Hello and thank you for standing by. Welcome to the Certara Fourth Quarter 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. I would now like to hand the conference over to David Deuchler, Head of Investor Relations. Sir, you may begin.

Good afternoon everyone. Thank you all for participating in today's conference call. On the call from Certara, we have William Feehery, Chief Executive Officer; and John Gallagher, Chief Financial Officer. Earlier today, Certara released financial results for the quarter ended December 31st, 2023. 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 forward-looking statements. Please refer to Slide 2 in the company materials for additional information, which you can find on the company's Investor Relations site. 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 on the company's website. Please refer to the reconciliation tables in the company materials for additional information. This conference call contains time-sensitive information and is accurate only as of the live broadcast today February 29th, 2024. 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 William.

Thank you, David. Good afternoon everyone. Thank you for joining Certara's fourth quarter and full year earnings call. John and I will start with prepared remarks and then we will take your questions. We are pleased to finish the year with a solid fourth quarter performance in both software and in technology-enabled services. 2023 presented our industry with many challenges as pharmaceutical and biotech customers were conservative in their spending amidst macroeconomic and geopolitical pressures. Our full year reported revenue growth was 6%, in line with the guidance we gave in August. This revenue growth included 14% growth in software and 1% in technology-enabled services. We had record software sales in the fourth quarter, and we were encouraged to see our technology-enabled services bookings pick up in the second half of 2023. Certara's goal is to enable model-informed drug development or MIDD in the global biopharmaceutical industry. MIDD is an approach that utilizes biological and statistical models derived from preclinical and clinical data to inform decision-making in drug development and commercialization. Biosimulation is a critical component of MIDD that uses computer-aided mathematical simulation of biological processes and systems to understand the action of a drug in a human body or in a population of humans. Certara enables our customers to use biosimulation and MIDD to increase the probability of success in bringing a new drug to market and to decrease the cost of drug development. We have an extensive and expanding list of customers within the biopharmaceutical industry, which expanded in 2023 to account for 2,395. Within this customer base as of December 31st, 2023, we had 389 customers with an annual contract value of more than $100,000, representing growth of 5% year-over-year. We also had 63 customers with an annual contract value of more than $1 million, up 11% from 2022. During the second half of 2023, we reorganized our commercial infrastructure to better sell our end-to-end solutions, and the team delivered improved results in both software and services throughout the second half. With our new enterprise sales approach, we have effectively captured cross-selling opportunities, leading to expanded relationships with some of our top customers. I am very happy with the progress our team has made so far, and I'm confident that these improvements will support our commercial initiatives in the coming years. Our software business growth of 14% in 2023 was driven by our Simcyp, Phoenix, and Pinnacle 21 platforms. We have been investing in these products to add new features, a number of which launched during 2023 and will continue to increase traction as we move into 2024. Some of the highlights in 2023 included the 22nd version of our Simcyp-PBPK simulator, which included several upgrades to our modeling and simulation capabilities. We also launched Simcyp Biopharmaceuticals, a new module designed to aid drug formulation and expand our presence in the early stages of drug development. Following the acquisition of Vyasa last January, we began to integrate AI and machine learning across our portfolio. An early example was the release of an updated version of D360, which featured deep learning models for novel chemical structure generation and automated property prediction. We also launched CoAuthor, a new regulatory writing tool that uses generative AI to aid in the drafting of regulatory submissions. Customer feedback on our AI products has been encouraging and drove customer interest in the second half of the year. Looking ahead to 2024, we will continue to invest in our software platform. One key area of focus is our clinical data strategy. Last fall, we augmented the Pinnacle 21 data exchange with the acquisition of Formedix, a provider of data standardization and automation software. With Formedix, Certara will bring increased efficiency to clinical trial data management via an end-to-end solution. In addition to Pinnacle 21, we also plan to invest in other areas such as new models for biosimulation, new products and product features, and additional integration of AI across the platform. As biosimulation becomes more widespread, we are broadening the range of our offerings to support additional use cases in therapeutic areas. I am confident that these investments will create new opportunities to grow our platform on a global scale and penetrate deeper into our customers' R&D organizations. Our technology-enabled services business overcame market headwinds to deliver solid performance in the second half of 2023. In August, we announced the consolidation of our biosimulation services and regulatory services teams in order to better deliver all of Certara's capabilities to our customers' projects. Thus far, we are pleased with the improved execution in the services business, which is performing better as a combined organization. Across our technology-enabled services group, we saw a pickup in new business activity, which led to sequential bookings growth in the fourth quarter. Customers of all sizes continue to recognize the value that Certara's services can add to their modeling, simulation, and regulatory projects. We look forward to building on this momentum in 2024. As a leader in biosimulation, expanding into emerging methods of modeling and simulation is a key component of our business strategy. In December, we announced the acquisition of Applied Biomath, a leading provider of QSP services. QSP, or quantitative systems pharmacology, combines computational modeling and experimental data to simulate how the body will respond to a drug. QSP is at the cutting edge of biosimulation approaches and has vast potential to improve biopharmaceutical R&D and informed decision-making across the drug development process. Along with proprietary software, Applied Biomath brings a complementary customer base, which includes clients in the discovery and preclinical stages of development. By combining the Applied Biomath and Certara's QSP teams, we are proud to have the largest QSP services group in the drug development industry. In 2023, we continued to invest in our business and expand our team worldwide. We prioritized hiring leading scientists and subject matter experts to support our growth. As of the end of 2023, we had about 1,400 employees, including more than 400 employees with doctorate degrees. We believe we are the employer of choice in the biosimulation industry, and we offer a strong culture and commitment to innovation. We believe there is an opportunity for us to accelerate some investments in 2024 across our organization. In particular, we intend to invest in the development of software capabilities, including AI, as well as expand our commercial organization, including key account management positions. These investments will start to yield minor benefits in 2024, but will be most impactful in 2025 and 2026. In closing, we are pleased with our 2023 results. The growth opportunity in biosimulation continues to strengthen as drug developers look to maximize capital efficiencies and reduce pipeline risk. I am confident that the secular adoption of biosimulation, our improved commercial execution, and the investments we are making in our products and our team will support strong growth in 2024 and beyond. I will now turn it over to our CFO, John Gallagher, to discuss our fourth quarter and full year financial results in more detail.

Thank you, William. Hello everyone. Total revenue for the three months ended December 31st, 2023, was $88 million, representing year-over-year growth of 2% on a reported basis and 1% on a constant currency basis. For the full year 2023, total revenue was $354.3 million, which represents 6% growth on a reported basis and on a constant currency basis. Bookings, which provide visibility into the year ahead, came in at $402.3 million for the trailing 12-month period ended December 31st, 2023, down 2% year-over-year. Our total company book-to-bill ratio ended the year at 1.14. Bookings as of December 31st, 2023, do not include bookings from Formedix or Applied Biomath. Software revenue was $33.6 million in the fourth quarter, which increased 15% over the prior year period on a reported basis and 14% on a constant currency basis. The growth in the quarter was driven by biosimulation software and Pinnacle 21. For the full year, software revenue was $131.7 million, up 14% on a reported basis and on a constant currency basis. Ratable and subscription software revenue amounted to 62% of total software revenue for the year, up from 60% in the prior year. Ratable and subscription revenue accounted for 68% of fourth quarter software revenues. Software bookings were $43.3 million in the fourth quarter, which increased 10% from the prior year period. Trailing 12-month software bookings were $136.9 million, also up 10% year-over-year. The software aggregate renewal rate was 85% in the fourth quarter and 88% for the year. I'd like to take a moment and discuss the ARR metric and how it has evolved over the past couple of years. We had a very strong Q4 software revenue performance, up 15%, and on a full-year performance, up 14%, despite our ARR being in the mid-80s in the second half of the year and at 88% for the full year. As our software business has grown and expanded, particularly with additional features and the mix conversion to subscription or ratable software revenue, we have found the ARR metric to be less informative of the underlying performance of the business. As we evaluate customer retention and growth in existing customers across the portfolio, the ARR metric is not capturing the performance of the products or business when incorporating the SaaS conversion, Vyasa options, and expanding Pinnacle 21 features, among other initiatives. As a result, we are moving away from ARR as a KPI of the software business internally and will do so externally as well. For continuity, we will report the ARR on an annual basis going forward. We do believe that the net retention rate, which reflects the existing customer revenue, is a better metric to measure the performance of our existing business. In the fourth quarter and for the full year 2023, the net retention rate was 109%, which is consistent with our long-term growth algorithm. The fourth quarter revenue growth of 15% and full year revenue growth of 14% represent healthy performance and contribution from new customers. On a go-forward basis, we intend to provide the software net retention ratio on a quarterly basis. Now, turning to services revenue, which was $54.4 million in the fourth quarter, down 5% versus the prior year on a reported basis and down 6% on a constant currency basis. For the full year, services revenue was $222.7 million, up 1% on a reported basis and on a constant currency basis. Technology-driven services bookings in the fourth quarter were $75.6 million, which decreased 7% from the prior year period. TTM services bookings were $265.4 million, also down 7% as compared to the prior year. Total cost of revenue for the fourth quarter of 2023 was $34.1 million, an increase from $31.8 million in the fourth quarter of 2022, primarily due to a $2.6 million increase in stock-based compensation, offset by lower outside consulting costs of $0.4 million. Total operating expenses for the fourth quarter of 2023 were $62.4 million, an increase from $43.5 million in the fourth quarter of 2022. The components of operating expenses are as follows; sales and marketing expenses were $8.7 million compared to $7.8 million in the fourth quarter of 2022. This increase is primarily due to $0.6 million in employee expenses due to the expansion of the sales force and a $0.2 million increase in marketing and travel costs. R&D expenses were $8 million compared to $6.6 million in the fourth quarter of 2022. R&D expenses were up primarily due to $2 million in employee-related costs, which were offset by lower stock-based compensation and capital development costs. G&A expenses were $33.6 million compared to $18.3 million for the fourth quarter of 2022. The increase was primarily due to a $12.8 million change in contingent considerations related to the Vyasa acquisition and $1.6 million in acquisition costs, partially offset by a $1.5 million decrease in stock-based compensation. Intangible asset amortization was $11.7 million compared to $10.3 million in the fourth quarter of 2022. Depreciation and amortization expense was $0.4 million, flat with last year. Continuing down the P&L, interest expense was $5.9 million compared to $5.5 million for the fourth quarter of 2022, due to higher interest expense related to the floating portion of our term loan. Miscellaneous income was $2 million compared to an expense of $2.2 million for the fourth quarter of 2022. Income tax expense was $0.1 million, bringing the full-year provision to $0.2 million compared to $4 million in the prior full year. Net loss for the fourth quarter of 2023 was $12.5 million compared to net income of $9.2 million in the fourth quarter of 2022. Reported adjusted EBITDA for the fourth quarter of 2023 was $29.6 million compared to $31.9 million for the fourth quarter of 2022. Adjusted EBITDA margin was 33.6% for the fourth quarter of 2023 and 34.7% for the full year 2023. Reported adjusted net income for the fourth quarter of 2023 was $14.3 million compared to $25.2 million for the fourth quarter of 2022. Diluted loss per share for the fourth quarter of 2023 was $0.08 compared to earnings per share of $0.06 in the fourth quarter of 2022. Adjusted diluted earnings per share for the fourth quarter of 2023 was $0.09 compared to $0.16 for the fourth quarter of 2022. Now, moving to the balance sheet. We ended the quarter with $235 million of cash and cash equivalents. As of December 31st, 2023, we had $288.2 million of outstanding borrowings on our term loan and full availability under our revolving credit facility. Turning to the guidance for full year 2024. We expect total revenue in the range of $385 million to $400 million, representing growth of 9% to 13% compared with 2023. We expect to grow adjusted EBITDA on a dollar per year basis in 2024, and expect an adjusted EBITDA margin in the range of 31% to 33%. We expect adjusted EPS in the range of $0.41 to $0.46 per share. Fully diluted shares in the range of $160 million to $162 million, and a tax rate in the range of 25% to 30%.

Thank you, John. To summarize our message today, we are pleased with our 2023 results, and we look forward to executing our 2024 goals. There's a lot to be excited about at Certara as we advance biosimulation forward with our software and our technology-enabled services. We will now open the line for questions. Operator, can you open the line?

Thank you. Our first question comes from the line of David Windley with Jefferies. Your line is open.

Hi, good evening. Thanks for taking my questions. I want to ask a couple, circle around revenue and related. On the commercial progress, Bill, you talked about traction in the sales force and seeing a nice uptick in the fourth quarter. I also hear you talking about some of the investments being in that sales force. So, maybe you could talk about what you saw in the quarter that helped the bookings to kind of pick up and meet your expectations? And then where you feel like you need to make those investments to, I guess, further that traction?

Thanks, David. I appreciate the question. So, what you're referring to is for everybody, is that earlier in the year, we combined our sales forces across the company into one sales force where we cover both our software and our technology-enabled services. The idea behind doing that was to enable us to offer our clients the full suite of what we have in Certara because, after all, for a lot of our clients are buying multiple products and services from us. So, it's not really efficient to call on them multiple times. And in fact, as we brought this out, I think the first investment we had to make was in the training of our sales forces, and we had a lot of people who are specialized in certain products or technology-enabled services. So, as we went through the year, we invested a lot in training. As we go into the fourth quarter, we had people who are able to go into our clients confidently and talk not just about the product they have been known to have been selling all along, but also to be able to say, 'Hey, well, you probably are having a drug at this stage and you want to look at this,' and that started to pay off. I'd say that investment in the sales training and just uniting the sales force is probably not fully realized yet. We're expecting additional gains as we go through this year. We had limited ability to do things like change compensation plans in the middle of 2023, where now we've kind of put in place a united compensation plan that will go into 2024. So, that will make more sense. And we've got more products that are launching. We've got our AI products. We've made investments in hiring people that are focused on them. And our goal, in general, is to kind of up the game in terms of the enterprise sale, taking care of our key accounts and moving up the value chain in terms of how our customers think about us. We did benefit in the fourth quarter from a pick-up a bit in the end markets, and then I think there were quite a number of big customers that had budgets during the year. I think we referred to this earlier, but halfway through the year, we had clients saying, 'Well, we haven't cut our budget, but we haven't spent half of our budget.' So, there was a big push on a number of them to kind of catch up to where they wanted to be at the end of the year as well. So, that was a welcome finish to the year after some of the things we've seen earlier.

Excellent. Okay, great. So, my follow-up then on revenue and revenue guidance, really. You've talked, really since the IPO, in terms of leading indicator KPIs and that your trailing 12-month bookings growth is generally a good indicator of forward revenue growth. That bookings number is down a couple of percent. Your guidance is up almost, I guess, midpoint double-digit percent. Maybe two points there. One, how much of the revenue guidance is inorganic from Formedix and Applied Biomath? And then on the organic side, what gives you confidence that you can generate growth out of a trailing bookings number that did not grow? Thanks.

Thanks for the question, John. In response to your first question, we're anticipating organic revenue growth in the mid-single digits, specifically between 9% to 13%. We are confident in our ability to achieve this across various scenarios. Regarding the second part of your question, we observed a strong performance from Tier 1, with improvements from Q3 to Q4. Tier 1s excelled in both software and services, which positively impacted our year-end results.

Thank you. Our next question comes from the line of Michael Ryskin with Bank of America.

Hi, thank you for the questions. This is [Indiscernible] filling in for Mike. Regarding your guidance, it appears that your adjusted EBITDA margin forecast for 2024 is somewhat conservative given the expected sales growth and your performance at the end of 2023. You mentioned this briefly in your prepared remarks, but could you elaborate on how we should consider OpEx growth for 2024 and any potential areas where you might achieve further operating leverage?

Yes, hi Mike. The couple of key areas that we're investing in there from a margin perspective that's leading us to the 31% to 33%. I'd say that R&D is a key investment area for us, especially as we're looking at software development. We have key investments across the software platforms. I think Simcyp new modules that Bill mentioned. Think Phoenix Hosted, and then very importantly, think about AI investment. So, that's one key area where you'll see the investment come in. And then the other, of course, is around the sales force. So, Bill was talking about the changes that we made on the commercial model that we're going to expand the sales force, and we're expecting to be able to increase the call point as that comes through. So, that's where you're going to see it. I think it's really important to note, though, too, that we're guiding to the margin of 31% to 33%. We're committed to growing EBITDA dollars. So even though we didn't really talk about a range there, I think it's important to note that within that guidance, we're committed to growing EBITDA dollars on a year-over-year basis.

Thank you for the clarification. As a follow-up, I noticed you made a significant adjustment regarding the remeasurement of your consideration for Vyasa. Can you provide more details on the factors that contributed to this change and what trends you are observing in that business?

Yes. So, yes. So, you're right. What you're seeing there, the adjustment is $12.8 million, and it is centered on Vyasa, and it's due to the performance of the business there. So, we're pleased with the progress, and it's one of the key areas for investment. And I think Bill wants to make a couple of comments on it, too.

Yes, I agree with John. We acquired Vyasa at the beginning of last year during a timely moment as AI was becoming more impactful. We're very happy with how Vyasa has integrated into Certara. As I noted earlier, we've already launched a few products and are generating revenue from them. While we anticipate that revenue will be modest in 2024, we're seeing significant customer interest. Moving forward, we're optimistic about our progress and the potential of our products, which is reflected in the valuation adjustment.

Thank you. Our next question comes from the line of Luke Sergott with Barclays. Your line is open.

Thank you. I would like to follow up on the M&A aspects. You recently acquired 500 basis points. Can you provide details on the contributions from Formedix and Biomath, along with any information on the valuation or price paid? Additionally, could you give us an overview of the margin and fundamental profiles of these businesses?

Yes. Hi. So, some of those details that you're asking about as far as like purchase price are in the K. So, that would be something to look at. But as far as like the margin is concerned, then companies that we purchased, we're purchasing companies that are profitable. They may operate under what our corporate margin is, but we always have a pathway to be able to get them to our corporate margin, and I'd say that Formedix and Biomath will fall into that camp.

All right. Regarding the guidance, I wanted to touch on something Dave mentioned. Outside of the 500 basis points from the M&A, the performance came in significantly above expectations. I'm curious about the current visibility in the demand environment from a bookings perspective or RFPs that give you confidence in achieving that acceleration. Can you share details on the pacing of what that looks like?

Yes, I would like to highlight three key points. First, there is the momentum we experienced as we closed out the year. We were pleased with our Tier 1 performance and noted stability in the Tier 3s. While those bookings did not convert to revenue in the fourth quarter, we are looking forward to that happening in 2024, which reinforces our positive momentum. Second, we saw a backlog conversion during 2023, which, despite some slowing in bookings conversion, will positively impact 2024. This also supports our growth prospects. Finally, we have new products in our software platforms, including offerings in AI, Phoenix Hosted, and the Simcyp modules. When we combine these three factors, we feel confident about achieving mid-single-digit organic growth.

Thank you. Our next question comes from the line of Jeff Garro with Stephens. Your line is open.

Yes, good afternoon. Thanks for taking the questions. I want to dive into the strong software bookings a bit. I was hoping you could help parse out contributions, qualitatively from price increases, adding new clients, the new products that you launched in 2023, and then the kind of standby of cross-selling existing products to your large existing customer base.

I want to highlight the software net retention rate, which we see as a crucial measure for assessing our software performance. For the quarter, it stood at 109%. This includes growth from existing customers, pricing adjustments, and the acquisition of new clients, which together contributed to the 15% growth for the quarter. While we won't break down the growth by platform, achieving 15% growth in software and 14% for the year is a solid outcome for us. As I noted earlier, we experienced strong performance from our Tier 1 customers and across all tiers as we wrapped up the year on bookings, positioning us favorably for 2024.

Excellent. I appreciate that. And then to follow up, as we think about the mid-single-digit organic growth for 2024, how would you compare that to the market growth? It seems like the commentary on the end market is improving, and that's reflected in your trajectory. But what I'm really getting at is, with your 2024 guidance, does that kind of assume that you're taking market share? Or is that more an upside case?

Thanks, Jeff. This is Bill. I think a couple of things are happening in the market right now. First, for the larger companies, we're noticing some stabilization in demand as they reassess their portfolios from last year. Many of them have made decisions about their direction moving forward. As a result, we've observed and assumed that demand will at least remain steady as we progress through the year. We're also hearing indications of a rise in biotech activity. There have been statistics released showing increased funding; however, we haven't really seen that reflected in our bookings so far. Based on our observations, we anticipate that in the second half of the year, we may start to see a healthier market segment than we experienced in 2023.

Thank you. Our next question comes from the line of Michael Cherny with Leerink Partners. Your line is open.

Good afternoon and thanks for all the details so far. I appreciate the color on the organic growth. Can you just give us a little sense on how you expect it to trend between software and services? I mean, I know it especially falls from the bookings. But just want to make sure we have a good understanding on very different growth rates, both organic and inorganic contribution against the backdrop of your margin commentary for the year.

Yes. Yes. So, the way to think about it as a sort of cadence through the year would be that we would see some acceleration across both software and services Q1 through into Q4. I'd say for software that there's less of that. And then I think there's really more of a story on first half, second half on the services side of the business. But even when you look at that, it's probably a couple of hundred basis points, north and south of 50%, when you look at services accelerating into the back half. Coinciding with that also would be from a margin perspective, since historically, we have had a strong Q4 then, and because of the ramp that we'd see going as we progress through the year, then we'd expect the margin to progress in that fashion as well.

Okay, got it. And then when you think about where you sit right now, obviously, having completed the recent M&A, building into QSP. How do you think about that next leg of pipeline for inorganic growth? This is obviously a business that's had great contributions as you built out that portfolio. At what point in time do you feel like service-wise, critical mass has essentially been achieved? Or is this going to continually be, especially as you get back into the market with more demand, a perpetual growth opportunity for more and more bolt-ons like we've seen recently?

Yes, this is Bill. I'll address this. We've had a successful track record of bolt-on acquisitions that have helped shape the company. From the start, we’ve emphasized that while there are many promising technologies and companies in the market, we don’t approach our strategy with a strict requirement to pursue inorganic deals. Most of our acquisitions have been closely-knit collaborations with companies we know well, which made it logical for them to join a larger platform, and we’ve found success in that. Moving forward, we remain open to opportunities. However, I believe that even if we don’t pursue any new deals, we will still have ample opportunities for organic growth at Certara. Occasionally, we come across technologies that offer synergistic benefits, and when we do, it’s advantageous that we have the experience and capability to integrate them effectively into Certara.

Thank you. Our next question comes from the line of Vikram with Morgan Stanley. Your line is open.

Hi, good afternoon. This is Vikram. Thanks for taking our questions. We had two. My first one was a follow-up to your commentary on the health of the biotech markets. I just wanted to clarify one item on your guidance here. So, does your current revenue guidance for 2024 contemplate a certain level of recovery in the second half of the year? Or would that present 4% upside to your current guidance? And then as a follow-up, I was hoping to get your latest thoughts on geographic expansion and whether there are any ex-U.S. geographies that represent particular areas of focus for you? Thanks.

Yes, certainly. Regarding the biotech market, we have presented our guidance with a stable outlook. As we reviewed the third quarter, we noted stability, and we exited the fourth quarter with the same stability in mind, which our guidance reflects for the entire year. While we acknowledge the potential for market improvement, especially in the latter half of the year, our guidance does not incorporate that expectation. As for your second question about markets outside the U.S., we are making investments in regions we see as growth opportunities, including Asia-Pacific, and we have a solid business foundation in Europe. However, the growth we are anticipating in our guidance primarily focuses on the U.S. and European markets for 2024.

Thank you. Our next question comes from the line of Max Smock with William Blair. Your line is open.

Hey, good afternoon, guys. Thanks for taking our questions. Maybe just asking a little bit of a longer-term one here on the margins. And just getting your thoughts on the long-term trajectory, in particular, I know during the IPO process, you mentioned getting up to high 30% longer term. Just wondering if that is still kind of the long-term target here and how we should think about the margin trajectory beyond 2024?

Yes. So, I'll start, and I'll let John chime in. The way we think about this is we can easily run this company at mid-30s EBITDA margin. Right now at this period of time, we have significant opportunities to make investments in our software and our AI, some of the things we talked about. We're going to do that through 2024. At the end of 2024, we could certainly have the option to go right back to where we were, but we'll evaluate and see what the opportunities are for our company and our shareholders at that point.

Yes. And then so to carry on to what Bill said, as we look at 2024, of course, we're looking at 31% to 33% margin. There's investments that we talked about that we're making. I think some of those investments, as we mentioned, the sales force will start to kick in really at the very tail end of 2024, and then we'll have a stronger impact in 2025. And so as Bill mentioned, it's really within the management team's control to evaluate the pace of those investments and the amount of those investments and be able to toggle our margin accordingly as we move through this year.

Got it. Thank you. Maybe just following up on the services piece. Can you remind us for 2023, as we move into 2024 here, how big of a piece regulatory services is within the broader services bucket? How that piece performed in total in 2023? And then what you have embedded in your guide for that regulatory services piece in 2024?

Yes. In Q4, the regulatory business accounted for 19% of total revenue and about 30% of services revenue. As we mentioned, we expected that business to contract during 2023, which it did. However, the positive signs we talked about were largely in bookings, particularly in Q4, where we noted that large deal bookings often occur. We experienced several large bookings in Q4 that will be recognized as revenue in 2024. As we look into 2024 and consider this business in our guidance, we anticipate it will return to growth, but this will unfold over several quarters. Thank you.

Thank you. I'm showing no further questions in the queue. I would now like to turn the call back over to William for closing remarks.

Thank you everybody for joining us tonight. We're looking forward to a great 2024 for Certara and we'll see you on the next call. Good evening.

Ladies and gentlemen, that concludes today's conference call. Thank you for your participation. You may now disconnect.