管理層發言
Good day, and thank you for standing by. Welcome to the Certara Second Quarter 2026 Earnings Conference Call. At this time all participants are in a listen-only mode. To ask a question, press star then one. Please be advised that today's conference is being recorded. I would now like to hand the conference over to Jay Liu, Investor Relations at LifeSci. Please go ahead.
Good morning, everyone. Thank you all for participating in today's conference call. On the call from Certara, we have Jon Resnick, Chief Executive Officer; and Faiz Mohammed, Interim Chief Financial Officer. Earlier today, Certara released financial results for the quarter ended June 30, 2026. 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 2 in the accompanying presentation titled Second Quarter 2026 Financial Results for additional information, which you can find on the company's Investor Relations website. 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 in the accompanying materials for additional information. This conference call contains time-sensitive information and is accurate only as of today, August 4, 2026. 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 Jon.
Thank you for joining today's call. Before I get into our results, I want to highlight the appointment of our new Chief Commercial Officer, which we announced earlier this morning. This reflects our commitment to a new, more impactful go-to-market approach, which I'll cover in more detail shortly. The second quarter was about executing on our commitments. Overall, we are pleased with our progress. We are transforming Certara into a company we believe is capable of delivering sustainable double-digit growth. We still have work to do, but we are on the right path. We are executing against our plan. Our foundation is strengthening and the macro market conditions, biopharma spending, clinical trial starts and new regulatory guidance continue to be in our favor. I'll start with our top line financials, then move to our strategic and operational priorities, our client impact and finally, how we are leveraging AI. Top line results in the quarter were in line with expectations and guidance. Overall, revenue growth was modest at 1% with software revenue growing 4% and service revenue declining 3%. On software, our renewed focus on driving new growth is building momentum. Normalizing for the Chemaxon acquisition, trailing 12-month bookings grew 7% exiting the first half, up sharply from 0.8% exiting 2025. Overall, software revenue now represents 53% of our business versus 40% just 2 years ago. Service bookings lagged in the quarter with a book-to-bill of 1.07. Services bookings were impacted in part by the carve-out of our regulatory and medical writing business. In the quarter, we also began implementing several changes to the broader services go-to-market model, which we will continue to refine. Leading indicators are positive. Our pipeline grew 27% year-on-year exiting the quarter, which we anticipate translating into revenue growth in the back half of 2026. Today, we are reaffirming our guidance range of 0% to 4% for full year revenue growth. Shifting to the key actions we have taken to improve our ability to drive growth. In February, we outlined bold initiatives to more sharply focus the organization on its ability to deliver. And in Q2, we continued implementing them. A divestiture was our first step in sharpening our strategy, rebalancing Certara while improving our overall financial predictability and strengthening our software-services flywheel. We have reprioritized our product portfolio to focus on key growth areas and adjusted our road maps to accelerate AI. Our reorganization around two business units, Model Informed Discovery and Drug Development, or MID3, and Accelerated Clinical Evidence or ACE, is expected to better align our business to how customers consume our products and our services. We have taken steps to streamline our cost base. In May, we executed a reduction in force focused predominantly on overhead, impacting approximately 5% of our global employee base. This action, combined with other steps towards operational excellence, is expected to result in a run rate savings of approximately $13 million. These reductions allow us to address some of the stranded costs from the divestiture and accelerate our investments in innovation. We're also redesigning our commercial go-to-market engine to tightly integrate sales and marketing in support of the business units. This is expected to activate growth across all segments, extend our partnership models and drive adoption of new customer use cases. As part of that, I'm excited to announce Julien Perrier as our new Chief Commercial Officer, effective August 1. Julien brings nearly two decades of international commercial leadership across global biopharma, technology-enabled scientific services and AI-driven biotechnology. Most recently, he was CEO of an AI-powered diagnostic company. I'm also pleased to announce that Eric Jahn has been promoted to CIO. Eric will be critical in enabling our global scalability and optimizing internal AI systems to drive growth. Now turning to our unique value proposition and how it translates to customer impact. Certara sits at a rare intersection: regulatory and scientific leadership, proprietary software and AI. We serve more than 2,600 customers in over 70 countries with nearly 160,000 daily users of our software. The ecosystem we sit in amplifies our positioning. Regulators are accelerating model-informed approaches into policy. This quarter, HHS launched Operation TrialBlazer to speed up early-stage clinical trials and the FDA issued new guidance backing quantitative systems pharmacology or QSP modeling for first-in-human dosing. In July, ICH M15 took effect at EMA, giving U.S. and Europe a shared standard for model-informed drug development for the first time. Certara is at the forefront of helping shape these policies. Our scientists are in direct dialogue with agencies on how modeling can optimize trial design and strengthen evidence. Their leadership is evident in the numbers: 62 peer-reviewed publications this quarter alone, spanning AI and machine learning, rare populations and the cutting edge of science. That science shows up directly in the products and services our customers buy. In the quarter, every one of the 13 novel therapies the FDA approved came from a Certara client. One was for Eli Lilly's orforglipron, the first once-daily non-peptide oral GLP-1 therapy for obesity. Certara's Simcyp Simulator supported the drug-to-drug interaction labeling and helped characterize how slower gastric emptying affects dosing. For patients, this means a therapy that can be taken any time of day and no longer requires the inconvenience of self-injection. This product was approved in just 50 days, the fastest new molecular entity approval since 2002. We saw the same pattern in rare disease where our clinical pharmacology and pharmacometrics teams partnered with a biopharma company on the evidence package behind the FDA's approval of a new therapy for a rare autoimmune condition with historically few treatment options. And in oncology, Certara scientists partnered with Memorial Sloan Kettering to build a virtual patient model on our QXP platform for CAR-T therapy in multiple myeloma, individualizing treatment and optimizing trials of novel combination therapies. Our software business is seeing strong momentum from AI and the movement to the cloud. Phoenix, our pharmacometrics modeling platform, has won 30 cloud implementations this year across client segments. Phoenix is one of our core launch points for integrated AI capabilities. Additionally, we grew our footprint globally this quarter. Our first major Simcyp win in China, expanding engagement across the Middle East and in Japan, a full modeling collaboration, delivering a first-in-human dose estimate through Certara IQ, our AI-powered QSP platform. Speaking about AI, we believe AI accelerates how we deliver customer value. With 25 years of accumulated scientific and operational data, deep scientific judgment, proven algorithms and software embedded in the workflows of both clients and regulators, Certara has exactly what it takes to optimize how AI benefits the regulated environments we serve. Generic AI tools don't have the same level of specialization and cannot provide the accountability that Certara can. Let me highlight three examples from the quarter to illustrate how AI is helping us drive revenue growth and margin efficiencies. First, we are embedding AI across our product development and operations teams to drive speed and efficiency. Up to 85% of our new code is now AI-assisted. And we are seeing a 65% year-on-year increase in the rate of development per software engineer. We are connecting our internal systems and automating workflows across our functions. Agents are cutting cycle times by as much as 90% in areas like legal and IT. And our sales teams now get daily automated signals from our AI platform to drive prospecting and pipeline. Second, AI is enabling new customer use cases, powering new workflows and enhancing our existing software products. The integration of D360 and Chemaxon Design Hub will enable scientists to connect experimental data, scientific hypotheses and candidate compound design into a single workflow. Our next-generation platform will allow customers to leverage our software products alongside Frontier AI models, including NVIDIA's BioNeMo agent toolkit. We are enhancing functionality across several products, including Phoenix Cloud, Pinnacle, CertaraIQ, D360 and CoAuthor. As an example, CoAuthor, which has been used in more than 400 regulatory submissions, now provides nearly 600 AI agents, driving a 40% productivity increase in drafting quality control documents and over 90% accuracy summarizing complex databases. And third, AI agents are now making our scientific services more productive. A proprietary scientific agentic workflow is accelerating delivery steps by up to 80% for certain tasks. This allows our scientists to spend more time on activities that require human judgment. Importantly, our scientists remain at the center of every decision, creating an accountability layer that AI alone cannot provide. This protects the trust, reproducibility and auditability our customers and regulators depend on. In closing, today, we are focused on growth and instilling operational discipline into our business. We are aligning the organization behind our strategy, resetting our operational model and rightsizing our cost base. Our sights are also set on the future. Certara is well positioned to drive transformative growth, defining the science needed to accelerate drug development. With a broad customer base and deeply embedded software, we believe we are uniquely situated to lead MIDD adoption and growth that will meaningfully impact our customers and the patients they serve. With that, I'll turn the call over to Faiz, who will go over the financials. Faiz?
Thank you, Jon. Before I review the quarter, my comments on continuing operations include final adjustments relating to the divestiture of the regulatory and medical writing business. Our bookings discussion also excludes this divestiture. Through the close on May 8, that business contributed $19.2 million of revenue and $7.5 million of adjusted EBITDA, both in discontinued operations. Turning to the income statement. Total revenue for the three months ending June 30, 2026, was $93.3 million, representing year-over-year growth of 1% on a reported basis. Total bookings in the second quarter were $98.3 million, which increased 1% from the prior year. Trailing 12-month bookings were $405.4 million, increasing 3%. Software revenue was $48.8 million in the second quarter, which increased 4% over the prior year on a reported basis. Growth in the quarter was driven by strength in Simcyp, Phoenix and Pinnacle 21. Software bookings were $50.7 million in the second quarter, which increased 9% from the prior year period. Trailing 12-month software bookings were $196.4 million, up 8% year-over-year. Services revenue was $44.5 million in the second quarter, down 3% versus the prior year period on a reported basis. Services bookings in the second quarter were $47.6 million, which declined 6% from the prior year period. Trailing 12-month services bookings were $209 million, down 1% compared to the prior period. Total cost of revenue for the second quarter of 2026 was $35.1 million compared to $34.3 million in the second quarter of 2025. Total operating expenses for the second quarter of 2026 were $58.3 million compared to $50.4 million in the second quarter of 2025, an increase of $7.9 million. This increase was primarily driven by the absence of a $5.7 million favorable contingent consideration adjustment in the prior year period. Adjusted EBITDA for the second quarter of 2026 was $26.2 million compared to $27 million in the second quarter of 2025. Adjusted EBITDA margin in the quarter was 28.1%. This decline is largely attributed to stranded costs related to the divestiture, which I will discuss in a moment. Wrapping up the income statement. Note that GAAP net income and EPS are both impacted by nonrecurring items. Net loss from continuing operations for the second quarter of 2026 was $6.1 million compared to net income from continuing operations of $1.5 million in the second quarter of 2025. The change primarily reflects the absence of a $5.7 million favorable contingent consideration adjustment recorded in the prior year period, a $2.9 million unfavorable swing in currency expense and a $2.2 million increase in reorganization costs, partially offset by a lower income tax expense. Adjusted net income for the second quarter of 2026 was $12.5 million compared to $12.7 million in the second quarter of 2025. Diluted loss per share for the second quarter of 2026 was $0.04 compared to diluted earnings per share of $0.01 in the second quarter of 2025. Adjusted diluted earnings per share for the second quarter of 2026 were $0.08 compared to $0.08 per share in the second quarter of 2025. Moving to the balance sheet. We finished the quarter with $184.1 million in cash and cash equivalents. As of June 30, 2026, we had $294 million of outstanding borrowings on our term loan and $100 million availability under our revolving credit facility. In the second quarter, we repurchased $17.4 million in shares, which completed a $100 million share repurchase program previously authorized by the Board. In the third quarter, our Board approved a new $50 million share repurchase program, reflecting our continued confidence in the business and our disciplined approach to capital allocation. Turning to our outlook for the remainder of the year. We continue to expect 2026 revenue growth in the range of 0% to 4%, which translates into full year revenue of $367 million to $382 million on a comparable continuing operations basis. This reflects the impact of the divestiture of our regulatory and medical writing business we announced on May 8. We anticipate full year software revenue to be at or above the high end of the 0% to 4% range for the year. We have greater visibility into the software business than we did last quarter as we continue to see a shift from desktop to cloud-based product mix. In services, we expect full year to be at or below the low end of 0% to 4% range. As Jon mentioned, we remain focused on improving performance in this part of our business. Turning to margins. We expect full year 2026 adjusted EBITDA margin in the range of 29% to 31% compared to 30% to 32% range we provided in May. This change reflects the impact of the divestiture of our regulatory and medical writing business and is not related to the underlying performance of our remaining business. As we noted last quarter, the divestiture generated approximately $17 million of adjusted EBITDA in 2025, excluding unallocated overhead costs. A portion of that shared infrastructure remains with us, while the associated revenue does not. The reduction in force we completed at the start of the third quarter offset a meaningful portion of that impact, and we expect margins to improve through the second half as those savings are realized. Factoring in the divestiture, we now expect full year adjusted diluted EPS from continuing operations to be in the range of $0.31 to $0.36 per share. Fully diluted shares are expected to be in the range of 155 million to 157 million, and we are modeling an effective tax rate of approximately 30%. With that, we will open up the call for Q&A. Operator, can you please open the line?
分析師問答
At this time, if you would like to ask a question, please press star then one. One moment for our first question. Our first question is from Craig Hettenbach with Morgan Stanley.
So Jon, it's now been a couple of quarters since you realigned the sales and go-to-market strategy. Just would love an update on what's working to date and then some of the milestones or things to watch for to execute on that.
Great. Thanks, Craig. I joined in January. The changes we've made to the go-to-market model really began coming into effect in Q2 and have been fully rolled out in July, especially with the announcement of the new Chief Commercial Officer today. We're still in the early innings in terms of rotating the model itself. I pay attention to leading indicators on the software side, such as ARR and future revenue. We're seeing strong indicators around revenue accumulation. That's been a focus from a go-to-market standpoint on net new sales in addition to renewals. The services side has been different. We've focused on getting our specialists and experts back out into the market and reversing some of the changes made in 2024 and 2025. That is early, but it's yielding positive indicators. I look at pipeline creation, which I highlighted in my earlier remarks, and it's up roughly 28% to 29% year-on-year, which is a positive indicator. So we still have work to do. The end market is strong. We've made changes to software, services, and the overall engagement model. With Julien announced today and the other steps we've taken, we're tracking where you'd expect to be on positive leading indicators.
One moment for our next question that comes from Brendan Smith with TD Cowen.
I wanted to ask quickly about net retention rate. It looks just down a bit sequentially and maybe year-over-year. Is there any nuance there in the quarter we should be aware of or any customer feedback you've been hearing in Q2? And you mentioned rightsizing the company to get to sustainable double-digit growth. Do you have a time frame in mind over which you hope to hit that? From a go-to-market perspective, what do you see as the most important inflections to supercharge that? Is it new product rollouts, cloud-based monetization, or something else?
Thanks, Brendan. On net retention rate, there's no particular issue. Absolute renewal rates were up in the quarter, slightly ahead of our expectation. There is a timing and mix effect between ratable and on-prem work that affects timing, but nothing unusual. Overall, on software, we're happy with where we sit and the pipeline looks good. The team's focus is on executing renewals and net new sales. On the timeframe for sustainable double-digit growth, I've said consistently since I joined that the end market is strong and our products are exceptional. Historically, execution has been the challenge. We're making significant changes: setting the portfolio for long-term growth, investing, changing P&L and operating models, changing go-to-market incentives, and bringing in the new CCO to position us for sustainable growth. I take a midterm view on when the full inflection will be realized. We've taken hard steps over the last six months to put the building blocks in place. The leading indicators around ARR and pipeline creation are positive, and execution against those will be the early sign of inflection.
One moment for our next question that comes from Luke Sergott with Barclays.
This is Jake on for Luke. You mentioned breaking into China for the first time. Could you talk about the significance of that, your exposure in the region and the broader opportunity you see there?
Thanks, Jake. We emphasize that this is a truly global, international business. While there's a tendency to focus on the FDA, regulatory trends like ICH M15 are global. Europe and Asia are attractive growth opportunities for us. We have built foundations and teams in those geographies over the last few months. China, Japan and the Middle East are not huge contributors to our overall business today, but we see outsized growth potential as we continue to focus on international opportunities.
One moment for our next question that comes from Michael Cherny with Leerink Partners.
If I can tie back to the NVIDIA partnership: as you think about this partnership in the context of the broader offering, how are you measuring timing on returns? How are you measuring broader partnership functionality capabilities as you work to reposition the go-to-market strategy?
Thanks for the question. The NVIDIA partnership is an important enabler. Our next-generation platform is how our software will interface with frontier models and other AI models in the market. The NVIDIA partnership allows NVIDIA agents to be an interface with our software system. A second dimension is around new use cases like discovery, where high throughput can accelerate timelines and turn through more data to provide earlier indicators and support earlier decision-making. We haven't put timelines on individual products yet, but we view this as a near- to midterm opportunity to build functionality that allows customers to consume our software in new, innovative ways. You'll hear more from us in the coming weeks and months.
Got it. And just one more follow-up regarding the divestiture: within the guidance, is there an assumption on any incremental share repurchases and/or plans for capital deployment with the cash balance available?
We did highlight that the Board has authorized an incremental $50 million in potential buybacks. Our capital allocation stance hasn't changed; we're disciplined and focus on the best use of cash. The incremental authorization signals where we see attractiveness, but there's no timeline or outlined execution path at this time.
One moment for our next question that comes from Jared Haase with William Blair.
This is Christine Rains on for Jared. Hoping you can speak to your expected back half cadence for revenue overall and for software versus services and overall EBITDA given the moving pieces here.
Thanks, Christine. Our guidance is unchanged; we continue to call out the same range we highlighted at the beginning of the year. While we don't guide on sub-quarter cadence, the pattern we've seen in the first half with software outperforming services is a pattern we expect to continue into Q3 and Q4. Software indicators on the ARR side are very positive and give us confidence. Services require building pipeline, converting it to backlog and then to revenue. Our leading indicators on services are pipeline creation, and we're feeling good about the changes we've made. The rate and pace of conversion will drive potential upside on services, but our fundamental guidance has not changed.
Great. That makes sense. And just double-clicking on EBITDA margin puts and takes for the rest of the year, specifically asking given the risk in 2Q but lower margin guidance at the midpoint. Also, should we think about margin ending this year as a good jumping-off point for next year?
First, the change reflects the new composition of the business after the divestiture, not an underlying deterioration. The regulatory and medical writing business we divested had been approximately a 30% margin business in 2025. Coming out of the divestiture, the math of the new business profile and some stranded costs explain the change. We're actively addressing stranded costs and freeing up capital to focus on AI and new offerings. The operational excellence activities, including the $13 million in run-rate savings and the RIF focused on overhead, are intended to protect margins and position us to achieve the margins we're outlining. The run rate won't fully impact the second half of this year; the benefits are more apparent in out years, but the actions are intended to improve margins over time.
One moment for our next question that comes from Sean Dodge with BMO Capital Markets.
This is Tom Kelliher on for Sean. Jon, can you talk about the lag between an improving biotech funding backdrop and when that typically starts to translate into demand on both the software and services side?
The majority of our impact tends to have a slight lag. We're not doing a lot of work in very early-stage discovery; our services start to click in as discovery translates to development and early-stage development moves toward first in human. There is a lag between funding and when those programs engage our services. That said, I don't view our recovery as dependent on biotech funding. This is an execution story: getting our teams in front of existing and new clients. There's plenty of market for Certara today, and our focus is on execution rather than on biotech funding timing.
Okay, that's helpful. And just a clarification on the cost savings: is some or all of that $13 million incremental to the $10 million you had discussed earlier? I know you had a prior cost avoidance plan. Is this completely separate?
Yes, the $13 million is the latest update and is an increase over the formerly identified plan. We signaled that we would be putting this in place to address stranded costs in the second half and to change the cost base. The $13 million is the latest view of run-rate savings. We'll continue to optimize to free up capital to spend on things that drive returns for investors.
One moment for our next question that comes from Matthew Hewitt with Craig-Hallum Capital Group.
With some consolidation in pharma and biotech and with a peer being acquired, is there any disruption from a customer perspective? For example, if a competitor is getting taken out, does that slow timelines for deals with them, or does that create an opportunity for you to win new business while they're distracted?
There's plenty of market for Certara. I'm not overly concerned about small biotech acquisitions or the M&A headlines. Our focus is execution: commercial operations and getting out in front of customers. We're not looking to speculate on competitor M&A. Our job is to serve clients with excellent science, proposals, delivery and software. This is within our control.
One moment for our next question that comes from Scott Schoenhaus with KeyBanc.
Jon, you noted pipeline commentary up 25%. Can you give more color on what's driving that—more services versus software? Is it more smaller biotech clients or larger pharma? With the new Chief Commercial Officer, how are you thinking about executing on this pipeline? Is there a mandate to convert it more quickly?
I focus on a few metrics: ARR accumulation on the software side, which continues to build and is positive, and pipeline on the services side. The biggest change year-over-year is on the services side. I believe the prior generalist go-to-market model implemented two years ago was not optimal. We need to focus on specialist scientific engagement and get our scientists back in front of the market. We've rotated the model, hired more PhD-led sales and are getting scientists out to customers. That's driving the spike in pipeline and a higher percentage of scientific services in the business, which is exactly where we're positioned to compete. With Julien coming in, we'll have an integrated sales and marketing effort that is more data-driven and segment-driven. We've built AI to enable our sales teams differently and have a different approach to getting scientists in front of customers and conferences. We are optimistic, though with any change you should be appropriately cautious. Execution and implementation of the go-to-market model will be critical.
One moment for our last question that comes from Joe Vruwink with Baird.
I wanted to ask about the updated guidance for the year. I understand regulatory is now in discontinued operations and that was about $19 million. The guidance range moved down by about $26 million. What's the delta between those two numbers?
I don't think that's the case. We continue to guide 0% to 4% for 2026. The discontinued operations from the carve-out did contribute $19.2 million of revenue in the period through May 8. The 2025 baseline was $367 million. Applying 0% to 4% to that baseline gives you the $367 million to $382 million range. If you'd like, we can walk through the math offline to reconcile the numbers you're seeing.
Okay. And then, with so much draft guidance and evolving regulatory approaches to model usage and data, does that create hesitancy among customers in how they engage with Certara?
I see the opposite. There are established use cases where Certara is the go-to player. Regulators are accelerating new use cases and maturing their acceptance. We're actively involved in discussions with regulators worldwide; our scientists are deeply engaged and are journal editors for major publications. There's a time lag between regulators establishing a framework and adoption in practice, but we're seeing an exponential increase in questions from clients on how to manage this. That drives demand for our scientists. We don't see regulatory evolution as a distraction for clients; we see it as an opportunity for Certara to partner with them and guide adoption.
This concludes our Q&A session. I will pass it back to Jon Resnick for final comments.
Thanks, everyone, for joining. I look forward to subsequent follow-up calls over the next couple of hours. Thanks, everyone.
Thank you for participating in today's conference, and you may now disconnect.