Yahoo Finance Certara Inc (CERT) Q1 2024 Earnings Call Transcript Highlights: Navigating Challenges and ...
Total Revenue: $96.7 million, up 7% year-over-year.
Software Revenue: $39.3 million, 19% growth reported, 18% constant currency growth.
Services Revenue: $57.3 million, flat year-over-year.
Net Loss: $4.7 million compared to net income of $1.4 million in the previous year.
Adjusted EBITDA: $29.1 million, down from $32.3 million year-over-year.
Diluted Loss Per Share: $0.03, compared to earnings per share of $0.01 in the previous year.
Adjusted Diluted Earnings Per Share: $0.10, down from $0.12 year-over-year.
Cash and Cash Equivalents: $224.8 million as of March 31, 2024.
Outstanding Borrowings: $287.8 million on term loan.
2024 Revenue Guidance: Expected in the range of $385 million to $400 million.
2024 Adjusted EBITDA Margin: Expected in the range of 31% to 33%.
2024 Adjusted EPS Guidance: Expected in the range of $0.41 to $0.46 per share.
Release Date: May 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
Certara Inc (NASDAQ:CERT) reported a total revenue of $96.7 million for Q1 2024, marking a year-over-year growth of 7% on a reported basis and 6% on a constant currency basis.
Software revenue increased significantly by 19% on a reported basis and 18% on a constant currency basis, driven by strong performance in biosimulation software and Pinnacle 21 platforms.
The launch of Certara Cloud, a platform integrating access to all software applications, has been successful with 1,500 client-specific portals and usage by 15 of the top 30 biopharmaceutical companies.
Certara Inc (NASDAQ:CERT) maintained a healthy software net retention rate of 114%, indicating strong customer loyalty and satisfaction.
The company reiterated its full-year 2024 guidance, expecting total revenue in the range of $385 million to $400 million, representing growth of 9% to 13% compared with 2023.
Negative Points
Technology-driven services segment revenue was flat year-over-year on both a reported and constant currency basis, indicating stagnation in this area of the business.
Services bookings for Q1 2024 decreased by 11% from the prior year period, reflecting challenges in securing new service contracts.
The net loss for Q1 2024 was $4.7 million, compared to a net income of $1.4 million in the first quarter of 2023, showing a downturn in profitability.
Total operating expenses for Q1 2024 increased significantly to $58.7 million from $48 million in Q1 2023, driven by rises in employee-related expenses and stock-based compensation.
Despite the growth in software revenue, the overall adjusted EBITDA margin for Q1 2024 was 30%, below the full-year guidance range of 31% to 33%, partly due to costs associated with recent acquisitions.
Q & A Highlights
Q: Can you provide more details on the uptake of Certara Cloud and whether it is more skewed towards larger clients or across the board? A: William F. Feehery, CEO of Certara, explained that Certara Cloud is a platform aimed at making Certara's suite of software products more accessible. Initially, smaller clients were targeted to ensure operational functionality before migrating to larger ones. The uptake is expected to accelerate throughout the year, with the platform already being used by 15 of the top 30 biopharmaceutical companies. This integration facilitates data sharing and improves the user interface across products.
Q: How does the cloud-hosted product affect the economics of versioning products like Simcyp? A: William F. Feehery noted that versioning, such as the annual updates to Simcyp, provides economic benefits by adding features that justify upgrades. The transition to cloud-hosting is expected to reduce the burden of software validation for customers, potentially leading to more frequent updates and economic advantages similar to desktop installations.
Q: Can you confirm the organic versus inorganic contribution to growth in the first quarter and for the full year as per your guidance? A: John E. Gallagher, CFO, confirmed that the first quarter's 7% revenue growth included a few hundred basis points from recent acquisitions. The full-year guidance anticipates a similar contribution pattern, with no changes to the previously stated expectations.
Q: How has the visibility into services bookings trended since the quarter closed? A: John E. Gallagher mentioned that while there was some timing impact on software bookings, services bookings have shown stability. The Tier 1 bookings faced a tough comparison from a strong Q1 in 2023, but Tiers 2 and 3 are showing signs of recovery, aligning with expectations of gradual improvement.
Q: What are the expectations for the contribution of M&A to each segment in the quarter and for the full year? A: John E. Gallagher stated that M&A contributed less than 2% to total bookings in the quarter, which aligns with expectations. For the full year, the contribution from recent acquisitions is expected to accelerate, supporting the guidance of mid-single-digit growth from these sources.
Q: How should we think about the conversion of services bookings or backlog into revenue for the fiscal year? A: John E. Gallagher explained that the conversion from backlog to revenue is proceeding as expected, with a stable transition from bookings to revenue. The company anticipates continued stability and gradual improvement in services revenue, particularly in the second half of the year.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
