couple hundred basis points north and south of 50% when you look at services accelerating into the back half. Coinciding with that also would be from a margin perspective, since, you know, historically, we have had a strong Q4. Then, and because of, you know, the ramp that we'd see going as we progress through the year, then we'd expect the margin to progress in that fashion as well, margin progressing alongside services, which I assume would come as a lower gross margin or some other, I'm a total cope, I meant Okay, I got it.

Certainly have the option to go right back to where we were but we will evaluate.

<unk> and see what the.

What the opportunities are for our company and our shareholders at that point.

Yes, and then so to carry on to what Bill said as we as we look at <unk>.

2024 of course, we're looking at 31% to 33% margin there is investments that.

We talked about that we're making I think some of those investments as we mentioned the sales force. We will we will start to kick in really at the very tail end of 2024, and then we'll have a stronger impact in 'twenty five and so as Bill mentioned.

It's really within the management team's control to.

Evaluate.

The pace of those investments and the amount of those investments and be able to.

<unk>.

Toggle our margin accordingly.

As we move through this year.

Got it. Thank you maybe just following up on the services piece can you remind us for 2023, so as you move into 'twenty 'twenty four here, how big of a piece.

Regulatory services is within the broader services bucket, how that piece performed in total in 2023, and then what you have embedded in your guide.

John E. Gallagher: And then when you think about where you sit right now, obviously having completed the recent M&A, building into QSP, how do you think about that next leg of the pipeline for inorganic growth? This is obviously a business that's made great contributions as you've built out that portfolio. At what point in time do you feel like service-wise critical mass has essentially been achieved? Or is this going to continually be, especially as you get back into the market with more demand, a perpetual growth opportunity for more and more bolt-ons like we've seen recently successful? Yeah, so this is Bill. I'll take this one.

Regulatory services piece in 2024.

Yes.

<unk> in Q4.

<unk> business represented 19% of total revenue.

The services revenue it represents about 30% of it.

<unk>.

As we had mentioned we anticipated that business contracting during 2023 it did.

Signs of the.

The positive signs, though that you heard us talking about were mainly centered in bookings.

And came in Q4, where we had said that business is marked by often having large deal bookings come in in Q4, and we saw that happen. So we had a number of of.

William F. Feehery: So, we've been fortunate to have a history of, you know, a fair number of very successful bolt-on acquisitions that helped us create the company. But we've said from the beginning that, you know, the first point is we're in an interesting space where there are a lot of interesting technologies and companies available. But you know, we don't think about the world as you know, we expect or have to do inorganic.

Large sized bookings come in in Q4, that's that's going to turn to revenue during 2024 so.

As we as we approach 2024, and what that business looks like.

Inside of our guidance there than we see it returning to growth.

But.

That's going to happen.

William F. Feehery: Most of the deals we've done have been companies that we've worked with very closely. We knew them really well, and it made a lot of sense for them to come onto a bigger platform, and we've been successful with that. As we go forward, we're always looking at things, but if we don't... The way I feel about this is, if we do no deals, I'll be fine.

Over over a period of quarters.

Understood. Thanks, again for taking my questions.

Thank you.

Thank you.

As a reminder, ladies and gentlemen that star one to ask the question.

I'm showing no further questions in the queue I would now like to turn the call back over to Glenn for closing remarks.

Thank you everybody for joining us Tonight.

William F. Feehery: There's plenty of organic opportunities in Certara, but sometimes you see technologies where, you know, where you add one on one, you get more than two. And when we see those types of things, I think it's really good that we have the ability and the track record of moving successfully to integrate them into Certara. Thanks so much.

We're looking forward to a great 2024 for <unk> and we will see you on the next call good evening.

Ladies and gentlemen that concludes today's conference call. Thank you for your participation you may now disconnect.

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William F. Feehery: Thank you. Please stand by for our next question. Our next question comes from the line of Vikram with Morgan Stanley. Your line is open. Hi, good afternoon. This is Vikram. Thanks for taking our questions. We had two.

Okay.

Yes.

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Vikram Purohit: My first one was a follow-up to your commentary on the health of the biotech markets. I just wanted to clarify one item on your guidance here. So does your current revenue guidance for 2024 contemplate a certain level of recovery in the second half of the year, or would that present more percent upside to your current guidance? And then, as a follow-up, I was hoping to get your latest thoughts on geographic expansion and whether there are any ex-US geographies that represent particular areas of focus for you. Thanks. Yeah, sure.

Okay.

Sure.

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Yes.

Yes.

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John E. Gallagher: So as far as the biotech market itself is concerned, then we do, we have it, we have it stable, the way that we presented our guidance and the way that we think about it. So as we exited, as we looked at Q3, we saw stability there, we exited Q4 with stability, and our guidance contemplates stability throughout the year. Of course, you know, we read the same things everybody else does.

Sure.

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John E. Gallagher: So we know that there is, you know, the possibility of an improving market, and perhaps that happens more in the back half, but that's not the way that we built the guidance in this case. And then the second part of your question was related to the ex-US.

John E. Gallagher: I mean, some of the investments that we're making outside of the US are areas that we see for growth, including Asia-Pacific. We have a strong base of business in Europe, but I'd tell you that the growth profile of what we're looking for here in the guidance is centered mainly on the US and European markets for 2024. Okay.

Sure.

Yes.

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Vikram Purohit: Thank you. As a reminder, ladies and gentlemen, that's star 11 to ask the question. Please stand by for our next question. Our next question comes from the line of Max Smock with William Blair. The line is open.

Okay.

Okay.

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Maxwell Andrew Smock: Hey, good afternoon, guys. Thanks for taking our questions. We're just asking a little bit about a longer term one here on the margins and just getting your thoughts on the long term trajectory. In particular, I know, you know, during the IPO process mentioned getting up to high 30% longer term. Just wondering if that is still kind of a long term target here and how we should think about the margin trajectory beyond 2024. Yeah, so.

Okay.

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William F. Feehery: I'll start, and I'll let John chime in. The way we think about this is we can easily run this company at a mid-30s EBITDA margin. Right now, at this period of time, we have significant opportunities to make investments in our software and our AI, some of the things we talked about. We're going to do that through 2024. At the end of 2024, we could, you know, we'll certainly have the option to go right back to where we were.

William F. Feehery: But we'll evaluate and see what the what the opportunities are for our company, our shareholders at that, Yeah, and then so to carry on to what Bill said, as we look at 2024, of course, we're looking at 31 to 33% margin. There are investments that, you know, that we talked about that we're making. I think some of those investments, as we mentioned, the Salesforce platform will start to kick in really at the very, very tail end of 2024. And then we'll have a stronger impact in 25. And so, as Bill mentioned, it's really within the management team's control to evaluate the pace of those investments and the amount of those investments and be able to, you know, tilt our margin accordingly as we move through this year. I got it.

Yes.

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Okay.

Yes.

Yes.

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Alright.

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John E. Gallagher: Thank you. Maybe I'll just follow up on the services piece. Can you remind us, for 2023, as we move into 2024 here, how big of a piece Regulatory Services is within the broader services bucket, how that piece performed in total in 2023, and then what you have embedded in your guide for that regulatory services piece in 2024. Yeah, so in Max, in Q4, the regulatory business represented 19% of total revenue of the services revenue. It represents about 30% of it. We, as we had mentioned, anticipated that business would contract during 2023. It did. The signs of the, you know, the positive signs, though, that you heard us talking about were mainly centered on bookings and came in Q4, where we had said that business is marked by often having large deal bookings come in in Q4. And we saw that happen.

Okay.

Yes.

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Yes.

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Peter.

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John E. Gallagher: So we had a number of large-size bookings come in in Q4. That's going to turn to revenue during 2024. So, you know, as we approach 2024 and what that business looks like, you know, inside of our guidance there, then we see it returning to growth. But, you know, that's going to happen over a period of quarters.

Yes.

Yes.

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Maxwell Andrew Smock: Thanks again for taking our questions. Thank you. As a reminder, ladies and gentlemen, that's star 11 to ask the question. I'm showing no further questions in the queue.

Sure.

Okay.

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Operator: I would now like to turn the call back over to William for closing remarks. Thank you, everybody, for joining us tonight. We're looking forward to a great 2024 for Certara, and we'll see you on the next call. Good evening. Ladies and gentlemen, that concludes today's conference call. Thank you for your participation. You may now disconnect. ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? Hello, and thank you for standing by.

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Operator: Welcome to Certara's 4th Quarter 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during this session, you will need to press star 1-1 on your telephone. You will then hear an automated message advising your hand is raised to withdraw your questions for Star 11 again. I would now like to hand the conference over to David Deuchler, Head of Investor Relations. Sir, you may begin.

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David J. Deuchler: Good afternoon, everyone. Thank you all for participating in today's conference call. On the call from Certara are William Feehery, Chief Executive Officer, and John Gallagher, Chief Financial Officer. Earlier today, Certara released financial results for the quarter ended December 31st, 2023. A copy of the press release is available on the company's website.

Thanks.

Okay.

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David J. Deuchler: Before we begin, I would like to remind you that management will make statements during this call that include forward-looking statements, and actual results may differ materially from those expressed or implied in such forward-looking statements. Please refer to slide two in the accompanying materials for additional information, which you can find on the company's investor relations site. In their remarks or responses to questions, management may mention some non-GAAP financial measures. Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP measures are available in the recent earnings press release available on the company's website. Please refer to the reconciliation tables and the accompanying materials for additional information.

Thank you.

Okay.

Okay.

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Yes.

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Thanks.

Thanks.

Yes.

David J. Deuchler: Conference call contains time-sensitive information and is accurate only as of the live broadcast today, February 29, 2024. Certara disclaims any 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.

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William F. Feehery: Thank you for joining Certara's fourth quarter and full year earnings call. John and I will start with prepared remarks, and then we will take your questions. We are pleased to finish the year with a solid fourth quarter performance in both software and in technology-enabled services. 2023 presented our industry with many challenges, and pharmaceutical and biotech customers were conservative in their spending amidst macroeconomic and geopolitical pressure. The full year reported revenue growth was 6%, in line with the guidance we gave in August.

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William F. Feehery: This revenue growth included 14% growth in software and 1% in technology-enabled services. We had record software sales in the fourth quarter, and we were encouraged to see our technology-enabled services bookings pick up in the second half of 2022. Certara's goal is to enable model-informed drug development, or MIDD, in the Global Pharmacy by a pharmaceutical company. MIDD is an approach that utilizes biological, and statistical models derived from preclinical and clinical data to inform decision making in drug development and commercialization. Biosimulation is a critical component of MIDD that uses computer-aided mathematical simulation of biological processes and systems to understand the action of a drug in a human body or in a population. Certara enables our customers to use biosimulation and MIDD to increase the probability of success in bringing a new drug to market and to decrease the cost of drug development.

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Hello, and thank you for spending that welcome to <unk> fourth quarter 2023 earnings Conference call.

At this time all participants are in a listen only mode.

After the speaker's presentation, there will be a question and answer session.

Ask a question. During this session you will need to press star one on your telephone you have been here automated message advising you had this race.

To withdraw your question.

Press Star one again.

I would now like to hand, the conference over to David <unk> head of Investor Relations. Sir you may begin.

Good afternoon, everyone. Thank you all for participating in today's conference call on the call from <unk>, We have really in theory, Chief Executive Officer, and John Gallagher Chief Financial Officer earlier today <unk> released financial results for the quarter ended December 31, 2023, the copy of the press release is available on the company's website before we.

I would like to remind you that management will make statements. During this call that include forward looking statements and actual results may differ materially from those expressed or implied in the forward looking statements. Please refer to slide two and the accompanying materials for additional information, which you can find on the company's Investor Relations site in.

William F. Feehery: We have an extensive and expanding list of customers within the biopharmaceutical industry, which expanded in 2023 to a count of 2,395. Within this customer base, as of December 31st, 2023, we had 389 customers with an annual contract value of more than $100,000, representing growth of 5% year over year. We also had 63 customers with annual contract values of more than $1 million, up 11% from 2020.

In our remarks or responses to questions May mentioned, some non-GAAP financial measures reconciliations of these non-GAAP financial.

Financial measures to the most directly comparable GAAP measures are available on our recent earnings press release available on the company's website.

Please refer to the reconciliation tables and the accompanying materials for additional information.

Call contains time sensitive information and is accurate only as of the live broadcast today February 29, 2024 tar disclaims any 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.

William F. Feehery: During the second half of 2023, we reorganized our commercial infrastructure to better sell our end-to-end solutions, and the team delivered improved results in both software and services throughout the second half. With our new enterprise sales approach, we have effectively captured cross-selling opportunities, leading to expanded relationships with some of our top customers. I am very happy with the progress our team has made so far, and I'm confident that these improvements will support our commercial initiatives in the coming years. Our software business growth of 14% in 2023 will be driven by our SimSip, Phoenix, and Pinnacle21 platforms. We have been investing in these products to add new features, a number of which launched during 2023 and will continue to gain traction as we move into 2024.

Thank you David Good afternoon, everyone. Thank you for joining <unk> fourth quarter and full year earnings call.

John and I will start with prepared remarks, and then we will take your questions.

We are pleased to finish the year with a solid fourth quarter performance in both software and in technology enabled services.

<unk> 2023 presented our industry with many challenges as pharmaceutical and biotech customers were conservative in their spending amidst macroeconomic.

And geopolitical pressures.

Our full year reported revenue growth was 6% in line with the guidance we gave in August.

This revenue growth included 14% growth in software and 1% in technology enabled services.

We had record software sales in the fourth quarter and we were encouraged to see our technology enabled services bookings pick up in the second half of 2023.

<unk> goal is to enabled model informed drug development or <unk>.

William F. Feehery: Some of the highlights in 2023 included the 22nd version of our SimCity PBPK simulator, which included several upgrades to our modeling and simulation capabilities. We also launched Symset Biopharmaceuticals, a new module designed to aid drug formulation and expand our presence in the early stages of drug development. Following the acquisition of Viasa last January, we began to integrate AI and machine learning across our portfolio. An early example was the release of an updated version of D360, which featured deep learning models for novel chemical structure generation and automated property. We also launched co-op, a new regulatory writing tool that uses generative AI to aid in the drafting of regulatory submissions.

In the global pharmacy biopharmaceutical industry.

<unk> is an approach that utilizes biological.

Statistical models derived from preclinical and clinical data to inform decision, making and drug development and commercialization.

By a stimulation is a critical component of <unk> that uses computer aided mathematical accumulation of biological processes and systems to understand the action of the drug in the human body or in a population of humans.

<unk> enables our customers to use bio stimulation and <unk> to increase the probability of success in bringing a new drug to market.

And to decrease the cost of drug development.

We have an extensive an expanding list of customers within the biopharmaceutical industry, which expanded in 2023 to account of 2395.

Within this customer base as of December 31, 2023, we had 389 customers with an annual contract value of more than $100000 representing growth of 5% year over year.

William F. Feehery: Customer feedback on our AI products has been encouraging and drove customer interest in the second half of the year. Looking ahead to 2024, we will continue to invest in our software platform, and one key area of focus is our clinical data strategy. Last fall, we augmented Pinnacle21 data exchange with the acquisition of Prometix, a provider of data standardization and automation software. With Formedics, Certara will bring increased efficiency to clinical trial data management via an end-to-end solution. In addition to Pinnacle 21, we also plan to invest in other areas, such as new models for biosimulation, new products, and product features, and additional integration of AI across the platform. As biosimulation becomes more widespread, we are broadening the range of our offerings to support additional use cases in therapeutic areas.

We also had 63 customers with annual contract value of more than $1 million.

Up 11% from 2022.

Okay.

During the second half of 2023, we've reorganized our commercial infrastructure to better sell our end to end solutions and the team delivered improved results in both software and services throughout the second half.

With our new enterprise sales approach, we have effectively captured cross selling opportunities.

Leading to expanded relationships with some of our top customers.

I am very happy with the progress our team has made so far and I am confident that these improvements will support our commercial initiatives in the coming years.

Our software business growth of 14% in 2023 was driven by our since at Phoenix and political 'twenty one platforms.

We have been investing in these products to add new features a number of which launched during 2023 and we will continue to increase traction as we move into 2024.

William F. Feehery: I'm confident that these investments will create new opportunities to grow our platform on a global scale and penetrate deeper into our customers' R&D organizations. Our technology-enabled services business overcame market headwinds to deliver solid performance in the second half of 2020. In August, we announced the consolidation of our biosimulation services and regulatory services teams in order to better deliver all of Certara's capabilities to our customers.

Some of the highlights in 2023 included the 22nd version of our <unk> PD PK simulator.

Which included several upgrades to our modeling and simulation capabilities.

We also lost launched sensitive biopharmaceutical, a new module designed to a drug formulation and expanded our presence in the early stages of drug development.

Following the acquisition of the asset last January we began to integrate AI and machine learning across our portfolio.

An early example was the release of an updated version of <unk> hundred 60, which featured deep learning models for novel chemical structure generation and automated property prediction.

William F. Feehery: Thus far, we are pleased with the improved execution in the services business, which is performing better as a combined organization. Across our technology-enabled services group, we saw a pickup in new business activity, which led to sequential bookings growth in the fourth quarter. Customers of all sizes continue to recognize the value that Certara services can add to their modeling, simulation, and regulatory projects.

We also launched co author.

New regulatory writing tool that uses general generative AI to aid in the drafting of regulatory submissions.

Customer feedback on our AI products has been encouraging and drove customer interest in the second half of the year.

Looking ahead to 2024, we will continue to invest in our software platform.

One key area of focus is our clinical data strategy.

Last fall, we augmented the pinnacle 'twenty, one data exchange with the acquisition of <unk>, a provider of data standardization and automation software.

William F. Feehery: We look forward to building on this momentum in 2020 as the leader of bio-stimulation. Expanding into emerging methods of modeling and simulation is a key component of our business strategy. In December, we announced the acquisition of Applied Biomass, a leading provider of QSP services. QSP, or Quantitative Systems Pharmacology, combined computational modeling and experimental data to simulate how the body will respond to a drug.

With for medics sitar will bring increased efficiency to clinical trial data management via an end to end solution.

In addition to clinical 'twenty, one we also plan to invest in other areas towards such as new models for Biosimilars <unk>, new products and product features and additional integration of AI across the platform.

As far as stimulation becomes more widespread we are broadening the range of our offerings to support additional use cases and therapeutic areas.

I am confident that these investments will create new opportunities to grow our platform on a global scale and penetrate deeper into our customers' R&D organizations.

William F. Feehery: QSP is at the cutting edge of biosimulation approaches and has vast potential to improve biopharmaceutical R&D and inform decision making across the drug development process. Along with proprietary software, Applied Biomath brings a complementary customer base, which includes clients in the discovery and preclinical stages of development. By combining the Applied Biomath and Certara QSP teams, we are proud to have the largest QSP services group in the drug development industry. In 2023, we will continue to invest in our business and expand our team worldwide. We prioritized hiring leading scientists and subject matter experts to support our growth.

Our our technology enabled services business overcame market headwinds to deliver solid performance in the second half of 2023 and.

In August we announced the consolidation of our Biosimilar <unk> services and regulatory services teams in order to better deliver all of the surcharge capabilities to our customers projects.

Thus far we are pleased with the improved execution in the services business, which is performing better as a combined organization.

Across our technology enabled services group, we saw a pickup in new business activity, which led to sequential bookings growth in the fourth quarter.

Customers of all sizes continue to recognize the value. This entire services can add to their modeling simulation and regulatory projects. We look forward to building on this momentum in 2024.

William F. Feehery: As of the end of 2023, we had about 1,400 employees, including more than 400 employees with doctorates. We believe we are the employer of choice in the biosimulation industry, and we offer a strong culture and commitment to innovation. We believe there's an opportunity for us to accelerate some investments in 2024 across our organization. In particular, we intend to invest in the development of software capabilities, including AI, as well as expand our commercial organization, including key account management positions. These investments will start to yield minor benefits in 2024 but will be most impactful in 2025 and 2026. In closing, we are pleased with our 2023 results. The growth opportunity in bias simulation continues to strengthen as drug developers look to maximize capital efficiency and reduce pipeline risk.

As the leader in Biosimilars <unk> expanding into emerging methods of modeling and simulation is a key component of our business strategy.

In December we announced the acquisition of applied biomass, a leading provider of <unk> services.

OSP or quantitative systems pharmacology.

Combined computationally modeling and experimental data to stimulate the body will respond to a drug <unk>.

USPS at the cutting edge of Biosimilars and approaches and has vast potential to improve the biopharmaceutical R&D and informed decision making across the drug development process.

Along with proprietary software applied biomass, bringing the complementary customer base, which includes clients in the discovery and preclinical stages of development by.

By combining the <unk> biomass and <unk> teams, we are proud to have the largest <unk> services group in the drug development industry.

In 2023, we continue to invest in our business and expand our team worldwide.

We prioritized hiring leading scientists and subject matter experts to support our growth.

As of the end of 2023, we had about 1400 employees, including more than 400 employees with doctorate degrees.

William F. Feehery: I am confident that the secular adoption of biosimulation, our improved commercial execution, and the investments we are making in our products and our team will support strong growth in 2024 and beyond. I will now turn it over to our CFO, John Gallagher, to discuss our fourth quarter and full year financial results in Ward 2. Thank you, William. Hello, everyone.

We believe we are the employee of choice in the Biosimilars as an industry and we offer a strong culture and commitment to innovation.

We believe there is an opportunity for us to accelerate some <unk> in 2024 across our organization.

In particular, we intend to invest in the development of software capabilities, including AI as well as expand our commercial organization, including key account management positions.

These investments will start to yield minor benefit in 2024, but will be most impactful in 2025 and 2026.

John E. Gallagher: Total revenue for the three months ended December 31, 2023 was $88 million, representing year over year growth of 2% on a reported basis and 1% on a constant basis. For the full year 2023, total revenue was $354.3 million, which represents 6% growth on a reported basis and on a constant basis. Bookings, which provide visibility into the year ahead, came in at $402.3 million for the trailing 12-month period ended December 31, 2022, down 2% here. Our total company book to bill ratio ended the year at 1.14. Bookings as of December 31, 2023 do not include bookings from ProMedic or Applied Biomedicine.

In closing we are pleased with our 2023 results.

The growth opportunity in Biosimilars <unk> continues to strengthen as drug developers look to maximize capital efficiency and reduced pipeline risk.

I am confident that the secular adoption of Biosimilars <unk>, our improved commercial execution and the investments, we're making in our products and our team will support strong growth in 2024 and beyond.

I will now turn it over to our CFO, John Gallagher to discuss our fourth quarter and full year financial results in more detail.

Thank you William Hello, everyone total revenue for the three months ended December 31, 2023 was $88 million.

Representing the year over year growth of 2% on a reported basis and 1% on a constant currency basis.

For the full year 2023, total revenue was $354 3 million.

John E. Gallagher: Software revenue was $33.6 million in the fourth quarter, which increased 15% over the prior year period on a reported basis and 14% on a constant current basis. The growth in the quarter was driven by bio-simulation software and Pinnacle 21. For the full year, software revenue was $131.7 million, up 14% on a reported basis and on a constant current basis. Radical and subscription software revenue amounted to 62% of total software revenue for the year, up from 60% in the prior year.

Which represents 6% growth on a reported basis and on a constant currency basis.

Bookings, which provides visibility into the year ahead came in at $402 $3 million for the trailing 12 month period ended December 31, 2023 down 2% year over year.

Our total company book to Bill ratio ended the year at 114.

Bookings as of December 31, 2023, do not include bookings from Hermetic or applied biomass.

Software revenue was $33 6 million in the fourth quarter, which increased 15% over the prior year period on a reported basis and 14% on a constant currency basis the.

John E. Gallagher: Routable and subscription revenue accounted for 68% of fourth-quarter software revenue. Software bookings were $43.3 million in the fourth quarter, which increased 10% from the prior year period. Trailing 12-month software bookings were $136.9 million, also up 10% year-over-year. The software aggregate renewal rate was 85% in the fourth quarter and 88% for the year. I'd like to take a moment and discuss the ARR metric and how it has evolved over the past couple of years. We had a very strong Q4 software revenue performance, up 15%, and on a full year performance, up 14%. Despite our ARR being in the mid-80s in the second half and 88% for the full year.

The growth in the quarter was driven by bio stimulant software and clinical 'twenty one.

For the full year software revenue was $131 $7 million up 14% on a reported basis and on a constant currency basis.

Ratable and subscription software revenue amounted to 62% of total software revenue for the year up from 60% in the prior year rates.

Ratable and subscription revenue accounted for 68% of fourth quarter software revenues.

Software bookings were $43 $3 million in the fourth quarter, which increased 10% from the prior year period.

Trailing 12 month software bookings were $136 9 million also up 10% year over year.

The software aggregate renewal rate was 85% in the fourth quarter and 88% for the year.

I'd like to take a moment and discuss the AAR metric and how it has evolved over the past couple of years.

John E. Gallagher: As our software business has grown and expanded, particularly with additional features and Mixed Conversion to Subscription or Routable Software Revenue, we have found the ARR metric to be less informative of the underlying performance of the business. As we evaluate customer retention and growth in existing customers across the portfolio, the ARR metric is not capturing the performance of the products or business when incorporating the fast conversion, Viasa options, and expanding Pinnacle 21 features, among others. As a result, we are moving away from ARR as a KPI of the software business internally, and we'll do so externally as well. For continuity, we will report the ARR on an annual basis going forward. However, we do believe that the net retention rate, which reflects the existing customer revenue, is a better metric to measure the performance of our existing customers.

We had a very strong Q4 software revenue performance up 15% and on a full year performance up 14%. Despite <unk> being in the mid <unk> in the second half of the year and 88% for the full year.

As our software business has grown and expanded particularly with additional features and the mix conversion to subscription or ratable software revenue.

We have found the IRR metric to be less informative of the underlying performance of the business.

As we evaluate customer retention and growth in existing customers across the portfolio.

Our metric is not capturing the performance of the products of our business when incorporating the SaaS conversion by ASUR options and expanding political 'twenty. One features among other initiatives.

As a result, we are moving away from IRR as the case of the software business internally and we will do so externally as well.

For continuity, we will report the IRR on an annual basis going forward.

John E. Gallagher: In the fourth quarter and for the full year 2023, the net retention rate was 109%, which is consistent with our long-term growth algorithm. The fourth quarter revenue growth of 15% and full year revenue growth of 14% represent healthy performance, and On a go-forward basis, we intend to provide the software net retention ratio on a quarterly basis. Now, turning to services revenue, which was $54.4 million in the fourth quarter, down 5% versus the prior year on a reported basis and down 6% on a cost basis. For the full year, services revenue was $222.7 million, up 1% on a reported basis and on a constant currency basis. Technology-driven services bookings in the fourth quarter were $75.6 million, which decreased 7% from the prior year period. TTM Services bookings were $265.4 million, also down 7% as compared to the prior year.

We do believe that the net retention rate, which reflects the existing customer revenue is a better metric to measure the performance of our existing business.

In the fourth quarter and for the full year 2023, the net retention rate was 109%, which is consistent with our long term growth algorithm.

The fourth quarter revenue growth of 15% and our full year revenue growth of 14% represents healthy performance and contribution from new customers on a go forward basis, we intend to provide the software and net retention ratio on a quarterly basis.

Now turning to services revenue, which was $54 4 million in the fourth quarter down 5% versus the prior year on a reported basis and down 6% on a constant currency basis.

For the full year services revenue was $222 $7 million up 1% on a reported basis and on a constant currency basis.

Technology, driven services bookings in the fourth quarter were $75 6 million, which decreased 7% from the prior year period.

TTM services bookings were $265 4 million also down 7% compared to the prior year.

John E. Gallagher: Total cost of revenue for the fourth quarter of 2023 was $34.1 million, an increase from $31.8 million in the fourth quarter of 2022, primarily due to a $2.6 million increase in stock-based compensation, offset by lower outside consulting costs of $0.4. Total operating expenses for the fourth quarter of 2023 were $62.4 million, an increase from $43.5 million in the fourth quarter of 2022. The components of operating expenses are as follows.

Total cost of revenue for the fourth quarter of 2023 was $34 $1 million, an increase from $31 8 million in the fourth quarter of 2022, primarily due to a $2 $6 million increase in stock based compensation offset by law.

Lower outside consulting costs of <unk> 4 million.

Total operating expenses for the fourth quarter of 2023 were $62 $4 million, an increase from $43 $5 million in the fourth quarter of 2022.

The components of operating expenses are as follows.

John E. Gallagher: Sales and marketing expenses were $8.7 million compared to $7.8 million in the fourth quarter of 2020. This increase is primarily due to $0.6 million in employee expenses. Due to the expansion of the sales force and a $0.2 million increase in marketing and travel, R&D expenses were $8 million compared to $6.6 million in the fourth quarter of 2022. R&D expenses were up primarily due to $2 million in employee-related costs, which were offset by lower stock-based compensation and capital development.

Sales and marketing expenses were $8 $7 million compared with $7 $8 million in the fourth quarter of 2022.

This increase is primarily due to zero point $6 million in employee expenses due to the expansion of the sales force and zero point $2 million increase in marketing and travel costs.

R&D expenses were $8 million compared to $6 6 million in the fourth quarter of 2022.

R&D expenses were up primarily due to $2 million in employee related costs, which were offset by lower stock based compensation and capital development cost.

John E. Gallagher: G&A expenses were $33.6 million compared to $18.3 million for the fourth quarter of 2022. The increase was primarily due to a $12.8 million change in contingent considerations related to the Bias Act and $1.6 million in acquisition costs, partially offset by a $1.5 million decrease in stock. Intangible asset amortization was $11.7 million compared to $10.3 million in the fourth quarter of 2020. Depreciation and amortization expense was $0.4 million, flat with last. Continuing down the P&L, interest expense was $5.9 million compared to $5.5 million for the fourth quarter of 2022 due to higher interest expense related to the floating portion of our term. Miscellaneous income was $2 million compared to an expense of $2.2 million for Income tax expense was $0.1 million, bringing the full-year provision to $0.2 million compared to $4 million in the prior full year.

G&A expenses were $33 6 million compared to $18 $3 million for the fourth quarter of 2022.

The increase was primarily due to a $12 $8 million change in contingent considerations related to the bias acquisition.

And $1 6 million in acquisition costs, partially offset by $1 $5 million decrease in stock based compensation.

Intangible asset amortization was $11 7 million compared to $10 3 million in the fourth quarter of 2000 to 2022.

Depreciation and amortization expense was zero point $4 million flat with last year.

Continuing down the P&L interest expense was $5 9 million.

Compared to $5 $5 million for the fourth quarter of 2022 due to higher interest expense related to the floating portion of our term loan.

Miscellaneous income was $2 million compared to an expense of $2 2 million for the fourth quarter of 2022.

Income tax expense was zero point $1 million, bringing the full year provision to zero point $2 million compared to $4 million in the prior full year.

John E. Gallagher: Net loss for the fourth quarter of 2023 was $12.5 million compared to net income of $9.2 million in the fourth quarter of 2020. Reported adjusted EBITDA for the fourth quarter of 2023 was $29.6 million compared to $31.9 million for the fourth quarter of 2020. Adjusted EBITDA margin was 33.6% for the fourth quarter of 2023 and 34.7% for the full year. Reported adjusted net income for the fourth quarter of 2023 was $14.3 million, compared to $25.2 million for the fourth quarter of 2022. Diluted loss per share for the fourth quarter of 2023 was eight cents as compared to earnings per share of six cents in the fourth quarter of 2020.

Net loss for the fourth quarter of 2023 was $12 $5 million compared to net income of $9 2 million in the fourth quarter of 2022.

Reported adjusted EBITDA for the fourth quarter of 2023 was $29 6 million compared to $31 9 million for the fourth quarter of 2022.

Adjusted EBITDA margin was 33, 6% for the fourth quarter of 2023, and 34, 7% for the full year 2023.

Reported adjusted net income for the fourth quarter of 2023 was $14 3 million compared to $25 2 million for the fourth quarter of 2022.

Diluted loss per share for the fourth quarter of 2023 was eight <unk> compared to.

<unk> earnings per share of success in the fourth quarter of 2022.

John E. Gallagher: Adjusted diluted earnings per share for the fourth quarter of 2023 was $0.09 compared to $0.16 for the fourth quarter of 2022. Now moving to the balance sheet, we ended the quarter with $235 million of cash and cash equipment.

Adjusted diluted earnings per share for the fourth quarter of 2023 was nine <unk>.

Compared to <unk> 16 for the fourth quarter of 2022.

Now moving to the balance sheet, we ended the quarter with $235 million of cash and cash equivalents.

John E. Gallagher: As of December 31, 2023, we had $288.2 million of outstanding borrowings on our term loan and full availability under our revolving credit. Turning to the guidance for full year 2024, we expect total revenue in the range of $385-400 million, representing growth of 9-13% compared with 2023. We expect to grow adjusted EBITDA on a dollar figure basis in 2024 and expect an adjusted EBITDA margin in the range of 31% to 33%. We expect adjusted EPS in the range of 41 to 46 cents per share. Fully diluted shares in the range of $160 to $162 million and a tax rate in the range of 25 to 30.

As of December 31, 2023, and we have $288 $2 million of outstanding borrowings on our term loan and full availability under our revolving credit facility.

Turning to the guidance for full year 2024.

We expect total revenue in the range of $385 to $400 million representing.

Representing growth of 9% to 13% compared with 2023.

We expect to grow adjusted EBITDA on a dollar figure basis in 2024, and expect an adjusted EBITDA margin in the range of 31% to 33%.

We expect adjusted EPS in the range of 41 to <unk> 46 per share.

Fully diluted shares in the range of $160 million to $162 million.

And a tax rate in the range of 25% to 30%.

William F. Feehery: I will now turn the call back over to our CEO, William Feehery, for closing remarks. Thank you, John. To summarize our message today, we are pleased with our 2023 results, and we look forward to executing our 2024 goals. There's a lot to be excited about at Certara as we advance biosimulation forward with our software and our technology-enabled services. We will now open the line for questions. Operator, can you open it? Thank you. Ladies and gentlemen, as a reminder to ask the question, please press start, 1-1 on your telephone and then wait to hear your name announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster. Our first question comes from the line of David Windley with Jeffrey. Your line is open. Hi, good evening.

I will now turn the call back over to our CEO William <unk> Barry for closing remarks.

Thank you John.

To summarize our message today, we are pleased with our 2023 results and we look forward to executing our 2024 goals.

A lot to be excited about at <unk> as we advanced by assimilation forward within our software and our technology enabled services.

We will now open the line for questions. Operator can you open the line.

Thank you.

Ladies and gentlemen, as a reminder to ask a question. Please press star one on your telephone and then wait to hear your name announced.

Withdraw your question. Please press star one again.

Please standby, while we compile the Q&A roster.

Okay.

Our first question comes from the line of David Windley with Jefferies. Your line is open.

Hi, Good evening. Thanks for taking my question I wanted to ask a couple of circle around revenue and related.

David Howard Windley: Thanks for taking my question. I want to ask a couple of questions around revenue and related to the commercial progress. Bill, you talked about traction in the Salesforce and seeing a nice uptick in the fourth quarter. I also hear you talking about some of the investments being in that salesforce, so maybe you could talk about what you saw in the quarter that helped the bookings to kind of pick up and meet your expectations, and then where you feel like you need to make those investments to, I guess, further that traction. Thanks, David. I appreciate the question.

On the on the commercial progress Bill you talked about traction in the sales force and seen a nice uptick in the fourth quarter.

I also hear you talking about some of the investments being in that sales force. So maybe you could talk about what you saw in the quarter.

That helped the bookings to kind of pick up and meet your expectations and then where you feel like you need to make those investments I guess further that traction.

Thanks, David I appreciate the question.

William F. Feehery: So what you're referring to is, for everybody, that earlier in the year, we combined our sales forces across the company into one sales force, where we cover both our software and our technical technology-enabled services. The idea behind doing that was to enable us to offer our clients the full suite of what we have in Certara because, after all, you know, most of our clients are buying multiple products and services from us, so it's not really efficient to call on them multiple times. And, in fact, you know, as we brought this out, I think the first investment we had to make was in the training of our sales forces, and we had a lot of people who were specialized in certain products or technology-enabled services.

So what you're referring to is the earth for for <unk>.

Everybody is that earlier in the year, we combined our sales forces across the company into one sales force will recover both our software and our technical technology enabled services.

The idea behind doing that was too.

Enable us to offer our clients the full suite of what we have in their tire because after all.

Sure.

Are most of our clients are buying multiple products and services from us.

It's not really efficient too.

To call on the multiple times.

And in fact.

As we as we brought this out I think the first the first investment we had to make was in the was in the training of our sales forces and we had a lot of people are specialized in certain products or technology enabled services. So.

William F. Feehery: So, you know, as we went through the year, we invested a lot in training. As we got into the fourth quarter, we had people who were able to go into our clients confidently and talk not just about the product they had been known to be selling all along but also be able to say, hey, you know, well, you know, you probably are out of the drug at this stage, and you want to look at this. And that started to pay off. I'd say that investment in sales training and just uniting the sales force is probably not fully repaid.

As we went through the year, we invested a lot in training as we got into the fourth quarter. We had people who were able to go into our clients' confidently and talk not just about the product. They had been known to have been selling all along but also being able to say hey, you know well.

You probably are and having a drug at this stage and you ought to look at this.

And that started to pay off.

I would say.

That investment in the sales training and just United and Salesforce.

Is probably not fully.