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 June 30, 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 our 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 most recent earnings press release available on the company's website. Please refer to the reconciliation tables in the company materials for additional information. The conference call contains time-sensitive information and is accurate only as of the live broadcast today, August 6, 2025. 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, and good afternoon, everyone. Thank you for joining Certara's second quarter earnings call. John and I will begin with prepared remarks, and then we will take your questions. Certara's second quarter performance reflected continued strength across the organization as we achieved results that were consistent with our full year outlook in both software and services. Second quarter revenue of $104.6 million represented 12% year-over-year growth, while second quarter bookings of $112 million reflected 13% year-over-year growth. Relative to internal expectations, we are pleased with the state of our financial performance and sales funnel as we head into the second half of the year. Across the portfolio, we continue to see strength in high-growth areas such as QSP services and our Simcyp software. We have a high degree of visibility into second half software performance based on the mix of renewals in our pipeline, which gives us additional confidence in our full year growth expectations. In services, our commercial team continues to execute in line with or ahead of our expectations, delivering 15% bookings growth in Q2 and 10% bookings growth on a trailing 12-month basis, which supports the revenue outlook through the rest of the year. As a result of our strong year-to-date execution, we are reiterating our full year guidance. Across a variety of customer groups, our conversations continue to reflect a mixed spending environment in our various end markets. Large pharma companies remain cautious driven by a rapidly changing geopolitical and macroeconomic environment, decision-making timelines for our customers have been affected by proposed pharmaceutical tariffs and the potential introduction of a most favored nation pricing algorithm. Among smaller customers, the biotech funding environment has slightly improved, but it remains below trend on a historical basis. Despite these headwinds, we have been encouraged by persistent interest from customers seeking to expand their use of biosimulation technology, incorporating additional Certara products and services into their development workflows. Throughout the second quarter, our team did an excellent job of remaining in front of key stakeholders and facilitating discussions about how we can further expand existing relationships. Now turning to our second quarter commercial performance. In software, we saw strong bookings performance across Tiers 2 and 3, offset by timing-related softness in Tier 1, which remains in line with plan on a year-to-date basis. Software revenue of $46.7 million grew 22% on a reported basis and 9% organically, led by strong growth from Simcyp in addition to $5.1 million of contribution from Chemaxon. In services, we saw bookings growth across all 3 of our customer tiers led by strength in Tier 1 across both biosimulation and regulatory services. Strength in biosimulation services bookings was driven by QSP and Simcyp services, while total regulatory bookings also grew nicely during the quarter. Services revenue of $57.9 million grew 5% on a reported basis. Certara Simcyp reached a significant regulatory milestone earlier this week. We're happy to share that Certara is the first and only company to receive European Medicines Agency, EMA, qualification for a PBPK Modeling Platform and Simcyp is the only software to hold this designation. The recognition follows a rigorous multiyear collaborative engagement between Certara scientists, technologists and the EMA. The qualification is a significant milestone for biosimulation, demonstrating the value that regulators place on evidence generated through modeling and simulation approaches, and it will continue to encourage the usage of Simcyp by companies globally. Certara is continuing to increase investment in R&D to create our next-generation AI-enabled MIDD platform. This investment started in 2022, before the breakthroughs in GPT AIs were announced when Certara acquired Vyasa. Vyasa brought to Certara the foundational distributed data fabric technology which has become the underpinning of our ability to integrate AI with our modeling technology and data sets. Since then, we have utilized this technology in a number of new AI features in our products and also some new important AI products like CoAuthor. Last week, I was pleased to announce the promotion of Dr. Christopher Bouton, Founder of Vyasa as Certara CTO. Chris is leading the integration of Certara's key MIDD modeling tools into our next-generation AI MIDD platform, which we'll be launching over the next year. We believe that Certara can solidify our leading position in the MIDD with this platform, which will fuse both AI and biosimulation technology to enable our customers to reduce the risk and cost of drug development. The next step in the creation of this platform will be the release this fall of CertaraIQ, an AI-enabled QSP software solution that includes an intuitive model building interface and several prevalidated QSP models. As you will recall, QSP is one of the fastest-growing markets within Model Informed Drug Development, and we have the largest group globally serving these customers. Our services team will adopt CertaraIQ as their preferred platform for executing QSP products, leveraging cutting-edge features and modeling capabilities. With CertaraIQ, customers will have one unified QSP platform to reference in collaboration with peers, Certara, and regulators. The product will be based in the cloud, allowing for high-performance simulation and analysis work at faster speeds. We believe this product launch is a critical step in growing the market for QSP solutions by democratizing access to modeling capabilities across our customers, which should ultimately lead to more QSP use in clinical development. The product is currently in an early access phase with several customers, and we expect to announce a full commercial launch at some point in the fourth quarter. While we are on the subject of QSP, we received an update on our QSP collaboration with IGI, which was published in Nature Cancer last fall. Our QSP team worked with IGI to optimize the first-in-human dose of ISB 2001, resulting in a clinical starting dose that was 50 to 100 times over the conventional starting dose, and that reduced the need for animal testing. These predictions were validated by first-in-human trial results that were presented at AACR this year and ISB 2001 was granted a Fast Track designation for the treatment of relapsed refractory myeloma patients in May. We are thrilled by the work of our QSP team and the outcome of these studies for all key stakeholders, showcasing the impact that QSP could have in accelerating trial timelines and accelerating the delivery of treatments to patients in need. In addition, excitement about new approach methodologies and particularly model-informed drug development has grown in the wake of the FDA's guidance to phase out animal testing for monoclonal antibodies. While it's still too early to provide a precise estimate of the broader opportunity, we do view it as a multibillion dollar addressable market over the next 10 years. We are excited to share that our QSP and broader Simcyp businesses have begun to recognize bookings and revenue associated with the replacement of animal testing. Roughly 50% of our new QSP projects this year have been for monoclonal antibody therapies, which is a testament to Certara's competitive positioning as the leader in QSP of services as well as the growing momentum of NAM use in clinical development processes. Our acquisition of Applied BioMath in late 2023, and the subsequent combination of our 2 QSP teams has proven timely and is becoming an increasingly important component of our overall growth. Now shifting towards some other product-related updates. During the quarter, we released version 8.7 of our Phoenix PK/PD platform, following months of development and incorporating feedback from key stakeholders. New enhancements included in the update were improved speed and efficiency of NCA setup, data preparation and the speed of nonlinear mixed-effect algorithms for population pharmacokinetics. As we have discussed in the past, this product has been made available through the Certara Cloud, offering faster performance with lower back-end IT costs for our customers. Initial feedback from our users has been positive, and we look forward to collaborating with them to drive further improvements to the Phoenix platform. Another key focus area for investment over the past several quarters was our Pinnacle21 product suite, which is core to the data component of the software business. Following the acquisition of Formedix in late 2023, our team began to integrate Pinnacle21 and Formedix data standardization capabilities, seeking to improve our customers' clinical data workflows and timelines. In early July, we were pleased to announce a new collaboration with Merck, expanding their use of Pinnacle21 and broadly incorporating new integrated data standardization capabilities. This collaboration helped us build upon our long-standing relationship with Merck, which is an example of the type of engagement that Certara is striving to build across our customer base. Our commercial team remains focused on identifying opportunities to form stronger partnerships with customers, both through the expansion of existing capabilities to more seats and expansion of new products and services. As we add to our portfolio organically and inorganically, our land and expand commercial strategy remains top of mind. Now before handing things over to John, I wanted to provide an update on the strategic review of our regulatory business. Regulatory bookings have continued to grow nicely through the quarter, and we continue to value the business given the profitability and cash flows that it generates. Over the past several months, we have continued to make good progress in our review. However, this process has taken longer than we expected, which we attribute in part to the unprecedented nature of geopolitical and macroeconomic uncertainty that has taken place since the beginning of the year. With that said, we have maintained an active dialogue with several interested external parties with discussions progressing beyond the initial phases of diligence. We hope to be able to provide a more substantive update before the end of 2025. To close, we are pleased with our second quarter performance, and we are confident in our financial outlook for the remainder of the year. Our guidance is supported by solid bookings trends in services and high visibility into second half renewal dynamics in software. Customer interest in Model Informed Drug Development continues to grow stronger each quarter, supporting our growth strategy and validating the investments we are making in our business. We look forward to continued success and momentum during the second half of 2025. With that, I will hand things over to John Gallagher to discuss our financial results in more detail.

Thank you, William. Hello, everyone. Total revenue for the 3 months ended June 30, 2025, was $104.6 million, representing year-over-year growth of 12% on a reported basis and 10% on a constant currency basis. Total bookings in the second quarter were $112 million, which increased 13% from the prior year period on a reported basis. Trailing 12-month bookings were $470.8 million, increasing 15% on a reported basis. Excluding Chemaxon, total company organic bookings growth was 8% compared with the second quarter last year. Software revenue was $46.7 million in the second quarter, which increased 22% over the prior year period on a reported basis, and 20% on a constant currency basis. Organic growth was 9% in the quarter, driven by strong growth from Simcyp. Chemaxon contributed $5.1 million to our reported revenue, which was in line with our expectations. Ratable and subscription revenue accounted for 60% of second quarter software revenues or 64% when excluding Chemaxon, slightly down from 65% in the prior year period. Software bookings were $46.6 million in the second quarter, which increased 11% from the prior year period. Second quarter bookings included $5.2 million of Chemaxon bookings. Trailing 12-month software bookings were $181.9 million, up 25% year-over-year. The software net retention rate was 107.6% in the quarter, consistent with our full year plan. Looking at our software bookings performance by Tier, we saw strong performance in Tier 2 and 3 driven by continued adoption of our software. In Tier 1, we saw some timing-related slowness due to renewals, which we expect to normalize in the second half of the year. Now turning to services revenue, which was $57.9 million in the second quarter, up 5% versus the prior year period on a reported basis and 4% on a constant currency basis. We saw a strong performance from our QSP and Simcyp services businesses in the quarter, which was partially offset by softness in regulatory services. Technology-driven services bookings in the second quarter were $65.4 million, which increased 15% from the prior year period. TTM services bookings were $288.9 million, up 10% as compared to the prior year. During the quarter, we saw an improved demand for our biosimulation services with bookings growth across all 3 of our customer tiers. We were also encouraged by regulatory writing bookings, which grew mid-single digits versus the second quarter of 2024. Total cost of revenue for the second quarter of 2025 was $40.7 million, an increase from $39.8 million in the second quarter of 2024, primarily due to higher software amortization expense offset by lower stock-based compensation. Total operating expenses for the second quarter of 2025 were $54.3 million, a decrease from $62.5 million in the second quarter of 2024, primarily due to an $8.5 million decrease in the change in fair value of a contingent consideration, which was offset by higher sales and marketing expense and intangible asset amortization. Adjusted EBITDA for the second quarter of 2025 was $31.9 million, an increase from $26.3 million in the second quarter of 2024. Adjusted EBITDA margin in the quarter was 31%. As Bill mentioned earlier, we are executing on our investment plans this year and have begun hiring additional software developers in the second quarter, which will continue through the second half of the year. Total expenditure on R&D during Q2, including capitalized spend is growing year-on-year as a result of these investments. Wrapping up the income statement. Net loss for the second quarter of 2025 was $2 million compared to a net loss of $12.6 million in the second quarter of 2024. Reported adjusted net income for the second quarter of 2025 was $11.6 million compared to $11.4 million for the second quarter of 2024. Diluted loss per share for the second quarter of 2025 was $0.01 compared to a loss of $0.08 per share in the second quarter of last year. Adjusted diluted earnings per share for the second quarter of 2025 was $0.07, the same as the second quarter of last year. Moving to the balance sheet. We finished the quarter with $162.3 million in cash and cash equivalents. As of June 30, 2025, we had $297 million of outstanding borrowings on our term loan and full availability under our revolving credit facility. Earlier this year, our Board authorized a $100 million share repurchase program. As of today, we have purchased a total of $25 million in stock, all of which was during the second quarter. We are reiterating our guidance today as follows: we expect total revenue in the range of $415 million to $425 million, representing growth of 8% to 10% compared to 2024. We expect Chemaxon to contribute software revenue of $23 million to $25 million. We expect adjusted EBITDA margins between 30% to 32%, similar to our guidance last year; we anticipate a higher EBITDA margin at the lower end of our revenue guidance and a lower EBITDA margin at the higher end of our revenue guidance. This will be driven by discretionary investments in R&D, which will be managed carefully based on the timing of new product launches and business performance in the second half. We expect adjusted EPS in the range of $0.42 to $0.46 per share, fully diluted shares in the range of $162 million to $164 million, and a tax rate in the range of 25% to 30%. I will now turn the call back over to our CEO, William Feehery for closing remarks.

Thank you, John. To summarize our message today, we are pleased with the many exciting developments of Certara in the second quarter. We remain focused on executing our growth and profitability goals in 2025. We continue to make good progress on the software development front, and I am looking forward to sharing further updates following some new product launches in the fall. Operator, can you please open the line for questions?

Our first question comes from Joe Vruwink of Baird.

Just a quick clarification. The multibillion dollar addressable market opportunity you cited around NAMs. Is that incremental to the low single-digit billion TAM you traditionally have discussed for biosimulation software?

Yes. We're looking at that as what would be an additional opportunity, Joe, based on trying to ring-fence what we think the long-term opportunity is for NAM.

Okay. That's great. And then I thought it was interesting. Certara had a webinar during the quarter, and during the webinar, they asked respondents just what they're currently using around NAMs, and I think 40% cited nothing. So that seems like a good opportunity. But 30% cited PD/PK modeling, 12% with QSP. I guess I would have expected the QSP responses to be a lot higher. What's kind of your interpretation of just how kind of the thinking is settling out? Does Certara need to do more marketing on their part to educate customers around maybe the best course of action? Just how are you seeing kind of customer decision-making change now that we're a few months further in?

So Joe, as it relates to QSP, QSP is one of the bright spots in the quarter for us. So I think that those results would also surprise us as far as that's a pocket of the business along with Simcyp, where we would see additional opportunity going forward. So that QSP is a growing area in general. And our combination of our existing practice along with Applied BioMath makes us the market leader in that spot. So I would expect that ratio that you cited to grow into the future.

Yes, Joe, I think it's still early to fully understand the market's perception of this announcement and its implications for advancing drug programs. The truth is that QSP and PD/PK are often closely connected, and people's responses may vary based on their familiarity with each. QSP represents a newer aspect of model-informed drug development. The number you mentioned doesn't really worry us, as we have a strong presence in both areas. My perspective is that about 70% of users are employing technologies where we excel.

Our next question comes from the line of Luke Sergott of Barclays.

This is Anna Kruszenski on for Luke. I was wondering if you could give any color on the demand drivers for software versus services bookings? We would think that the services booking strength is like a better leading indicator of future spend and adoption. So it would be great to get your sense of this.

Yes, that's a good question. However, I think it's not exactly the right perspective. The demand drivers for software are significant because companies require software as part of their R&D infrastructure, which remains steady. Additionally, we have allocated considerable R&D resources recently towards new products that are contributing to this demand. Services have also rebounded well this quarter compared to last year. There are a few factors at play here. One is the particularly high demand for QSP services, which is an emerging area that I've mentioned before. Another factor is the connection between the services and the software that I previously discussed, which people are purchasing. While we view software and services as separate categories, they are often closely linked when it comes to sales to customers, with one influencing the other.

That is super helpful. One quick follow-up. Can you share a little bit more on the dynamics that you saw across customer tiers? The biggest difference is between Tier 1 behavior versus Tier 2 and 3, particularly on the software side?

Yes, we noticed that Tier 1 software was affected by the timing of renewals. However, when we consider the entire year and the second half specifically, we feel very confident and have good clarity regarding those renewals. That was the main point to highlight in customer tiering. On the other hand, in Tier 3, despite the challenging funding environment, we experienced strong performance in both software and services. We are pleased with this outcome. As Bill mentioned, we had a particularly successful quarter in services, especially with biosim services in Tier 1, which contributed positively to our overall growth rate.

Our next question comes from Jeff Garro of Stephens.

Yes. I wanted to ask about the new AI MIDD platform. Curious if you could provide any more detail on how we should think of the glide path for customers as they might adopt that new platform in the future? More specifically, does the delivery model or economics between you guys and customers look any different? And lastly, there, any concern over potentially pushing out demand ahead of an exciting new product launch?

Thank you for your question, Jeff. We believe we have leading technology in biosimulation and have made strategic acquisitions in the AI space. Our goal is to create a unified platform that integrates our various software solutions for drug development, enabling optimization based on multiple parameters. This will allow our customers to make more informed decisions about which molecules to advance. We view this as a significant opportunity for both our company and our customers to improve their drug selection processes. We emphasize this now not to pre-announce the product, but because we are investing considerable R&D resources into it and plan to launch it within the next year. I am not concerned about customers waiting; many are eagerly using our existing products for their current drug development projects, which have become standard tools in the industry. This new product will complement our current offerings and feature enhanced capabilities made possible by recent advancements in AI. We will provide more updates as we move forward, with the first phase launching in Q4 and already with customers.

Great. Appreciate that. Really helpful. And maybe to kind of translate some of the key themes there to the financial model, not just this new platform, but you've had CoAuthor released kind of last year and growing this year, you have regular releases of your existing products and some other new ones as well. I just want to get your viewpoint on whether product launches alone are sufficient to drive organic growth out of the low single-digit to mid-single-digit range that the company has been in the last few years? Or if you really do need a better macro environment on top of that?

Thank you for the question. Although we would prefer a better macroeconomic environment, we are not relying on that. We believe the company is in a unique and valuable position, combining technological maturity with a broader industry understanding and regulatory acceptance. These factors are aligning favorably right now. This is an ideal moment for us to broaden our product offerings, as the opportunities are increasing. We do not require a market recovery to achieve the results we anticipate. Markets fluctuate, and while some may rise, which would be beneficial, our model does not depend on that.

Our next question comes from the line of Michael Cherny of Leerink.

Great. This is Dan Clark on for Mike. Just had a question on the EMA qualification for Simcyp. I know this just came out, but how are you thinking about that in terms of differentiating your product, any early customer feedback on receiving that would be great to hear?

Thank you for the question. This has been a significant achievement for our teams at both the EMA and Certara. We have been working towards this qualification for nearly two years. The importance of this qualification lies in the fact that the EMA, like other regulatory agencies, has accepted the use of Simcyp in drug applications for some time. However, the EMA is made up of 27 member nations, and there was previously no specific qualification for any product. This meant that for many of our customers, the experience would vary depending on the reviewer and their questions, causing delays and uncertainty in the process. Reviewers want to understand the models, which necessitates qualification. What this qualification does is provide a prequalification, meaning the EMA has reviewed and confirmed all the essential aspects of Simcyp, alleviating the need for approvers to revisit this during a drug application. No other entity has reached this milestone, and it was a costly and challenging review process. For our customers, this brings two main benefits: first, it demonstrates the regulatory confidence in the software, having gone through substantial scrutiny and acceptance; second, it enhances the consistency customers can expect during the review process, as they won’t need to address questions about the underlying aspects of Simcyp, simplifying the software’s usage and improving the predictability of results.

Our next question comes from the line of Kyle Crews of UBS.

The software bookings declined organically, but it sounds like it's related to a timing issue with Tier 1 customers where you have more visibility into 2H. Beyond 2H and given kind of a heightened visibility in future orders, could you provide early framing thoughts on 2026 relating to the headwinds with pharma tariffs, potential MFN, and a potential reduction in pharma R&D spend offset by the continued regulatory push for Model Informed Drug Development, and if you expect growth to accelerate into 2026 and how much? And any early qualitative planning thoughts there?

Kyle, I believe the best way to approach this is to consider the investments we are making in research and development alongside the product launches that Bill mentioned. We do not anticipate significant improvements in the end market environment in the short term, but we are committed to growing the business despite that. Looking at the products we have recently introduced, I want to highlight the strength of our existing platforms, particularly Simcyp, as a noteworthy achievement this quarter. When we combine this with the upcoming product launches for this year, it creates a solid foundation for growth as we look ahead to next year.

Great. And then maybe could you discuss how you aim to get regulators comfortable with incorporating AI into Model Informed Drug Development?

Yes, we will discuss that further as we move forward. However, simply mentioning AI and Model Informed Drug Development does not encompass all the potential aspects. As a regulator, it's essential to question any situation where an AI provides a recommendation without a clear understanding of its reasoning. We recognize this concern, and our approach is different. This technology enables AI to analyze significant scientific data necessary for model creation, allowing us to develop models much more efficiently with our experts while ensuring transparency. In Model Informed Drug Development, explainability is crucial. We need to clarify the contents of the model, the sources of our information, the equations used, and the supporting data. This principle will remain constant, providing comfort to regulators. Moreover, the methodology to achieve these insights and the collaboration with our top experts at Certara can significantly improve. Essentially, we can reduce the costs and time associated with model creation and accelerate the overall timeline for their use in the drug development process.

Our next question comes from the line of Brendan Smith of TD Cowen.

I wanted to ask just another one actually about some of the new customer inbounds in the wake of FDA's pushing animal testing. I think you called out that 50% of new licenses in the quarter were kind of in that biologics biosim for non-animal testing arena. So I guess, can you just maybe remind us how we should think about kind of the cadence over the next couple of quarters really how and when some of the new bookings or even, I guess, new preliminary inquiries could translate into any upside? I mean I totally understand there's always some variability in customer timing and all that, but just trying to understand some of your internal assumptions around a brand new customer coming to you specifically because of FDA, what you expect kind of average time from first outreach to revenue recognition for you all looks like? And maybe what some of those considerations have been this quarter?

Yes. Well, probably the first thing to highlight, Brendan, would be the QSP business and the Simcyp business. We've said previously, they would be the areas that would be sort of the initial beneficiaries here. That being said, we do think it's a long-term conversion, as we discussed earlier in the call. But we've seen strength in QSP and Simcyp, as we mentioned earlier in the quarter, and as we look at the remainder of the year, there's certainly potential upside in those 2 areas, which is bookings for services on QSP services and Simcyp software. So the customer conversations have been good, and I think that we're increasing the dialogue while at the same time, those businesses are outperforming our expectations on the year.

Our next question comes from Steven Dechert of KeyBanc.

I just want to dig into the Tier 1 slowing of software renewals. Anything specific to point to there?

No. The way to think about it is that bookings are lumpy on a quarterly basis. We've certainly seen that historically. Revenue was strong, organic revenue at 9%. TTM organic bookings were at 11%. So that's indicative of what we've been booking, and we have good visibility into the second half renewals during the year. So that gives us a lot of confidence as we approach the remainder of 2025.

Okay. And then given the strength you're seeing in QSP, what's the profitability of that product relative to your other offerings?

Well, keep in mind, QSP is currently a services offering. It combines our existing practice with Applied BioMath, which we acquired in 2023, giving us a leading position in the market. The profitability profile aligns with what you would expect from a services business. As Bill mentioned earlier on the call, we are actively working to launch some software related to QSP, specifically CertaraIQ, later this year.

Our next question comes from the line of Max Smock of William Blair.

Maybe just following up on an earlier question around QSP, and you flagged the 50% of new engagements tied to mAbs just kind of a proxy for the uptick in demand you think you've seen since the FDA guidance was released. But just wonder if you can give some more context around what the breakdown of therapeutic modality looked like for QSP pre-FDA guidance? And then any context you have around what portion of those engagements that you flagged in the quarter wouldn't have been on, in your opinion, without that FDA guidance.

Yes, thanks for the question. QSP has been focusing on monoclonal antibodies for quite some time. The FDA recently announced something significant, likely due to the increased modeling in mAbs, which has provided valuable insights. While I won’t provide specific figures, we’ve seen a noticeable increase since the FDA’s announcement. However, it wasn’t an instantaneous shift; there has been a gradual process following the announcement, starting with a well-attended webinar we held shortly after. During this time, many companies explored what the FDA's announcement could mean and learned about the advantages of QSP, which has positively impacted our business. While it’s growing, it will take time for the market to fully develop and build confidence in how the FDA wants things to progress. Nonetheless, there has been a significant rise in interest in this type of modeling, which has boosted our revenues. I'll leave it at that.

That's helpful. Understood. Maybe turning to margins. The midpoint of the guide implies about 30% in the second half, kind of well below you did 32% in the first half. And I know you talked about hiring being a driver there. But can you just walk through any of the other kind of factors that are leading to that step down in 2H in the second half of the year here, and then the cadence between the third quarter and fourth quarter? And then, John, I think more importantly, is 4Q going to be a good jumping-off point for thinking about margins next year? Or are you going to moderate investments to make sure that you're protecting margins in 2026?

Yes, Max. The first half was influenced by slower hiring in Q1. A good way to project for the rest of the year is to use Q2 as a starting point. Our 13.5% margin in Q2 is a solid benchmark as we continue to increase investments heading into Q3 and Q4, while Q1 is less relevant for this analysis. This is the perspective to adopt when modeling the full year regarding margins due to those upcoming investments. Additionally, concerning the margin outlook for next year, I reiterate that the investments and hiring that will occur—some of which started in Q2—will continue in Q3 and Q4. Therefore, I believe Q4 will serve as a reasonable reference for our margin expectations going into the next year.

Our next question comes from the line of Gabriel Weiner of Jefferies.

Dave Windley here. Is it me? I think it's probably me, if you can hear me?

Yes.

So I wanted to ask around kind of adoption curve. So Certara has been in this modeling business for a couple of decades, probably seeing several adoption curves. And so my question is, what are the telltale signs of clients that are on the cusp of, say, climbing the steeper looking at adoption curve? Is it hiring more people in their quantitative sciences divisions? Is it running pilot programs? What might that look like? And I'm asking as something to look for as it relates to the NAMs and how we might try to observe pharma companies stepping into adoption of NAMs?

Thank you, David. This is a complex question due to the various players in this market and the technical aspects of biosimulation. Generally, we often begin with services. A company might not be running a traditional pilot program, but their first interaction usually involves a project conducted by Certara. As they grow excited and gain confidence in our offerings, they transition into software customers over time. Regarding NAMs, it's an intriguing situation because the FDA's announcement has only been out for a few months, which is a short timeframe in the pharmaceutical industry. However, there has been significant interest. We have been engaged in a range of projects, from additional QSP initiatives to strategic projects that explore implications for their drug development processes and adjustments they need to consider. This has all transpired very quickly. We're trying to forecast how this will evolve over several years based on just a few months of initial observations. What we find is that companies are keenly interested in NAMs, and many are integrating this with further modeling or biosimulation in their projects. This trend is beneficial for our business, though it can be somewhat complicated, especially since companies often attempt multiple initiatives simultaneously when first engaging with this technology.

Yes. As a follow-up to that, I'm trying to understand how the client might use or attempt to achieve their goals without animal models. Considering that Simcyp is being referenced as part of this newer QSP approach, is the client utilizing Simcyp differently to provide answers compared to how they've traditionally used it? Or are they conducting similar, perhaps more intensive, analyses while relying on those results more than before, without verifying them in animals?

For some time, many of our customers have been conducting modeling of monoclonal antibodies alongside their animal testing. This modeling has shown results that, if permitted by the FDA, could potentially reduce, if not completely eliminate, the need for animal use. The parallel modeling is beneficial because it provides valuable insights that can be challenging to obtain from animal studies. For instance, when determining first-in-human dosing, using modeling can yield superior answers compared to testing on primates. Improved answers increase the likelihood of effectively utilizing Phase I trials to identify the appropriate dosing range. Consequently, customers are leveraging this data and, with FDA approval, are aiming to lower animal usage in their research. This development is positive for our clients who are finding additional benefits from their existing modeling efforts. Moreover, companies that were previously hesitant are now considering adopting Quantitative Systems Pharmacology. This is why we believe this trend has been advantageous for our business. Currently, no one has submitted a drug application to the FDA with reduced animal use yet, but given the recent progress, we anticipate a snowball effect that will likely generate even greater interest.

Thank you. I am showing no further questions at this time. Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.