Management Commentary

David Deuchler
Investor Relations, Certara

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 Jon Gallagher, Chief Financial Officer. Earlier today, Certara released financial results for the full year ended December 31, 2025. 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 materials 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 the live broadcast today, February 26, 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. With that, I'll turn the call over to Jon Resnick for opening remarks.

Jon Resnick
CEO, Certara

Good morning. Thank you all for joining today's call. I want to begin by thanking the Certara team for the warm welcome to the organization. I am also grateful to the board of directors for their trust and support. I've spent the last 30 years working at the intersection of healthcare policy, science, and technology, where I've built and transformed data technology and services businesses within the life science industry. Joining Certara on January first, I am genuinely excited by the opportunity ahead. As the new CEO, coming in with fresh eyes, I've approached the first 50 days plus with 1 priority: listening intently and learning from our stakeholders. I've spent most of my time speaking with customers and engaging directly with employees at all levels. These discussions have been invaluable.

The conversations have reinforced the inherent strengths of this organization and also highlighted where we must operate differently to unlock our full potential. Everything I have seen and heard affirms three things. First, there is a compelling market opportunity to transform how the life science industry drives innovation across research and development. Second, regulators worldwide are actively embracing technological solutions to accelerate drug development, reduce costs, and shorten timelines. Third, Certara is uniquely positioned to lead in this evolving market with our AI-enabled technology, data, and our model-informed drug development platforms, which are deeply embedded in industry workflows and utilized by regulatory bodies. This presents an extraordinary opportunity. To capture it, we must sharpen how we operate, focus our investments, and execute with greater discipline and urgency. Our historic performance does not reflect the full potential of our market.

Later in this call, I will outline our plans to improve. My conversations with our customers have made one thing clear to me: Our customers want us to drive innovation and play a larger, more strategic role. The pharmaceutical industry is spending more than $200 billion per year developing drugs, with overall timelines now hitting 10-15 years. Now, more than ever, our customers are looking for partners who can reduce total development costs, accelerate timelines, improve decision-making, and respond to new regulatory requirements. AI, biosimulation, and other in silico methodologies are expanding the relevance of Certara's offerings, validating our value proposition, and opening new opportunities for us. Regulators are more favorably disposed to the use of new methodologies today than at any point in our history.

Agencies are providing clear guidance that advances Model-Informed and computational approaches and are actively encouraging the use of new approach methodologies to modernize drug development. Just recently, Dr. Martin Makary, the U.S. FDA Commissioner, noted that computational modeling can provide more insightful perspectives on experimental design and animal testing alone. In his words, "Now a computer can look at a drug and actually make better predictions." Additionally, in a recent New England Journal of Medicine article, the Commissioner outlined a framework where only one pivotal trial would be required for approval. This creates an opportunity for developers to rethink and improve clinical trial designs and reduce overall timelines. This is what Certara is built for. It underscores the relevance of our platforms and services. Certara's credibility has been built over decades. Our 430 PhDs and MDs have directly contributed to hundreds of drug approvals.

Worldwide, we have more than 2,600 customers and 23 agencies using our technologies. I see this foundation of one of Certara's greatest strengths and a powerful platform from which to lead in this expanding market. At the same time, we have not sufficiently converted that credibility into the level of growth the opportunity warrants, and that I believe we should and can deliver. In fact, over time, Certara's business should be able to drive double-digit growth. There are 3 potential explanations for this disconnect. First, the true potential and market acceptance of AI-enabled technology, data, and model-informed drug development has yet to be achieved. Second, external market conditions create a market headwinds, and/or third, internal execution gaps have impacted results. There are probably elements of all 3 of these at play. Let me address the market acceptance point, and then I'll return to discuss planned operational improvements.

Through our work, we are seeing accelerated adoption of MIDD use cases earlier in research, expanded use cases across preclinical development, and strategic applications in clinical and regulatory settings. Allow me to highlight a few recent examples that have delivered measurable impact for our clients. First, a top 10 pharma company used millions of quantitative systems pharmacology simulations, or QSP, to prioritize 28 drug candidates against 26 unique targets. This predicted the drug target combinations with the highest likelihood of clinical success, demonstrating how our QSP technology has the ability to drive dramatic productivity gains in the R&D workflow. Second, an innovative biotech company used model-informed approaches to justify a first-in-human dose, 50-100 times higher than what would be supported by standard methodologies. This change enabled the earlier selection of a more clinically relevant dose, which was the basis for a successful phase I trial.

Ultimately, this molecule was acquired. In rare disease, MIDD opens up new avenues for developers to reach underserved populations. For example, in Pompe disease, we created virtual populations to evaluate the efficacy of a novel compound versus the standard of care and predicted clinical outcomes in these virtual patients. These examples illustrate the broader point that aligns with our mission and the opportunity ahead of us. MIDD is growing. Now let me turn to our broader technology and services offerings and share a few perspectives. While Certara continues to benefit from a strong legacy as a market-leading software provider, it is clear that we must sharpen our execution to fully capture the opportunity ahead of us. Our four core franchises remain highly differentiated, deeply embedded in customer workflow, and integral to decision-making across the development lifecycle. Importantly, clients affirm to me that there's a limited risk of AI-driven disintermediation.

Instead, they are looking to Certara for leadership to advance AI model-informed development, creating new avenues for us to add value and strengthen our strategic position. Despite stepping up our R&D investment in product enhancements and new products, we have not yet converted that investment into sustained organic growth. To address this, we are taking targeted actions to accelerate our sales and strengthen our go-to-market approach and to focus our portfolio with greater discipline. Moving to our services business. I've been impressed by the caliber and depth of our scientific expertise and the longevity of our relationships. Our specialized services address our customers' needs and advance their goals, delivering value both independently and in combination with our software. Certara's tech-enabled services continue to be a core part of our growth strategy and a critical enabler of MIDD adoption.

When our consultants deploy our software and customer engagement, it surfaces new use cases and builds stickier customer relationships. This expert in the loop helps to create an innovation flywheel. Certara grows faster when our software products are integrated with our scientific expertise. As with our software business, our services execution has room for improvement. Ultimately, we need to enhance our engagement with customers and more proactively match the right solution to our customers' needs. Lastly, we are in the final stages of the strategic review of our regulatory writing and operations business, and expect to conclude that process in the near term. Coming in, it was important that I take the time to thoroughly evaluate all the options and ensure we are pursuing the course that best maximizes long-term shareholder value. Moving on to operations.

Over the last several weeks, I conducted structured reviews with business leaders, reviewed P&Ls and go-to-market plans, and met with nearly 100 employees. I went deep into our product portfolio. The talent and scientific capability inside Certara is exceptional. As I've alluded to above, I am equally clear-eyed about the opportunity to grow and to improve. We must operate with greater focus. We must build with clear priorities and reliable execution. We must engage customers more proactively, we must create a culture of accountability and financial discipline. Simply put, to grow faster, Certara must run differently. As CEO, I intend to lead that change with urgency and clarity. We are moving forward with 3 strategic priorities. First, we are developing a more focused corporate strategy and product portfolio, anchored in customer needs, scientific rigor, innovation, and disciplined investment.

We will accelerate AI integration and double down on core R&D technologies and MIDD. Second, we will continue to put customers at the center with deeper engagement and greater senior-level involvement. We will leverage our feedback from our customers to inform product roadmaps, AI initiatives, and service priorities. This will lead to improved commercial performance and improved revenue growth. Third, we are raising the bar operationally, sharpening pricing, improving delivery, and driving higher returns from our investments in sales and marketing and R&D. We will leverage AI to increase efficiency and scale our operations more effectively. Already, we have identified a path to approximately $10 million in cost avoidance relative to the initial 2026 plan. Our team will hold one another accountable for delivering on these improvements.

We believe that these changes will reposition Certara for sustainable, faster growth, and I look forward to updating you on our progress. 2026 will be a transition year as we bring change to the organization and strengthen our focus. In this context, we are guiding to flat to low single-digit revenue growth, which reflects both market conditions and the operational improvements we plan to implement. Our balance sheet and cash flow generation remains strong. We intend to be strategic with capital deployment, including executing against our existing share repurchase authorization, which we view as a compelling long-term investment at current levels. Our focus will be to reinvigorate growth at Certara and drive shareholder value. With a sharper strategy, a customer-centric operating model, and unflinching execution discipline, we would expect a faster-growing, more predictable, mission-oriented, and more valuable company.

John Gallagher
SVP and CFO, Certara

Thank you, Jon. Hello, everyone. Total revenue for the 3 months ended December 31st, 2025, was $103.6 million, representing year-over-year growth of 3% on a reported basis and 2% on a constant currency basis. For the full year of 2025, total revenue was $418.8 million, representing year-over-year growth of 9% on a reported basis and 8% on a constant currency basis. Total bookings in the fourth quarter were $155.2 million, which increased 7% from the prior year period on a reported basis. Trailing twelve-month bookings were $482.1 million, increasing 8% on a reported basis.

Software revenue was $46.4 million in the fourth quarter, which increased 10% over the prior year period on a reported basis and on a constant currency basis. Growth in the quarter was driven by MIDD software and Pinnacle 21. Ratable and subscription revenue accounted for 61% of fourth quarter software revenues, down from 63% in the prior year period. For the full year, software revenue was $183.3 million, which grew 18% on a reported basis and on a constant currency basis. Chemaxon contributed $22.9 million to reported software revenue in 2025, making full-year organic software growth 7%, which was in line with our plan. Ratable and subscription revenue accounted for 61% of 2025 software revenues.

down from 65% in 2024, due to the impact from Chemaxon, which is mostly term license software. Software bookings were $56.1 million in the fourth quarter, down 6% from the prior year period. Fourth quarter software bookings were lower than our expectations, compounded by both external factors and execution challenges. Customer reorganization and reprioritization, slower clinical trial completions, and weaker pipeline conversion of new and renewal software contributed to the bookings result. Trailing 12-month software bookings were $184.3 million, up 9% year-over-year. The software net retention rate was 107% in the quarter, and 105% on the year, consistent with our plan. Looking at our software bookings performance by tier, we saw strong performance among Tier 3 customers in the fourth quarter and throughout the full year.

Tiers 1 and 2 were slower in the fourth quarter, offsetting strength in Tier 3. Turning to services revenue, which was $57.3 million in the fourth quarter, down 1% versus the prior year period on a reported basis and on a constant currency basis. For the full year, services revenue was $235.6 million, which grew 3% on a reported basis and on a constant currency basis. Services revenue in 2025 includes regulatory writing revenue of $50.4 million, which compares to $54.7 million in 2024. Technology-driven services bookings in the fourth quarter were $99.1 million, which increased 17% from the prior year period. TTM services bookings were $297.8 million, up 8% as compared to the prior year.

In the quarter, we saw double-digit growth in MIDD services bookings, with growth led by Tiers 2 and 3. For the full year, MIDD services bookings grew 8%. Regulatory writing bookings grew in the high teens versus the fourth quarter of 2024, driven by solid bookings across all customer tiers. For the full year, regulatory bookings grew in the mid-single digits. I would like to point out that we did experience better-than-expected spending commitments from our customers during the month of December, which helped drive higher-than-expected overall services bookings for the quarter. Total cost of revenue for the fourth quarter of 2025 was $39.2 million, an increase from $38.3 million in the fourth quarter of 2024, primarily due to higher employee-related costs and an increase in capitalized software amortization.

Total operating expenses for the fourth quarter of 2025 were $63.6 million, an increase from $56.1 million in the fourth quarter of 2024, primarily due to higher employee-related expenses due to our investments in research and development. In 2026, our operating plan contemplates discretionary investments in research and development related to product development initiatives, as well as minor investments in SG&A and cost of sales. As Jon mentioned in his remarks, we have identified upwards of $10 million in cost avoidance in 2026 versus the prior planning. Adjusted EBITDA in the fourth quarter of 2025 was $32.5 million, a decrease from $33.5 million in the fourth quarter of 2024. Adjusted EBITDA margin in the quarter was 31%, in line with our expectations.

For the full year of 2025, Adjusted EBITDA was $134.5 million, an increase from $122 million in the prior year. Adjusted EBITDA margin was 32%, consistent with 2024. Wrapping up the income statement. Net loss for the fourth quarter of 2025 was $5.9 million, compared to net income of $6.6 million in the fourth quarter of 2024. Reported adjusted net income in the fourth quarter of 2025 was $14.9 million, compared to $24.7 million in the fourth quarter of 2024. Diluted loss per share for the fourth quarter of 2025 was $0.04, compared to earnings of $0.04 per share in the fourth quarter of 2024.

Adjusted diluted earnings per share for the fourth quarter of 2025 was $0.09, compared to $0.15 for the fourth quarter of last year. During 2025, Certara repurchased approximately 3.3 million shares for $43 million. Moving to the balance sheet, we finished the quarter with $189.4 million in cash and cash equivalents. As of December 31, 2025, we had $295.5 million of outstanding borrowings on our term loan and full availability under our revolving credit facility. Now, I would like to walk you through our guidance for 2026. We expect total revenue to be in the range of flat to 4% compared with 2025. We anticipate our end markets will remain stable and better execution will drive improving revenue growth throughout the year.

We expect Q1 to be closer to the low end of the revenue range related to a tough comparison to the prior year. Subsequent quarter acceleration related to new initiatives during 2026, as well as easing compares to year-over-year. We expect to achieve Adjusted EBITDA margin in the range of 30%-32%. As I mentioned earlier, our 2026 operating plan contemplates discretionary investments, which will be managed according to our commercial performance throughout the year. Adjusted EBITDA margin is expected to be lower in the first half of the year and will increase during the second half. We expect adjusted EPS in the range of $0.44-$0.48 per share for the full year.

Fully diluted shares are expected to be in the range of $160 million-$162 million, and we are modeling an effective tax rate of about 30%. With that, we will open up the call for Q&A. Operator, can you please open the line for questions?

Analyst Q&A

Jeff Garro — Managing Director, Healthcare IT Equity Research, Stephens
Yeah, good morning-
Jeff Garro — Managing Director, Healthcare IT Equity Research, Stephens
Yeah, good morning. Thanks for taking the question. Maybe start with one for Jon R. with your first call here. I appreciate all the remarks in the prepared comments about your approach going forward and strategy for the company. Was hoping you could share a little more of your external perspective on what attracted you to Certara, and maybe more in particular, how you view the differentiation of Certara's software products and talent on the services side as something that can really be leveraged going forward. Thanks.
Jon Resnick — CEO, Certara
Great. Thanks, Jeff, very much for the question. Yeah, as I said before, it is great to be here. You know, I, you know, as you come in, it's been a pretty intensive 56, now 57 days. I've gone as deep as I possibly could go with capacity over the couple of months, really trying to understand, you know, pretty much exactly what you're asking about here. You know, gone deep into kind of each of our products, done probably 100 skip-level conversations, talked to dozens of customers, really trying to get a good feel for exactly how we do stand here as a business. I was attracted to come here pretty simply.
I look at it, and I look at the external marketplace, the amount of opportunity that sits here. You know, this company sits on the right side of kind of every trend. Pharma's $250 billion per year, and what I'll call inefficient allocation of R&D spend, and their drive and demand for efficiency, regulator acceptance. You have this company that sits there with so many assets and so many tools and such a phenomenal track record. It just struck me as a, you know, an undervalued gem in this space, with, you know, tons of potential upsides and tons of potential opportunity to grow and to build as this market continues to evolve.
As I, go through some of the, you know, different products, you said services, but services and software, you know, I'd say that, you know, first of all, on the software side, the software, I found those products to be incredibly differentiated. As you talk to customers, it's amazing how deeply embedded, each of our major assets are in their workflow. Like, these are, you know, there's decades of teams who've grown up using Simcyp and using Phoenix and using the capabilities that exist to do their job every day. There's a high degree of dependence on the asset. You know, so they're not only market-leading, but just incredibly well-entrenched. Equally, you know, I think our relationships exist with 20 regulators around the world who are also using the assets.
You have this highly entrenched set of workflow used by regulators and used by the life science industry, and, you know, in this kind of highly scrutinized space where documentation and validation and transparency are essential areas where they have incredibly high track record. A very strong proposition, and the services side, I see as incredibly reinforcing. You know, as I noted in my opening remarks, we're strongest when the technology, software products, and the services work hand in hand. You know, this ability not only to have, you know, market-leading computational capability and workflow capability, but to be able to wrap the world's leading scientists in QSP and PBPK and QST around those capabilities makes it an enduring proposition.
Jeff Garro — Managing Director, Healthcare IT Equity Research, Stephens
Excellent. Really appreciate that. And to follow up, want to ask how a platform approach, cross-selling, integrating and automating workflows between software products factor into this more customer-centric go-forward strategy? You know, I thought those were kind of prior focus items, and maybe didn't hear as much of those in the script, but, you know, you're also speaking at a high level. So want to hear more on whether or not those are kind of encompassed or to what extent those are encompassed in the go-forward strategy, or whether there's, you know, some kind of deeper shift. Thanks.
Jon Resnick — CEO, Certara
Thanks. No, I don't think you heard a radical shift in strategy. You know, you have to kinda operate at the rate and pace at which your customers operate here as well. You know, there's kind of, as you look at the industry, there's kind of two folds here. There's kind of the power users who are sitting at levels in organizations who, you know, we serve with distinction and pride every day. That, you know, at the senior levels of the organization, they're looking to drive kind of more innovation and more cross-section, but that's a slow process.
Our focus is gonna be twofold: Continue to serve, you know, the users who use this every day, who, you know, who sit here and rely on this to do their function, and to build out a range of functionality and engagement at that more senior levels to start to work through some of those more longitudinal approaches to accelerate first-in-human, to accelerate regulatory timelines. We feel like we can tap into both of these with distinction, and know our strategy won't change. It's both gonna be to develop those product enhancements that the core expert teams are looking for, and to look to stitch together a lot of the assets in differentiated ways to play, to ensure that the same capabilities that are happening late in clinical development can move into preclinical and into development itself.
Jeff Garro — Managing Director, Healthcare IT Equity Research, Stephens
Great. Thanks again.
Michael Cherny — Analyst, Leerink Partners
Good morning. Thanks for taking the question, and Jon Resnick, welcome to the company. Maybe if I can just get into the guidance a little bit. Obviously, we all saw the bookings dynamics in four Q, and then the revenue guidance in particular, coming in below where your trend rate has been. As you think about the 0%-4%, can you kind of give us a little breakdown of how much of it is what you're seeing in the market, how much of it is both through the bookings, and is there any, at least in terms of the prioritization of revenue, strategic pullback on anything that's embedded in the specific 2026 revenue guidance?
John Gallagher — SVP and CFO, Certara
Hi, Mike. Yeah, as it relates to the guidance, I think about it in two components. One is services. You know, last several years, services revenue has been in low single-digit growth, although we had a very strong fourth quarter on services, which came with a surge in the pipeline in the month of December, which wasn't necessarily expected, but, you know, it's certainly a good indication of health in the end markets, and we do expect stable end markets as we approach the guide. But nonetheless, services performance has been low single-digit. Then when you combine that with a software business that had some deceleration in bookings in the fourth quarter. Now, mind you, software revenue in the fourth quarter grew 10%.
Full year organic revenue was 7%, right in the middle of the plan for the year. We were pleased with that performance, but we did see some deceleration in the software bookings in the fourth quarter. When you take that combined and the tight correlation between bookings and the revenue going forward, combined with the services in the low single digits, puts total company expectations for 2026 in the low single digits, hence the flat to 4% growth.
Michael Cherny — Analyst, Leerink Partners
Along those lines, relative to the software bookings, it seems like data points around all things tied to clinical trials have been, at least from a qualitative perspective, more positively than negatively skewed. You talked about some dynamics on decision making, but also some dynamics on execution. Can you dive a little bit more into what encompassed the composition of the software Tier 1 bookings and the red arrow that it got in the deck, specifically tied to what was, call it, on your side versus what was market-oriented?
John Gallagher — SVP and CFO, Certara
Yeah. Yeah. I mean, on the market side, you saw big pharma reprioritizing, headcount reductions, slowness, as you said. Those customer dynamics have an impact on, for example, Phoenix seat licenses. We also saw study counts down a bit, which, when you look at a product like Pinnacle 21, which has certainly penetrated the market very fully to the extent that studies are down, we're gonna see a little bit of softness there. Those are a couple of the points around market. Execution also is, like you said, is a key component here, too, where, you know, we have pipeline visibility and we didn't convert as much as we should have in the fourth quarter.
That's why we did call out the element of execution.
Jon Resnick — CEO, Certara
Michael, thanks for that welcome. It's Jon Resnick. You know, again, it's wonderful to kinda look at things with very kinda fresh eyes and clean eyes. First of all, in general, I think our view on the market is that it is strengthening, I think, consistent with what others are reporting. I was pretty encouraged by the December services bookings. You know, from my standpoint, you know, services tend to be a more discretionary item, which ebbs and flows over time and, you know, independent of some of the slowdown that we saw, you know, last year or two years ago, you know, that seems to be a really good leading indicator for us of some opening and, you know, perhaps a leading indicator of, you know, more spend into 2026.
The other thing I'd say on seat licensing, in particular, is the things like with Pinnacle, you know, there tends to be a little bit of a lag. You know, you're still gonna pay for the reduction in studies from 2 years ago. I think we're all looking at the same data that seat licensing is starting to come back up. As that starts to rise, you'll start to see some improvement in the, in Pinnacle as well, tied to studies. Sorry, I should say to tied to studies. As the, you know, number of studies, guys, that starts to aggregate, starts to lift, you'll start to see, you know, stronger performance, but there's a little bit of a lag time between the 2.
Yeah, look, I think as we enter 2026, I think we're, you know, cautiously optimistic, similar to what I've heard other peer companies and observers talk about things. A lot of the trends seem to be moving in the right direction, and that December discretionary spend number is one certainly I'm maintaining on and asking the team to work hard on the execution side.
Anna Kruszenski — Analyst, Barclays
Hi, guys, this is Anna Krasinski on for Luke. Thank you for taking our questions. It would be great to hear more about which areas you see the most opportunity on AI enablement. Specifically, how are you thinking about the balance of investing in AI capabilities to support a more innovative portfolio versus leveraging the productivity gains to drive more near-term margin expansion?
Jon Resnick — CEO, Certara
Sorry, I, you know, this is Jon. I missed the name up front.
Anna Kruszenski — Analyst, Barclays
This is Anna Krasinski on for Luke.
Jon Resnick — CEO, Certara
Hi, Anna, how are you? Nice to meet you. I think that's a great question. AI, in general, is, you know, a huge change agent here internally, and I think we think about it on a couple different dimensions. You know, if we think about, you know, our software side of the business, you know, AI is being actively embedded into, you know, all of our core assets. A good example would be Phoenix, where a bunch of modules and increased functionality are all AI-driven, consistent with the way we're approaching a bunch of the other businesses.
We have, you know, a handful of products that are been launched in the last, you know, end of last year into early... will be launched early this year, which also are highly kind of AI-driven products, which we're excited about. One, which was launched last year, was Certara IQ, which is in the QSP space, which is a very fast-driving area for us, heavy kind of AI backbone to it. We're really optimistic about not only the product side there, over time, but also the intersection between that and our QSP services. We also have a number of things. There was an earlier question about stitching together.
We have a number of stuff that aren't exactly horizon one offerings, but things that help stitch together stuff in more of a true kind of AI native way, which are groundbreaking and innovative. There's a lot of things happening on the core kind of product side, which we'll be taking a close look at and accelerating. As you'd imagine, there's equally as much going on, opportunities on the, you know, core execution side. On the software development side, huge push over the last six weeks, eight weeks, really to, you know, make sure we're using best-in-class process, rolling out tools, accelerating our internal timelines.
That'll be an ongoing effort and initiative this year to accelerate our internal builds and to ensure that we're moving at rate and speed and with high degree of efficiency. More broadly, on the AI side, there's a range of opportunities we see to enable our services business to help fix some of our operations infrastructure. It will be a major push internally that we believe will drive, you know, both short-term and midterm productivity and efficiency enhancements.
Anna Kruszenski — Analyst, Barclays
Great. Thank you. That was super helpful, caller. One follow-up. You talked about the efforts underway to revamp the commercial organization. Just curious, what do you see as the lowest hanging fruit here, and then any initiatives that will require a heavier lift? Thanks again for the questions.
Jon Resnick — CEO, Certara
Yeah, great. Thanks. The both on the portfolio side and the go-to-market side are areas in which I'm gonna take a close look. I think I'm looking at the same data that you guys are looking at, which is our investments over the last couple of years have gone up pretty steadily. You know, the translation into organic revenue growth hasn't materialized. You know, as a new leader in this business, you start to ask a bunch of questions about the shape of those investments and how you can start to optimize them, and we'll be focused both on the portfolio and go-to-market. On go-to-market, you know, I think there's a couple different dimensions of it.
You know, look, we talked about customer centricity as one key piece. You know, how do we optimize the relationships that we have and really dig and frame the best of the issues that they're facing into our organization, so we can respond to them most effectively? There's elements of pricing and contracting and kinda just core kind of operational elements that we have. There's, you know, an organizational focus around, you know, getting a number of our executives out in front of clients and having the kind of that second order, second level nature of conversation. I'm a big believer in, you know, in targeting and in AI-driven productivity around kind of sales initiatives and sales efforts.
How are we doing in terms of kind of automating our initiatives and, you know, making sure we're having the right conversations with the right people at the right times? You know, obviously, there's a range of other questions in terms of do we have the right people in the right places? You know, we've got a diverse portfolio with a combination of services and kind of tech services, and, you know, pure SaaS offerings, which all have slightly different service offerings. How do you kind of rationalize across those three to make sure that you're optimizing this directly with customer. You know, low-hanging fruit will be things like pricing, customer centricity, initiatives and targeting and incentives, things that you'd expect.
Then, you know, more medium term, really looking to transform some of the types of relationships we can have with those clients.
Scott Schoenhaus — Analyst, KeyBanc Capital Markets
Hey, guys. Thanks for taking my question, and welcome, Jon Resnick. I guess a follow-up to that question in fourth quarter software bookings. You know, as you look to sort of automate the process and, you know, put these price incentives in, how much of that pipeline, like, didn't get converted, do you think can be converted over the next 90 days? When can we see a bookings re-acceleration on the software side? Thanks.
John Gallagher — SVP and CFO, Certara
Yeah. Hi, Scott. The pipeline conversion piece on the execution side here, we don't, you heard in the prepared remarks, we don't necessarily see that coming back in Q1. We indicated that Q1, we expect to be at the lower end of the overall flat to 4% revenue growth guidance range. Some of that's due to a tough compare to the prior year. We're expecting to see some acceleration in the subsequent quarters, some of it due to, you know, increased conversion and visibility, and then some of it because the comps get a bit easier as we move through the year, too.
Scott Schoenhaus — Analyst, KeyBanc Capital Markets
Thanks. As a follow-up on the regulatory writing business grew nicely in the quarter, just your thoughts there on the divestiture, the timing of it, and maybe what's embedded in your services growth guidance on the regulatory writing side? Thanks.
Jon Resnick — CEO, Certara
Yeah. Let me tackle, Scott, the first question. Appreciate a number of you been asking about this for a long period of time. I had the luxury of 50 days or so to take a look at it. You know, it's a bit of a, you know, it's a bit of a riddle here, right? You have a business that's clearly been compressing year-over-year, which you'd expect, I guess, along with market trends, you kind of, you saw some of the dislocation in pipelines around IRA and some of the rebalancing over the last couple of years. You'd expect that business to decline. You saw that sharp increase in book-to-bill, the 1.5 book-to-bill in Q4.
You have to remember, at its core, it's a pretty profitable offering. You know, the first thing I did when I joined and, you know, we were active in strategic review, was really look at the options on the table to ensure that we were A, fully evaluating, you know, for example, the contributions to the profit margin. You know, those paid dividends in terms of our ability to invest in MIDD and invest in some of the other areas of high growth.
I wanted to make sure we had a, you know, a good hard look at that and that, you know, any potential options that we have take into consideration not only the strengthening of that underlying business, but the contributions that it makes on a bottom line basis. That said, I think we're, you know, in the final stretches here. We should have a, you know, a resolution answer for you in the near term. You know, it's, you know, it's something that, you know, I think everyone on this side wants to move forward with, and we're well on our way to have a clear answer for you very quickly.
Scott Schoenhaus — Analyst, KeyBanc Capital Markets
Thanks.
David Windley — Analyst, Jefferies
Hi. Thanks for taking my question. Jon Resnick, good to talk to you live, and Jon Gallagher, to you again. Is on the software sales, the software bookings, is the pipeline conversion there, a reflection at all of customers perhaps, you know, hitting the pause button as they evaluate how AI might influence how they use tools like this?
Jon Resnick — CEO, Certara
Hey, David, good to talk to you. I have an answer to the question you asked me on my first day here before we talked directly. Look, I don't, I don't hear that. Like I said, I spend a lot of time talking to customers. I ask this question very directly to every single one. I, you know, I tried to get to all of our major accounts in multiple levels in terms of the way that they're thinking about their technology stacks and the role that we see, they see us fitting in. Look, yes, is there an industry-wide set of questions about where are they gonna make investments? How are they gonna make investments? This does cause some paralysis on the client side.
Yeah, you know, clearly, we see that across segments and across different components. I don't think that's the issue here. Nobody who I spoke to is, you know, thinking within that context. I think what you ended up having here is just a little bit of issues around that lag on the Pinnacle side with studies, you know, the newness of some of the new products that we have and the time it's gonna take to get those to market. You know, some dynamics around the conversion as we start to convert clients to cloud, by the way, which we're very excited about.
The newness of the, you know, Certara IQ offering, which, you know, had a soft launch, which, you know, we expect to continue to, you know, to accelerate in the year. I think you've got a little bit more of a function of timing, a little bit of market events. You know, I don't hear, and I didn't hear, AI as being the driver. There was, you know, at every sales rep, every client I spoke to, there was no, there's no indication that that's, that that's the driver of, that slowdown in Q4.
David Windley — Analyst, Jefferies
Got it. Jon, if or Jon R, if, this may be a little unfair given what did you say, 56 or 57 days still? As you come into the business and kind of evaluate where do you aim sales efforts and where do you aim, you know, innovation investments, it seems like there's, you know, there has been a trade-off between like, later stage clinical development and opportunities to streamline there have, you know, perhaps bigger bang for the client and bigger TAM for Certara versus some of the recent maybe acquisitions or discussion and strategy that the company has aimed at early development, say, you know, maybe not discovery, but kind of late discovery, preclinical stage in more of a capture the molecule mindset. How do you weigh those two options, and which one do you lean into?
Jon Resnick — CEO, Certara
That's not the question I thought you were going to ask me. I thought you were going to ask me the TAM versus execution question. There's definitely, the market exists to the question you've asked me directly before. Where.
David Windley — Analyst, Jefferies
That one, too, if you like.
Jon Resnick — CEO, Certara
Yeah, well, I mean, I think we addressed that in the prepared remarks pretty clear.
David Windley — Analyst, Jefferies
Yeah.
Jon Resnick — CEO, Certara
This market is ripe for growth. You know, as I said in my opening remarks, I think there's a lot more opportunity for us to drive execution here. Look, I, you know, whether it's on the dev side, later on in the dev side or earlier in discovery, there's trade-offs of those different markets, you know, price point, size, fragmentation. You know, there's a lot of different things that are going to play. I think we'll be a little bit selective around how we're choosing what to do. I think, you know, and Jon Gallagher alluded to this in his remarks, kind of look at the core MIDD portfolio that we have.
It, you know, it grew in those double-digit numbers, you know, that I think David, you'd be expecting from this franchise. The core kind of, you know, where we're doing the biosimulation and the computational work, that is in the 10%. There's a range of places you can deploy that. You could deploy that at the point of regulatory submission. You can deploy that in trial optimization and trial design. You know, from some of the case studies and examples that we were highlighting, we were intentionally pointing you to earlier things, if we're used to QSP, to pick targets.
You know, as we integrate Chemaxon and D360 and some of the different offerings that we have that are closer to the discovery stage, we think there's going to be a lot more value by integrating PBPK and QSP earlier into that cycle. I don't know if the trade-off is much around, you know, do you play in discovery or do you play in dev, as much as, you know, how can we focus around those kind of core growth areas with our strong legacy and strong differentiation? I think those are the types of things that you'll be seeing from us over the next couple of weeks and months.
David Windley — Analyst, Jefferies
Got it. Thank you. Appreciate the answers.
Jon Resnick — CEO, Certara
Thanks, David.
Brendan Smith — Analyst, TD Cowen
Great. Thanks for taking the questions, guys, and welcome, Jon. I wanted to follow up, actually on your commentary in the prepared remarks. I know you just expanded a little bit on this. Where you said Certara should be able to drive double-digit growth over time. Can you maybe just expand a bit more on what you kind of mean there, and over what timeframe you think this is feasible? Are there maybe certain benchmarks over the next couple of years you think the company needs to hit to de-risk that ramp to 10%+ growth? And maybe just related to that, curious how you're thinking about software growth, specifically over the next couple of years, just given that I think some of your peers are in the space are benchmarking about 10%-15% there.
Wondering how we should interpret that within your kind of blended flat to 4% guidance. Thanks, guys.
Jon Resnick — CEO, Certara
Jon, I'm going to take a quick stab.
John Gallagher — SVP and CFO, Certara
Yeah.
Jon Resnick — CEO, Certara
I'll turn to you.
John Gallagher — SVP and CFO, Certara
Yeah.
Jon Resnick — CEO, Certara
for some of the thinking.
John Gallagher — SVP and CFO, Certara
Yep.
Jon Resnick — CEO, Certara
First of all, I think you definitely kind of picked up on the points that we were there. Look, I don't know why our expectations would be any different than anyone else in this peer group. There are no shortage of opportunities out there. We're not going to provide a multi-year path today. We will certainly get that to you over the course of this year. We're in the process of kind of updating those LRPs and those processes, and I will give you a very clear answer to timing and expectation at that point.
You know, the commentary that we had today is very clearly, if you look at the opportunity, you look at the potential for this, you look at the range of use cases this can be deployed into, and you look at, you know, what I alluded to around some of the, you know, opportunities around just execution, there's huge windows for improvement in what we do. We will get you know, those answers over the course, over the course of the year, if not, at the next set of calls. Early into Q3, we'll be providing that multi-year guidance and a clear direction and path for you. Do you want to add anything?
John Gallagher — SVP and CFO, Certara
Yeah. Yeah, I think, maybe just to add on to that, then, the view to double digits, of course, is predicated on, all the things that Jon just said. You know, some help from the end markets, which we seem to be getting. You know, like, when you look at the performance of the services business, as Jon was saying earlier, perhaps a good leading indicator on discretionary spend, that we could be entering a time of at least some stability, maybe even some tailwind from the end market, combined with some of the execution points that, you know, that we've discussed here, would set us on that path. We look forward to giving an update, you know, in the coming quarters on, you know, just what that timeline looks like. When you look at adoption of MIDD versus, you know, where we are today, and the growth rates that we have today versus the market-leading position that Certara has in this space, then we feel very optimistic about the future.
Brendan Smith — Analyst, TD Cowen
Great. Thanks, guys.
Thomas Kelliher — VP, BMO Capital Markets
Hey, good morning. This is Thomas Kelliher in for Sean. Welcome, Jon. Thank you for taking our questions. Maybe going back to pricing, how would you characterize the pricing environment across the different solutions and customer tiers? Are there more specific areas you'd call out where you're seeing a bit more pressure? On the flip side of that, do you see some areas where you have an opportunity to maybe better align price with value? Thanks.
Jon Resnick — CEO, Certara
Yeah. Thanks, Thomas. It's a good question, and I'm I want to answer your question directly without necessarily communicating to the entire world what our pricing strategy is gonna be on some of these dimensions. Look, I think, there's a handful of ways to think about... You know, there's some, you know, there's some core products, in the portfolio, you know, that, you know, probably should, you know, be thinking in a little bit more disciplined way around how to, you know, for pricing and for opportunity.
There's a segment of products that fit right into that category, where I think that there is more pricing potential, and I think, you know, it's fair and commensurate with the value of the product and the level of investments that we're putting into the product and the value that it's adding to the organization. I mean, I think, you know, one of the, you know, questions behind your questions, I presume, is also how is the pricing environment, you know, changing as you start to, you know, extend the SaaS model and start to extend some of, you know, what you're doing internally. The offerings that we bring, we believe add a tremendous amount of value. You know, when, you're...
You know, if you look at some of the case studies that we provided today or even other things in the public domain around impact that we're having, you know, whether it's, you know, trial avoidance or, you know, optimized, you know, optimized trial or the ability to do meta-analysis on, you know, on things and save, you know, considerable money, we think we're bringing considerable value to the, you know, to our clients. You know, we certainly are looking at how do we better align things that we do to ensure that we're participants in some of that value creation.
You know, the, you know, I think the world of, you know, flat, thinking the world about, you know, user fees and seat licenses and other things, I think that's going to evolve considerably over the next few years. I think we sit in a nice spot where we can partner with clients in a more longitudinal way and kinda demonstrate areas in which we're helping them avoid cost, accelerate timeline, de-risk trials in a way that we can tap into a little bit more, more value. That's the focus that we'll be going on.
You know, I'm trying not to give you the 100% detail on it, but I think we have a good forward approach here, which we think will align nicely to where our clients want to go as well.
Thomas Kelliher — VP, BMO Capital Markets
All right. Thank you for that. I totally appreciate some of the sensitivity there. Maybe going back to the Tier 1 bookings, looks like there's a kind of a disconnect between software and services. How should we think about that? Is, is demand for maybe some of the regulatory services, for example, could those be potential leading indicator on the software side of the business as well? Any color there would be helpful. Thanks.
John Gallagher — SVP and CFO, Certara
Yeah. The strength in the services bookings in Q4 is a good indicator of the overall market, we think. As Jon was saying before, it's probably a good indication of the appetite for discretionary spend. We saw it not only in the reg business, we had a strong Q4 bookings number in reg, but also in biosim services, so on both sides of that. We, as we approached, you know, the year looking at 2026, you know, we entered the year with a bit more optimism and a view toward a more stable end market environment as a result of that.
Thomas Kelliher — VP, BMO Capital Markets
All right. That's perfect. Thank you very much.
John Gallagher — SVP and CFO, Certara
Thank you.
Christine Rains — Analyst, William Blair & Company
Hi, great. It's Christine Rains on for Max. Thanks for taking our question. Hoping you can walk through the relative magnitude of the factors driving your expected step down in Adjusted EBITDA margin in 2026, just if it's predominantly revenue driven, maybe any headcount growth expected, innovation investments you discussed or other strategic or commercial change programs you're putting in place?
John Gallagher — SVP and CFO, Certara
Hi, Christine. The margin guide of 30%-32% is in line with the guide we provided last year, and we had noted that it was a year of investment, which you certainly saw that show up in our R&D expense during the course of 2025. 2026 is similar in the sense that, you know, we've guided a similar margin range. It is a step down, as you pointed out, from where we exited the year, and we did a full year of 32% last year. That's because we do have further investments in R&D related to MIDD and unifying our platforms. You know, these are investments that we're gonna continue to make.
We launched 4 new software, or, sorry, 3 new software products in Q4 of last year. We intend to continue that path of launching new software and enhancements to our existing software during 2026. You know, that's where we're at now. You know, I balance that with the fact that, yes, we put 30%-32% out. Last year, I think we did, I'd like to say we, you know, we did a good job of managing the investments that clearly we were making. You see them show up in R&D. We're finding operational efficiencies and still coming at the high end of that guide. As we look at this year, we're already starting to look at, you know, how we can make the investments this year, while also looking at the cost structure.
You heard Jon mention cost avoidance that we've looked at already in the 2026 plan of $10 million. Hopefully, that gives you a sense of how we're thinking about it. We are investing this year. You're gonna see that in the R&D, and hence the guide of 30%-32%.
Christine Rains — Analyst, William Blair & Company
Great. That's super helpful. Given this innovation ramp, hoping you can discuss your CapEx and free cash flow assumptions for this year.
John Gallagher — SVP and CFO, Certara
Yeah, we don't guide those particular metrics, but I think that what you've seen is, like, if you're looking at capitalized expense, then that's largely due to the R&D investments. If you think about what it is we're doing, we're investing in R&D, we're developing new software products or enhancements to our platforms. We're unifying our tech architecture, all of which are capitalizable, and as a result of that, you've seen us capitalize a bit more. The trend that you saw in 2025, or the levels of capitalization that you saw in 2025, would be, you know, similar based on the earlier comments that I made, would be similar in 2026.
Christine Rains — Analyst, William Blair & Company
Great. Thank you so much.
John Gallagher — SVP and CFO, Certara
Thank you.
John Park — Equity Research Associate, Morgan Stanley
Hey, guys. Thank you for taking my question. I'm on for Craig. Earlier in the prepared remarks, you talked about matching the right solution for clients. Do you think you have all the pieces together when it comes to personnel or IP?
Jon Resnick — CEO, Certara
Personnel or IP, is that the question?
John Park — Equity Research Associate, Morgan Stanley
Yeah. like, do you think you have all the pieces together to really find the right solution for clients?
Jon Resnick — CEO, Certara
Look, I think anyone would say they never have all the right answers. I mean, that's the honest answer. This is a dynamic space with, you know, a range of different things. I think we feel pretty darn good about our ability to respond to a range of questions. You know, I think, strategically, we always gotta have our eye on, you know, what else is out there with complementary capabilities to what we do. There's no shortage of ability for us to match kind of client demand. You take, you know, the toughest questions that our clients have about, you know, about trial design, execution, you know, chemical entity, you know, design.
We can answer a range, a massive range of things. I have no concern about the fitness of the current portfolio to execute. Obviously, we'll always continue to look for, you know, things to complement us and things to continue to help us create scale and grow as a business and round out our offerings. On the whole, we have more than enough in the current portfolio to, you know, very actively work with our clients on any number of challenges that they're facing.
John Park — Equity Research Associate, Morgan Stanley
Thank you. I know you mentioned a lot of the FDA remarks up top in the prepared remarks. Have your clients seen any changes in the FDA, in other than state, statements? I know it's probably way too early for, you know, drug approval rates to change, but are they optimistic when it comes to maybe going one phase to another?
Jon Resnick — CEO, Certara
I think. Look, I think I would answer the question fairly different, if you don't mind. The way I tend to think about it is, you know, are we seeing, you know, a shift towards more of our, you know, services as the FDA starts to, you know, push people to more computational and modeling-based approaches? I think the answer is certainly yes. You know, the FDA and the life sciences industry does not move quickly. You know, these cycles are long, so you get changes in regulatory guidance, you have inflate trials, you have a whole range of other things that take time to move.
If you look at underneath the growth in our, you know, our QSP business and the, and the core growth in our PBPK business, those are reflective of these alternative approaches being used and growing acceptance. You know, look, as we look at the direction of travel, the FDA, we certainly think that's a huge talent for our offerings. We're starting certainly to see the leading indicators in some of our core, you know, service offerings and the technology that underpins them. We're, we're optimistic about the way those guidelines and that the direction of travel for the regulatory bodies and how that plays into our ability to support clients in a broader and more helpful way.
John Park — Equity Research Associate, Morgan Stanley
Great. Thank you.
Source: Certara, Inc. earnings call transcript (2026-02-26). Management commentary and analyst Q&A are reproduced as delivered; speaker roles as stated on the call.

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