Certara, Inc. (Nasdaq: CERT), a global leader in biosimulation,
today reported its financial results for the second quarter of
fiscal year 2023.
Second Quarter Highlights:
- Revenue was $90.5 million, compared
to $82.8 million in the second quarter of 2022, representing growth
of 9% over the second quarter of 2022 on a reported basis and 10%
at constant currency.
- Net income was $4.7 million,
compared to a net loss of $0.6 million in the second quarter of
2022.
- Adjusted EBITDA was $32.4 million,
compared to $28.0 million in the second quarter of 2022.
“During the second quarter our software business
performed well, but we experienced lower growth than expected in
our services business due to cautious spending among smaller
biotech customers, as well as a slow recovery in our regulatory
business. While we are not satisfied with this quarter’s results
and they have led us to restate our outlook for 2023 based on
current market dynamics, we believe the fundamental health of the
drug development market and the increasing acceptance and adoption
of biosimulation technology provide an excellent opportunity for us
to continue to invest in the growth of Certara,” said William F.
Feehery, Chief Executive Officer. “We believe continued strength in
software sales reflects a healthy market for technology that
accelerates new medicine development and anticipate demand
improvement in the services business as we move into 2024.”
Second Quarter 2023 Results
“Certara’s second quarter performance reflects
strong software revenue and bookings performance, each growing 17%,
while services revenue grew 5% and services bookings declined, as
compared to the same period a year ago. The software business
continues to perform well, delivering a strong renewal rate of 93%
in the quarter, with customers continuing to recognize the unique
value proposition of the Certara platform. The weakness in our
services bookings was a result of more cautious spending among our
customers. Notably, adjusted EBITDA margins remained in line with
our expectations during the quarter,” said John Gallagher, Chief
Financial Officer.
Total revenue for the second quarter of 2023 was
$90.5 million, representing growth of 9% over the second quarter of
2022. The overall increase in revenues was primarily due to growth
in our technology-driven services and software product offerings
from strong renewal rates, client expansions, and new
customers.
On a constant currency basis, total revenue for
the second quarter of 2023 was $90.6 million, representing growth
of 10% over the second quarter of 2022. Please see note (1) in the
section A Note on Non-GAAP Financial Measures below for more
information on constant currency revenue.
Total cost of revenue for the second quarter of
2023 was $36.2 million, an increase of $1.0 million from
$35.2 million in the second quarter of 2022, primarily due to
a $0.6 million increase in employee-related costs resulting from
billable head count growth, a $0.4 million increase in stock-based
compensation costs, a $0.2 million increase in intangible assets
amortization, a $0.1 million increase in equipment, and a $0.1
million increase in travel expenses, partially offset by a $0.5
million decrease in professional and consulting costs.
Total operating expenses for the second quarter
of 2023 were $41.2 million, which decreased by
$2.2 million from $43.4 million in the second quarter of
2022, primarily due to a $6.3 million decrease in stock-based
compensation cost, partially offset by a $2.9 million increase in
employee-related costs, a $1.3 million increase in expense from
remeasuring fair value of contingent consideration related to the
Vyasa business acquisition.
Net income for the second quarter of 2023 was
$4.7 million, compared to a net loss of $0.6 million in the
second quarter of 2022. The $5.3 million increase in net income was
primarily due to a $8.9 million increase in operating income, as
explained above, offset by a $3.6 million increase in other
expenses and taxes,
Diluted earnings per share for the second
quarter 2023 was $0.03, as compared to $0.00 in the second quarter
of 2022.
Adjusted EBITDA for the second quarter of 2023
was $32.4 million compared to $28.0 million for the second quarter
of 2022, representing 16% growth. See note (2) in the section A
Note on Non-GAAP Financial Measures below for more information on
adjusted EBITDA.
Adjusted net income for the second quarter of
2023 was $18.4 million compared to $14.6 million for the second
quarter of 2022, representing 26% growth. Adjusted diluted earnings
per share for the second quarter 2023 was $0.12 compared to $0.09
for the second quarter of 2022. See note (3) in the section A Note
on Non-GAAP Financial Measures below for more information on
adjusted net income and adjusted diluted earnings per share.
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THREE MONTHS ENDED JUNE 30, |
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SIX MONTHS ENDED JUNE 30, |
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2023 |
|
2022 |
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2023 |
|
2022 |
Key Financials |
|
(in millions, except per share data) |
Revenue |
|
$ |
90.5 |
|
$ |
82.8 |
|
|
$ |
180.8 |
|
$ |
164.3 |
Net income (loss) |
|
$ |
4.7 |
|
$ |
(0.6 |
) |
|
$ |
6.1 |
|
$ |
1.6 |
Diluted earnings per
share |
|
$ |
0.03 |
|
$ |
0.00 |
|
|
$ |
0.04 |
|
$ |
0.01 |
Adjusted EBITDA |
|
$ |
32.4 |
|
$ |
28.0 |
|
|
$ |
64.7 |
|
$ |
55.6 |
Adjusted net income |
|
$ |
18.4 |
|
$ |
14.6 |
|
|
$ |
37.7 |
|
$ |
31.5 |
Adjusted diluted earnings per
share |
|
$ |
0.12 |
|
$ |
0.09 |
|
|
$ |
0.24 |
|
$ |
0.20 |
Cash and cash equivalents |
|
|
|
|
|
$ |
245.2 |
|
$ |
194.8 |
2023 Financial Outlook
Certara is updating its previously reported
guidance for full year 2023. We expect the following:
Full year 2023 revenue to be in the range of
$345 million to $360 million.
Full year 2023 adjusted EBITDA to be in the
range of $120 million to $128 million.
Full year adjusted diluted earnings per share to
be in the range of $0.44 - $0.48.
Fully diluted shares to be in the range of 159
million to 162 million.
Webcast and Conference Call Details
Certara will host a conference call today,
August 9, 2023, at 5:00 p.m. ET to discuss its second quarter
2023 financial results. Investors interested in listening to the
conference call are required to register online in advance of the
call. A live and archived webcast of the event will be available on
the “Investors” section of the Certara website at
https://ir.certara.com.
About Certara
Certara accelerates medicines using proprietary
biosimulation software, technology and services to transform
traditional drug discovery and development. Its clients include
more than 2,300 biopharmaceutical companies, academic institutions,
and regulatory agencies across 70 countries.
Please visit our website at www.certara.com. We
intend to use our website as a means of disclosing material,
non-public information and for complying with our disclosure
obligations under Regulation FD.
Such disclosures will be included in the
Investor Relations section of our website at
https://ir.certara.com. Accordingly, investors should monitor such
portion of our website, in addition to following our press
releases, Securities and Exchange Commission filings and public
conference calls and webcasts.
Forward-Looking Statements
This press release contains certain statements
that constitute forward-looking statements within the meaning of
the “safe harbor” provisions of the Private Securities Litigation
Reform Act of 1995, with respect to the Company’s future business
and financial performance, revenue, margin, and bookings. These
statements typically contain words such as “believe,” “may,”
“potential,” “will,” “plan,” “could,” “estimate,” “expects” and
“anticipates” or the negative of these words or other similar terms
or expressions. Any statement in this press release that is not a
statement of historical fact is a forward-looking statement and
involves significant risks and uncertainties. Although we believe
that the expectations reflected in these forward-looking statements
are reasonable, we cannot provide any assurance that these
expectations will prove to be correct. You should not rely upon
forward-looking statements as predictions of future events and
actual results, events, or circumstances. Actual results may differ
materially from those described in the forward-looking statements
and are subject to a variety of assumptions, uncertainties, risks
and factors that are beyond our control, including the Company’s
ability to compete within its market; any deceleration in, or
resistance to, the acceptance of model-informed biopharmaceutical
discovery; changes or delays in relevant government regulation;
increasing competition, regulation and other cost pressures within
the pharmaceutical and biotechnology industries; economic
conditions, including inflation, recession, currency exchange
fluctuation and adverse developments in the financial services
industry; trends in research and development (R&D) spending;
delays or cancellations in projects due to supply chain
interruptions or disruptions or delays to pipeline development and
clinical trials experienced by our customers; consolidation within
the biopharmaceutical industry; reduction in the use of the
Company’s products by academic institutions; pricing pressures; the
Company’s ability to successfully enter new markets, increase its
customer base and expand its relationships with existing customers;
the impact of acquisitions and our ability to successfully
integrate such acquisitions; the occurrence of natural disasters
and epidemic diseases; any delays or defects in the release of new
or enhanced software or other biosimulation tools; failure of our
existing customers to renew their software licenses or any delays
or terminations of contracts or reductions in scope of work by its
existing customers; our ability to accurately estimate costs
associated with its fixed-fee contracts; our ability to retain key
personnel or recruit additional qualified personnel; lower
utilization rates by our employees as a result of natural disasters
and epidemic diseases; risks related to our contracts with
government customers; our ability to sustain recent growth rates;
our ability to successfully operate a global business; our ability
to comply with applicable laws and regulations; risks related to
litigation; the adequacy of its insurance coverage and ability to
obtain adequate insurance coverage in the future; our ability to
perform in accordance with contractual requirements, regulatory
standards and ethical considerations; the loss of more than one of
our major customers; future capital needs; the ability of our
bookings to accurately predict future revenue and our ability to
realize revenue on bookings; disruptions in the operations of the
third-party providers who host our software solutions or any
limitations on their capacity; our ability to reliably meet data
storage and management requirements, or the experience of any
failures or interruptions in the delivery of our services over the
internet; our ability to comply with the terms of any licenses
governing use of third-party open source software; any breach of
its security measures or unauthorized access to customer data; our
ability to adequately enforce or defend ownership and use of our
intellectual property and other proprietary rights; any allegations
of infringement, misappropriation or violations of a third party’s
intellectual property rights; our ability to meet obligations under
indebtedness and have sufficient capital to operate our business;
any limitations on our ability to pursue business strategies due to
restrictions under our current or future indebtedness; any
impairment of goodwill or other intangible assets; our ability to
use our net operating losses and R&D tax credit carryforwards;
the accuracy of management’s estimates and judgments relating to
critical accounting policies and changes in financial reporting
standards or interpretations; any inability to design, implement,
and maintain effective internal controls or inability to remediate
any internal controls deemed ineffective; the costs and management
time associated with operating as a publicly traded company; and
the other factors detailed under the captions “Risk Factors” and
“Special Note Regarding Forward-Looking Statements” and elsewhere
in our Securities and Exchange Commission (“SEC”) filings, and
reports, including the Form 10-K filed by the Company with the
Securities and Exchange Commission on March 1, 2023, and subsequent
reports filed with the SEC. Any forward-looking statements speak
only as of the date of this release and, except to the extent
required by applicable securities laws, we expressly disclaim any
obligation to update or revise any of them to reflect actual
results, any changes in expectations or any change in events.
Factors that may materially affect our results and those risks
listed in filings with the SEC.
A Note on Non-GAAP Financial Measures
This press release contains “non-GAAP measures”
which are financial measures that either exclude or include amounts
that are not excluded or included in the most directly comparable
measures calculated and presented in accordance with U.S. generally
accepted accounting principles (“GAAP”). Specifically, the Company
makes use of the non-GAAP financial measures adjusted EBITDA,
adjusted net income (loss), adjusted diluted earnings per share,
and constant currency (“CC”) revenue, which are not recognized
terms under GAAP. These measures should not be considered as
alternatives to net income (loss) or GAAP diluted earnings per
share or revenue as measures of financial performance or any other
performance measure derived in accordance with GAAP and should not
be considered a measure of discretionary cash available to the
Company to invest in the growth of its business. The presentation
of these measures has limitations as an analytical tool and should
not be considered in isolation, or as a substitute for the
Company’s results as reported under GAAP. Because not all companies
use identical calculations, the presentations of these measures may
not be comparable to other similarly titled measures of other
companies and can differ significantly from company to company.
You should refer to the footnotes below as well
as the “Non-GAAP Financial Measures” section in this press release
below for a further explanation of these measures and
reconciliations of these non-GAAP measures in specific periods to
their most directly comparable financial measure calculated and
presented in accordance with GAAP for those periods.
Management uses various financial metrics,
including total revenues, income (loss) from operations, net income
(loss), and certain non-GAAP measures, including those discussed
above, to measure and assess the performance of the Company’s
business, to evaluate the effectiveness of its business strategies,
to make budgeting decisions, to make certain compensation
decisions, and to compare the Company’s performance against that of
other peer companies using similar measures. In addition,
management believes these metrics provide useful measures for
period-to-period comparisons of the Company’s business, as they
remove the effect of certain non-cash expenses and other items not
indicative of its ongoing operating performance.
Management believes that adjusted EBITDA,
adjusted net income (loss), adjusted diluted earnings per share,
and CC revenue are helpful to investors, analysts, and other
interested parties because they can assist in providing a more
consistent and comparable overview of our operations across our
historical periods. In addition, each of these measures is
frequently used by analysts, investors, and other interested
parties to evaluate and assess performance. Furthermore, our
business has operations outside the United States that are
conducted in local currencies. As a result, the comparability of
the financial results reported in U.S. dollars is affected by
changes in foreign currency exchange rates. We adjust revenues for
constant currency to provide a framework for assessing how our
business performed excluding the effect of foreign currency rate
fluctuations and we believe it is helpful for investors to present
operating results on a comparable basis period over period to
evaluate its underlying performance.
Please note that the Company has not reconciled
the adjusted EBITDA or adjusted diluted earnings per share
forward-looking guidance included in this press release to the most
directly comparable GAAP measures because this cannot be done
without unreasonable effort due to the variability and low
visibility with respect to costs related to acquisitions,
financings, and employee stock compensation programs, which are
potential adjustments to future earnings. We expect the variability
of these items to have a potentially unpredictable, and a
potentially significant, impact on our future GAAP financial
results.
(1) |
CC revenue
excludes the effects of foreign currency exchange rate fluctuations
by assuming constant foreign currency exchange rates used for
translation. Current periods revenue reported in currencies other
than U.S. Dollars are converted into U.S. Dollars at the average
exchange rates in effect for the comparable prior periods. |
(2) |
Adjusted EBITDA represents net income excluding interest
expense, provision (benefit) for income taxes, depreciation and
amortization expense, intangible asset amortization, equity-based
compensation expense, change in fair value of contingent
consideration, acquisition and integration expense and other items
not indicative of our ongoing operating performance. |
(3) |
Adjusted net income and adjusted diluted earnings per share
exclude the effect of equity-based compensation expense,
amortization of acquisition-related intangible assets, change in
fair value of contingent consideration, acquisition and integration
expense, and other items not indicative of our ongoing operating
performance as well as income tax provision adjustment for such
charges. |
In evaluating adjusted EBITDA, adjusted net
income, and adjusted diluted earnings per share, you should be
aware that in the future the Company may incur expenses similar to
those eliminated in this presentation and this presentation should
not be construed as an inference that future results will be
unaffected by unusual items.
Contacts:
Investor Relations Contact: David
DeuchlerGilmartin Groupir@certara.com
Media Contact:Daniel YungerKekst
CNCdaniel.yunger@kekstcnc.com
CERTARA, INC. AND SUBSIDIARIESCONDENSED
CONSOLIDATED STATEMENTS OF
OPERATIONS(UNAUDITED) |
|
|
|
|
|
|
|
|
|
|
|
THREE MONTHS ENDED |
|
SIX MONTHS ENDED |
|
|
JUNE 30, |
|
JUNE 30, |
(IN THOUSANDS, EXCEPT PER SHARE AND SHARE
DATA) |
|
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
Revenues |
|
$ |
90,450 |
|
|
$ |
82,760 |
|
|
$ |
180,751 |
|
|
$ |
164,311 |
|
Cost of revenues |
|
|
36,224 |
|
|
|
35,194 |
|
|
|
71,080 |
|
|
|
67,983 |
|
Operating expenses: |
|
|
|
|
|
|
|
|
Sales and marketing |
|
|
8,111 |
|
|
|
7,121 |
|
|
|
16,113 |
|
|
|
13,232 |
|
Research and development |
|
|
7,888 |
|
|
|
7,741 |
|
|
|
17,175 |
|
|
|
15,289 |
|
General and administrative |
|
|
14,245 |
|
|
|
17,778 |
|
|
|
34,017 |
|
|
|
36,117 |
|
Intangible asset amortization |
|
|
10,582 |
|
|
|
10,355 |
|
|
|
21,117 |
|
|
|
20,504 |
|
Depreciation and amortization expense |
|
|
361 |
|
|
|
422 |
|
|
|
772 |
|
|
|
904 |
|
Total operating expenses |
|
|
41,187 |
|
|
|
43,417 |
|
|
|
89,194 |
|
|
|
86,046 |
|
Income from operations |
|
|
13,039 |
|
|
|
4,149 |
|
|
|
20,477 |
|
|
|
10,282 |
|
Other income (expenses): |
|
|
|
|
|
|
|
|
Interest expense |
|
|
(5,668 |
) |
|
|
(3,879 |
) |
|
|
(11,143 |
) |
|
|
(7,107 |
) |
Net other income |
|
|
1,010 |
|
|
|
2,521 |
|
|
|
1,516 |
|
|
|
3,362 |
|
Total other expenses |
|
|
(4,658 |
) |
|
|
(1,358 |
) |
|
|
(9,627 |
) |
|
|
(3,745 |
) |
Income before income taxes |
|
|
8,381 |
|
|
|
2,791 |
|
|
|
10,850 |
|
|
|
6,537 |
|
Provision of income taxes |
|
|
3,675 |
|
|
|
3,380 |
|
|
|
4,786 |
|
|
|
4,916 |
|
Net Income (loss) |
|
$ |
4,706 |
|
|
$ |
(589 |
) |
|
$ |
6,064 |
|
|
$ |
1,621 |
|
|
|
|
|
|
|
|
|
|
Net income per share
attributable to common stockholders: |
|
|
|
|
|
|
|
|
Basic |
|
$ |
0.03 |
|
|
$ |
— |
|
|
$ |
0.04 |
|
|
$ |
0.01 |
|
Diluted |
|
$ |
0.03 |
|
|
$ |
— |
|
|
$ |
0.04 |
|
|
$ |
0.01 |
|
Weighted average common shares
outstanding: |
|
|
|
|
|
|
|
|
Basic |
|
|
158,955,822 |
|
|
|
156,478,724 |
|
|
|
158,568,575 |
|
|
|
156,209,335 |
|
Diluted |
|
|
159,906,972 |
|
|
|
156,478,724 |
|
|
|
159,817,688 |
|
|
|
159,293,362 |
|
CERTARA, INC. AND SUBSIDIARIESCONDENSED
CONSOLIDATED BALANCE SHEETS(UNAUDITED) |
|
|
|
|
|
|
|
JUNE 30, |
|
DECEMBER 31, |
(IN THOUSANDS, EXCEPT PER SHARE AND SHARE
DATA) |
|
|
2023 |
|
|
|
2022 |
|
Assets |
|
|
|
|
Current assets: |
|
|
|
|
Cash and cash equivalents |
|
$ |
245,190 |
|
|
$ |
236,586 |
|
Accounts receivable, net of allowance for credit losses of $460 and
$1,250, respectively |
|
|
83,952 |
|
|
|
82,584 |
|
Restricted cash |
|
|
3,020 |
|
|
|
3,102 |
|
Prepaid expenses and other current assets |
|
|
20,882 |
|
|
|
19,980 |
|
Total current assets |
|
|
353,044 |
|
|
|
342,252 |
|
Other assets: |
|
|
|
|
Property and equipment, net |
|
|
2,206 |
|
|
|
2,400 |
|
Operating lease right-of-use assets |
|
|
12,326 |
|
|
|
14,427 |
|
Goodwill |
|
|
721,853 |
|
|
|
717,743 |
|
Intangible assets, net of accumulated amortization of $244,974 and
$217,705, respectively |
|
|
473,805 |
|
|
|
486,782 |
|
Deferred income taxes |
|
|
3,703 |
|
|
|
3,703 |
|
Other long-term assets |
|
|
5,283 |
|
|
|
5,615 |
|
Total assets |
|
$ |
1,572,220 |
|
|
$ |
1,572,922 |
|
Liabilities and
stockholders’ equity |
|
|
|
|
Current liabilities: |
|
|
|
|
Accounts payable |
|
$ |
3,789 |
|
|
$ |
7,533 |
|
Accrued expenses |
|
|
38,654 |
|
|
|
35,403 |
|
Current portion of deferred revenue |
|
|
52,788 |
|
|
|
52,209 |
|
Current portion of long-term debt |
|
|
3,020 |
|
|
|
3,020 |
|
Other current liabilities |
|
|
4,645 |
|
|
|
4,993 |
|
Total current liabilities |
|
|
102,896 |
|
|
|
103,158 |
|
Long-term liabilities: |
|
|
|
|
Deferred revenue, net of current portion |
|
|
2,056 |
|
|
|
2,815 |
|
Deferred income taxes |
|
|
54,677 |
|
|
|
65,046 |
|
Operating lease liabilities, net of current portion |
|
|
8,285 |
|
|
|
10,133 |
|
Long-term debt, net of current portion and debt discount |
|
|
289,104 |
|
|
|
289,988 |
|
Other long-term liabilities |
|
|
18,028 |
|
|
|
22,121 |
|
Total liabilities |
|
|
475,046 |
|
|
|
493,261 |
|
Commitments and
contingencies |
|
|
|
|
Stockholders'
equity: |
|
|
|
|
Preferred shares, $0.01 par value, 50,000,000 shares authorized, no
shares issued and outstanding as of June 30, 2023 and December 31,
2022, respectively |
|
|
— |
|
|
|
— |
|
Common shares, $0.01 par value, 600,000,000 shares authorized,
160,171,493 and 159,676,150 shares issued as of June 30, 2023 and
December 31, 2022, respectively; 159,777,284 and 159,525,943 shares
outstanding as of June 30, 2023 and December 31, 2022,
respectively |
|
|
1,601 |
|
|
|
1,596 |
|
Additional paid-in capital |
|
|
1,162,317 |
|
|
|
1,150,168 |
|
Accumulated deficit |
|
|
(54,809 |
) |
|
|
(60,873 |
) |
Accumulated other comprehensive loss |
|
|
(3,173 |
) |
|
|
(8,230 |
) |
Treasury stock at cost, 394,209 and 150,207 shares at June 30, 2023
and December 31, 2022, respectively |
|
|
(8,762 |
) |
|
|
(3,000 |
) |
Total stockholders’ equity |
|
|
1,097,174 |
|
|
|
1,079,661 |
|
Total liabilities and stockholders’ equity |
|
$ |
1,572,220 |
|
|
$ |
1,572,922 |
|
CERTARA, INC. AND SUBSIDIARIESCONDENSED
CONSOLIDATED STATEMENTS OF CASH
FLOWS(UNAUDITED) |
|
|
|
|
|
|
|
SIX MONTHS ENDED JUNE 30, |
(IN THOUSANDS) |
|
|
2023 |
|
|
|
2022 |
|
Cash flows from operating activities: |
|
|
|
|
Net income |
|
$ |
6,064 |
|
|
$ |
1,621 |
|
Adjustments to reconcile net
income to net cash provided by operating activities: |
|
|
|
|
Depreciation and amortization of property and equipment |
|
|
772 |
|
|
|
904 |
|
Amortization of intangible assets |
|
|
26,286 |
|
|
|
25,161 |
|
Amortization of debt issuance costs |
|
|
765 |
|
|
|
771 |
|
Provision for credit losses |
|
|
(172 |
) |
|
|
217 |
|
Loss on retirement of assets |
|
|
29 |
|
|
|
7 |
|
Equity-based compensation expense |
|
|
12,153 |
|
|
|
17,014 |
|
Change in fair value of contingent considerations |
|
|
2,559 |
|
|
|
— |
|
Deferred income taxes |
|
|
(10,237 |
) |
|
|
(5,607 |
) |
Changes in assets and liabilities |
|
|
|
|
Accounts receivable |
|
|
(272 |
) |
|
|
(5,706 |
) |
Prepaid expenses and other assets |
|
|
494 |
|
|
|
4,586 |
|
Accounts payable and accrued expenses |
|
|
(8,343 |
) |
|
|
(7,934 |
) |
Deferred revenue |
|
|
(2,083 |
) |
|
|
3,186 |
|
Change in other liabilities |
|
|
— |
|
|
|
(1,158 |
) |
Net cash provided by operating activities |
|
|
28,015 |
|
|
|
33,062 |
|
Cash flows from
investing activities: |
|
|
|
|
Capital expenditures |
|
|
(588 |
) |
|
|
(859 |
) |
Capitalized development
costs |
|
|
(6,270 |
) |
|
|
(5,172 |
) |
Investment in intangible
assets |
|
|
(54 |
) |
|
|
— |
|
Business acquisitions, net of
cash acquired |
|
|
(7,550 |
) |
|
|
(5,883 |
) |
Net cash used in investing activities |
|
|
(14,462 |
) |
|
|
(11,914 |
) |
Cash flows from
financing activities: |
|
|
|
|
Payments on long-term debt and finance lease obligations |
|
|
(1,535 |
) |
|
|
(1,654 |
) |
Payments on financing component of interest rate swap |
|
|
— |
|
|
|
(1,085 |
) |
Payment of taxes on shares withheld for employee taxes |
|
|
(5,735 |
) |
|
|
(2,312 |
) |
Net cash used by financing activities |
|
|
(7,270 |
) |
|
|
(5,051 |
) |
Effect of foreign exchange
rate changes on cash and cash equivalents, and restricted cash |
|
|
2,239 |
|
|
|
(4,471 |
) |
Net increase in cash and cash equivalents, and restricted cash |
|
|
8,522 |
|
|
|
11,626 |
|
Cash and cash equivalents, and
restricted cash, at beginning of period |
|
|
239,688 |
|
|
|
186,624 |
|
Cash and cash equivalents, and
restricted cash, at end of period |
|
$ |
248,210 |
|
|
$ |
198,250 |
|
NON-GAAP FINANCIAL MEASURES
The following table reconciles net income to adjusted
EBITDA:
|
|
|
|
|
|
|
|
|
|
|
THREE MONTHS ENDED |
|
SIX MONTHS ENDED |
|
|
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
|
|
( in thousands) |
Net income (loss)(a) |
|
$ |
4,706 |
|
|
$ |
(589 |
) |
|
$ |
6,064 |
|
|
$ |
1,621 |
|
Interest expense(a) |
|
|
5,668 |
|
|
|
3,879 |
|
|
|
11,143 |
|
|
|
7,107 |
|
Interest income(a) |
|
|
(2,210 |
) |
|
|
(14 |
) |
|
|
(3,564 |
) |
|
|
(25 |
) |
Provision for income
taxes(a) |
|
|
3,675 |
|
|
|
3,380 |
|
|
|
4,786 |
|
|
|
4,916 |
|
Depreciation and amortization
expense(a) |
|
|
361 |
|
|
|
422 |
|
|
|
772 |
|
|
|
904 |
|
Intangible asset
amortization(a) |
|
|
13,173 |
|
|
|
12,711 |
|
|
|
26,286 |
|
|
|
25,161 |
|
Currency (gain) loss(a) |
|
|
1,120 |
|
|
|
(2,558 |
) |
|
|
2,014 |
|
|
|
(3,263 |
) |
Equity-based compensation
expense(b) |
|
|
3,610 |
|
|
|
9,501 |
|
|
|
12,153 |
|
|
|
17,014 |
|
Change in fair value of
contingent consideration(d) |
|
|
1,298 |
|
|
|
— |
|
|
|
2,559 |
|
|
|
— |
|
Acquisition-related
expenses(e) |
|
|
692 |
|
|
|
806 |
|
|
|
1,884 |
|
|
|
1,078 |
|
Integration expense(f) |
|
|
55 |
|
|
|
— |
|
|
|
157 |
|
|
|
— |
|
Transaction-related
expenses(g) |
|
|
— |
|
|
|
111 |
|
|
|
— |
|
|
|
128 |
|
Loss on disposal of fixed
assets(h) |
|
|
25 |
|
|
|
2 |
|
|
|
29 |
|
|
|
7 |
|
Executive recruiting
expense(i) |
|
|
200 |
|
|
|
— |
|
|
|
396 |
|
|
|
— |
|
First-year Sarbanes-Oxley
implementation costs(j) |
|
|
— |
|
|
|
308 |
|
|
|
— |
|
|
|
961 |
|
Adjusted EBITDA |
|
$ |
32,373 |
|
|
$ |
27,959 |
|
|
$ |
64,679 |
|
|
$ |
55,609 |
|
The following table reconciles net income to adjusted net
income:
|
|
|
|
|
|
|
|
|
|
|
THREE MONTHS ENDED |
|
SIX MONTHS ENDED |
|
|
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
|
|
(in thousands) |
Net income (loss)(a) |
|
$ |
4,706 |
|
|
$ |
(589 |
) |
|
$ |
6,064 |
|
|
$ |
1,621 |
|
Currency (gain) loss(a) |
|
|
1,120 |
|
|
|
(2,558 |
) |
|
|
2,014 |
|
|
|
(3,263 |
) |
Equity-based compensation
expense(b) |
|
|
3,610 |
|
|
|
9,501 |
|
|
|
12,153 |
|
|
|
17,014 |
|
Amortization of
acquisition-related intangible assets(c) |
|
|
11,259 |
|
|
|
11,099 |
|
|
|
22,515 |
|
|
|
21,979 |
|
Change in fair value of
contingent consideration(d) |
|
|
1,298 |
|
|
|
— |
|
|
|
2,559 |
|
|
|
— |
|
Acquisition-related
expenses(e) |
|
|
692 |
|
|
|
806 |
|
|
|
1,884 |
|
|
|
1,078 |
|
Integration expense(f) |
|
|
55 |
|
|
|
— |
|
|
|
157 |
|
|
|
— |
|
Transaction-related
expenses(g) |
|
|
— |
|
|
|
111 |
|
|
|
— |
|
|
|
128 |
|
Loss on disposal of fixed
assets(h) |
|
|
25 |
|
|
|
2 |
|
|
|
29 |
|
|
|
7 |
|
Executive recruiting
expense(i) |
|
|
200 |
|
|
|
— |
|
|
|
396 |
|
|
|
— |
|
First-year Sarbanes-Oxley
implementation costs(j) |
|
|
— |
|
|
|
308 |
|
|
|
— |
|
|
|
961 |
|
Income tax expense impact of
adjustments(k) |
|
|
(4,602 |
) |
|
|
(4,063 |
) |
|
|
(10,097 |
) |
|
|
(7,979 |
) |
Adjusted net income |
|
$ |
18,363 |
|
|
$ |
14,617 |
|
|
$ |
37,674 |
|
|
$ |
31,546 |
|
The following tables reconciles diluted earnings per share to
adjusted diluted earnings per share:
|
|
|
|
|
|
|
|
|
|
|
THREE MONTHS ENDED |
|
SIX MONTHS ENDED |
|
|
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
|
|
|
|
|
|
|
Diluted earnings per
share(a) |
|
$ |
0.03 |
|
|
$ |
— |
|
|
$ |
0.04 |
|
|
$ |
0.01 |
|
Currency (gain) loss(a) |
|
|
0.01 |
|
|
|
(0.02 |
) |
|
|
0.01 |
|
|
|
(0.02 |
) |
Equity-based compensation
expense(b) |
|
|
0.02 |
|
|
|
0.06 |
|
|
|
0.08 |
|
|
|
0.11 |
|
Amortization of
acquisition-related intangible assets(c) |
|
|
0.07 |
|
|
|
0.06 |
|
|
|
0.14 |
|
|
|
0.13 |
|
Change in fair value of
contingent consideration(d) |
|
|
0.01 |
|
|
|
— |
|
|
|
0.02 |
|
|
|
— |
|
Acquisition-related
expenses(e) |
|
|
0.01 |
|
|
|
0.01 |
|
|
|
0.01 |
|
|
|
0.01 |
|
Integration expense(f) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Transaction-related
expenses(g) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Loss on disposal of fixed
assets(h) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Executive recruiting
expense(i) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
First-year Sarbanes-Oxley
implementation costs(j) |
|
|
— |
|
|
|
0.01 |
|
|
|
— |
|
|
|
0.01 |
|
Income tax expense impact of
adjustments(k) |
|
|
(0.03 |
) |
|
|
(0.03 |
) |
|
|
(0.06 |
) |
|
|
(0.05 |
) |
Adjusted Diluted Earnings Per
Share |
|
$ |
0.12 |
|
|
$ |
0.09 |
|
|
$ |
0.24 |
|
|
$ |
0.20 |
|
|
|
|
|
|
|
|
|
|
Basic weighted average common
shares outstanding |
|
|
158,955,822 |
|
|
|
156,478,724 |
|
|
|
158,568,575 |
|
|
|
156,209,335 |
|
Effect of potentially dilutive
shares outstanding(l) |
|
|
951,150 |
|
|
|
2,946,216 |
|
|
|
1,249,113 |
|
|
|
3,084,027 |
|
Adjusted diluted weighted
average common shares outstanding |
|
|
159,906,972 |
|
|
|
159,424,940 |
|
|
|
159,817,688 |
|
|
|
159,293,362 |
|
The following tables reconcile revenues to the revenues adjusted
for constant currency:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
THREE MONTHS ENDED |
|
CHANGE |
|
|
2023 |
|
2023 |
|
2022 |
|
$ |
|
% |
|
$ |
% |
|
|
Actual |
|
CC |
|
Actual |
|
Actual |
|
Actual |
|
CC Impact |
|
|
|
|
(GAAP) |
|
(non-GAAP) |
|
(GAAP) |
|
(GAAP) |
|
(GAAP) |
|
(non-GAAP) |
|
(non-GAAP) |
|
|
(in thousands except percentage) |
Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Software |
|
$ |
33,723 |
|
$ |
33,850 |
|
$ |
28,724 |
|
$ |
4,999 |
|
17 |
% |
|
$ |
127 |
|
18 |
% |
Services |
|
|
56,727 |
|
|
56,792 |
|
|
54,036 |
|
|
2,691 |
|
5 |
% |
|
|
65 |
|
5 |
% |
Total Revenue |
|
$ |
90,450 |
|
$ |
90,642 |
|
$ |
82,760 |
|
$ |
7,690 |
|
9 |
% |
|
$ |
192 |
|
10 |
% |
|
|
SIX MONTHS ENDED |
|
CHANGE |
|
|
2023 |
|
2023 |
|
2022 |
|
$ |
|
% |
|
$ |
|
% |
|
|
Actual |
|
CC |
|
Actual |
|
Actual |
|
Actual |
|
CC Impact |
|
|
|
|
(GAAP) |
|
(non-GAAP) |
|
(GAAP) |
|
(GAAP) |
|
(GAAP) |
|
(non-GAAP) |
|
(non-GAAP) |
|
|
(in thousands except percentage) |
Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Software |
|
$ |
66,728 |
|
$ |
67,695 |
|
$ |
57,917 |
|
$ |
8,811 |
|
15 |
% |
|
$ |
967 |
|
17 |
% |
Services |
|
|
114,023 |
|
|
114,843 |
|
|
106,394 |
|
|
7,629 |
|
7 |
% |
|
|
820 |
|
8 |
% |
Total Revenue |
|
$ |
180,751 |
|
$ |
182,538 |
|
$ |
164,311 |
|
$ |
16,440 |
|
10 |
% |
|
$ |
1,787 |
|
11 |
% |
(a) |
Represents
amounts as determined under GAAP. |
(b) |
Represents expense related to equity-based compensation.
Equity-based compensation has been, and will continue to be for the
foreseeable future, a recurring expense in our business and an
important part of our compensation strategy. |
(c) |
Represents amortization costs associated with acquired
intangible assets in connection with business acquisitions. |
(d) |
Represents expense associated with remeasuring fair value of
contingent consideration of business acquisition. |
(e) |
Represents costs associated with mergers and acquisitions and
any retention bonuses pursuant to the acquisitions. |
(f) |
Represents integration costs related to post - acquisition
integration activities. |
(g) |
Represents costs associated with our public offerings that are
not capitalized. |
(h) |
Represents the gain/loss related to disposal of fixed
assets. |
(i) |
Represents recruiting and relocation expenses related to hiring
senior executives. |
(j) |
Represents the first-year Sarbanes-Oxley costs for accounting
and consulting fees related to the Company's preparation to comply
with Section 404 of the Sarbanes-Oxley Act, as well as
implementation cost of adopting ASC 842. |
(k) |
Represents the income tax effect of the non-GAAP adjustments
calculated using the applicable statutory rate by
jurisdiction. |
(l) |
Represents potentially dilutive shares that were included from
our GAAP diluted weighted average common shares outstanding. |
Certara (NASDAQ:CERT)
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Certara (NASDAQ:CERT)
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