Release Date: August 06, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Certara Inc (CERT, Financial) reported a 3% year-over-year increase in total revenue for Q2 2024, reaching $93.3 million.
- The software segment saw a robust 13% growth, driven by biosimulation software and Pinnacle 21.
- Certara Inc (CERT) achieved a 15% year-over-year growth in total bookings, amounting to $98.9 million.
- The company successfully launched new software products, including the 23rd version of Simcyp and the CoAuthor regulatory writing software.
- Certara Inc (CERT) announced the acquisition of Chemaxon, expected to enhance its biosimulation capabilities in the drug discovery phase.
Negative Points
- Services revenue declined by 3% year-over-year, reflecting cautious spending among Tier 1 customers.
- Adjusted EBITDA for Q2 2024 decreased to $26.3 million from $32.4 million in the same period last year.
- The company reported a net loss of $12.6 million for Q2 2024, compared to a net income of $44.7 million in Q2 2023.
- Certara Inc (CERT) is tracking towards the lower half of its full-year revenue guidance range due to underperformance in Tier 1 services customers.
- Operating expenses increased significantly to $62.5 million in Q2 2024, up from $41.2 million in Q2 2023, driven by higher employee-related expenses and stock-based compensation.
Q & A Highlights
Q: What gives you confidence that you won't slip below the bottom end of the revenue guidance range?
A: John Gallagher, CFO: We expect software to continue to perform well and have seen positive signs in Tier 3 customers. Additionally, typical seasonality, including last year's trends, gives us confidence in maintaining the guidance range.
Q: Can you elaborate on the cost reductions and their impact on profitability?
A: John Gallagher, CFO: We are reallocating resources to focus on software and AI, while reducing costs in underutilized areas. This will result in a 500-basis-point benefit, with 300 basis points impacting cost of sales and 200 basis points affecting other expenses.
Q: Why won't the recent cost reductions impact the long-term growth opportunity?
A: William Feehery, CEO: We have maintained investments in new products and AI. Some cost reductions were achieved by not hiring for certain positions, ensuring we meet our EBITDA margin guidance without compromising long-term growth.
Q: What has changed in the market environment since the beginning of the year?
A: William Feehery, CEO: We saw a pickup in small biotech funding in Q1, which flowed through in Q2. Larger customers have shown more caution in spending, particularly in services, leading us to adjust our cost position accordingly.
Q: How are you balancing pricing discipline with getting deals done in the current environment?
A: John Gallagher, CFO: Given the cautious spending and slower decision-making environment, we are implementing more modest price increases while still maintaining some level of price adjustments.
Q: What is the rationale behind the Chemaxon acquisition?
A: William Feehery, CEO: Chemaxon provides tools for the discovery phase of drug development, which we can integrate with our biosimulation products. This will enhance model-informed drug development in the discovery and lead optimization phases.
Q: What are your expectations for biotech funding for the rest of the year?
A: John Gallagher, CFO: We are not planning for an uplift in Tier 3 customers but expect typical seasonality in Tier 1 customer activity in Q4, similar to last year.
Q: How did the launch of CoAuthor impact your software bookings?
A: William Feehery, CEO: CoAuthor was fully launched at the end of June, so it did not significantly impact Q2 bookings. However, it has generated substantial interest, and we expect it to contribute more in future quarters.
Q: How do you see the current regulatory environment affecting your software offerings?
A: William Feehery, CEO: We see continued spending on software as customers view it as an essential part of their R&D infrastructure. The launch of CoAuthor, which offers significant cost savings, has been well received.
Q: How did services bookings perform in Q2, and what are your expectations for the second half of the year?
A: John Gallagher, CFO: Services bookings grew 14% year-over-year but came in later than expected. We anticipate typical seasonality in the second half, with a pickup in Q4 similar to last year.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
