Certara, Inc. — FY2022 Form 10-K
Reporting period: Fiscal year ended December 31, 2022. This is an annual filing; the supplied filing text does not provide a clear standalone Q4 income statement or cash-flow summary.
Business context
Certara sells biosimulation software and technology-driven services supporting drug discovery and development, regulatory submissions, and market access. Its platform served more than 2,300 biopharmaceutical companies and academic institutions across 70 countries. Management cites growing adoption of biosimulation and regulatory support as key demand drivers.
Key financial metrics
| Metric | FY2022 | FY2021 |
|---|---|---|
| Revenue | $335.6 million | $286.1 million |
| Software revenue | $115.5 million | $86.8 million |
| Services revenue | $220.2 million | $199.3 million |
| Operating income | $32.5 million | $13.6 million |
| Net income (loss) | $14.7 million | $(13.3) million |
| Diluted EPS | $0.09 | $(0.09) |
| Adjusted EBITDA (non-GAAP) | $120.2 million | $103.7 million |
| Adjusted diluted EPS (non-GAAP) | $0.46 | $0.34 |
| Operating cash flow | $92.5 million | $60.4 million |
Revenue grew 17%; software grew 33% and services 10%. Calculated gross margin was approximately 60.5% versus 61.0%, operating margin approximately 9.7% versus 4.7%, and net margin approximately 4.4% versus negative 4.6%. Adjusted EBITDA margin was approximately 35.8% versus 36.3%. These margins are calculated from reported figures; adjusted measures are non-GAAP.
At year-end, cash and cash equivalents were $236.6 million and current assets were $342.3 million against current liabilities of $103.2 million. Total borrowings were $297.5 million, with no revolving borrowings and approximately $99.9 million of revolver availability after letters of credit. Cash less borrowings was approximately negative $60.9 million. Long-term debt matures primarily in 2026; the debt bears variable rates, partly hedged by a $230 million interest-rate swap through August 2025. The company reported compliance with credit-agreement covenants.
Cash flow from investing was negative $27.8 million, principally reflecting acquisitions, capitalized software development, and capital expenditures. Financing activities used $7.4 million. The company reported no significant off-balance-sheet arrangements.
Material changes versus FY2021
- Certara moved from a $13.3 million net loss to $14.7 million net income, as revenue increased and general and administrative expense declined; operating income more than doubled.
- Software revenue increased $28.6 million, while services revenue rose $20.9 million. Management attributed growth to acquisitions, renewals, customer expansion, new customers, and biosimulation services; foreign exchange and lower regulatory and market-access revenue partly offset growth.
- Operating cash flow increased $32.2 million to $92.5 million, aided by higher collections and deferred-revenue inflows, partly offset by higher receivables.
- Bookings rose to $409.0 million from $341.7 million. The full-year software renewal rate was 91%, compared with 92% in FY2021. Bookings are not a guaranteed predictor of future revenue.
- R&D expense increased to $28.2 million; management also cited $39.3 million of R&D investment, or 12% of revenue, using its broader stated measure.
Outlook, risks, and unusual items
- Management said existing liquidity should cover working capital, capital expenditures, and contractual obligations for the foreseeable future. The filing provides no specific FY2023 revenue or earnings guidance.
- Management expects continued investment in scientific talent, sales and marketing, R&D, operations, and acquisitions; headcount and operating expenses are expected to increase over time. It estimates a $12 billion addressable market, but notes that market estimates rely on third-party research and assumptions.
- Vyasa Analytics was acquired in December 2022 for estimated consideration of $29.3 million. Contingent payments depend on revenue targets through 2025, could total up to $60 million, and were valued at $19.8 million at acquisition. The acquisition and contingent-liability valuation were identified as critical audit matters.
- Other key risks include customer R&D spending and funding conditions, contract delays or cancellations, customer concentration (the ten largest customers generated 28% of revenue), competition, retention of specialized staff, cybersecurity and privacy compliance, foreign exchange, and variable-rate debt.
- COVID-19 variants had caused some delays in clinical-trial closeouts and regulatory-services projects; management characterized these effects as transitory. Income-tax expense was $4.0 million, and the filing describes changes in tax rates affecting Madeira income following an EU decision.
- Goodwill and intangible assets totaled approximately $1.2 billion; the annual goodwill impairment tests found no impairment. The auditor issued an unqualified opinion on the financial statements and internal controls. A previously reported IT-controls material weakness was reported as remediated in 2022.
Important facts for investors to verify
- Whether software growth, renewal rates, and bookings convert into sustained recognized revenue and cash collections.
- How much of the reported profit and adjusted performance depends on recurring exclusions, especially equity compensation and acquisition-related intangible amortization.
- Debt interest-rate exposure, swap coverage and maturity terms, covenant headroom, and the capacity to meet debt service while funding growth.
- Vyasa’s performance against contingent-payment targets, integration progress, and the resulting cash or share dilution.
- Developments in customer concentration, biopharmaceutical R&D funding, regulatory acceptance of biosimulation, and foreign-exchange effects.