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 John 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 the 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. And with that, I'll turn the call over to Jon Resnick for opening remarks.

Good morning, and 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 health care policy, science, and technology, where I've built and transformed data, technology, and services businesses within the life science industry. Joining Certara on January 1, I am genuinely excited about the opportunity ahead. As the new CEO coming in with fresh eyes, I have approached the first 50 days with one priority: listening intently and learning from our stakeholders. I have 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 strength 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. And 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 to 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 United States FDA Commissioner, noted that computational modeling can provide more insightful perspectives on experimental design in 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 as 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 three 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 created market headwinds; and/or third, internal execution gaps have impacted results. There are probably elements of all three 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 to 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. And 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 predictive 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 life cycle. 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. At the same time, 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. Now 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 in 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. But 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, and 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 three 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 in 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 remain 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. With that, I'll turn the call over to John Gallagher to walk you through the 2025 results and our 2026 guidance.

Thank you, Jon. Hello, everyone. Total revenue for the three months ended December 31, 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 12-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. Now 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 G&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 and 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% to 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 to $0.48 per share for the full year. Fully diluted shares are expected to be in the range of 160 million to 162 million, and we are modeling an effective tax rate of about 30%. With that, we will open up the call for Q&A.

Our first question comes from Jeff Garro from Stephens.

Maybe start with one for Jon Resnick with your first call here. I appreciate all the remarks in the prepared comments about your approach going forward and strategy for the company. I 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.

Great. Thanks, Jeff, for the question. Yes, it's great to be here. It's been a busy 57 days. I've really delved into our capacity over the past couple of months to understand what you're asking about. I've explored each of our products, had numerous discussions, and talked to many customers to gain a clear view of where we stand as a business. I was drawn to this opportunity simply by looking at the marketplace and the potential it holds. This company aligns well with every trend in the industry. The pharmaceutical sector spends $250 billion a year, often with an inefficient allocation of R&D resources, driving the demand for more efficiency and regulatory approval. Our company has numerous assets and tools along with an impressive track record, making it feel like a hidden gem with significant growth potential. As for our products, I found our software offerings to be highly differentiated. Customers are very reliant on our major assets; teams have been using Simcyp and Phoenix for decades to perform their daily tasks. There's a strong reliance on these products, making them not only leaders in the market but also deeply integrated. Additionally, we have established relationships with 20 regulators worldwide who utilize our assets. This forms a strong foundation of workflows used by both regulators and the life sciences industry in a highly scrutinized environment that demands documentation, validation, and transparency. On the services side, I view it as a valuable complement to our technology. As I mentioned earlier, we perform best when technology and services work together. Having leading computational and workflow capabilities, combined with the expertise of top scientists in QSP and PBPK, creates a lasting advantage.

Excellent. Really appreciate that. And to follow up, I 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. I thought those were kind of prior focus items, and maybe I didn't hear as much of those in the script, but you're also speaking at a high level. So I 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 some kind of deeper shift.

No, I don't think you heard a radical shift in strategy. You have to kind of operate at the rate and pace at which your customers operate here as well. As you look at the industry, there's kind of twofold here. There are kind of the power users who are sitting at levels in organizations who we serve with distinction and pride every day. 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. So our focus is going to be twofold: continue to serve the users who use this every day, who sit here and rely on this to do their function and to build out a range of functionality and engagement at those 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 no, our strategy won't change. It's both going to 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.

Our next question is coming from Michael Cherny from Leerink Partners.

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 4Q and then the revenue guidance in particular coming in below where your trend rate has been. As you think about the $0% to 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 flow through to bookings? And is there any, at least in terms of the prioritization of revenue, strategic pullback on anything that's embedded in the specific '26 revenue guidance?

Mike, yes, as it relates to the guidance, I think about it in two components. One is services. The 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 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. And then when you combine that with the 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. So we were pleased with that performance. But we did see some deceleration in the software bookings in the fourth quarter. And so 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.

And 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?

Yes. Yes. So 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 going to see a little bit of softness there. So those are a couple of the points around market. But execution also is, like you said, is a key component here, too, where we have pipeline visibility, and we didn't convert as much as we should have in the fourth quarter. And so that's why we did call out the element of execution.

Michael, thanks for the welcome. It's Jon Resnick. It's great to look at things with fresh and clear eyes. First, I believe the market is strengthening, consistent with what others are reporting. I was encouraged by the December services bookings. Services tend to be more discretionary and can vary over time. Despite some slowdowns we experienced in the past couple of years, this seems to be a strong leading indicator for us, possibly signaling increased spending in '26. Regarding seat licensing, particularly with Pinnacle, there tends to be a slight delay. We are still addressing the impacts from the reduction in studies a few years ago. It appears that seat licensing is beginning to recover, and as this increases, we should see improvements in Pinnacle tied to study counts. There is a bit of a lag between rising study numbers and performance. As we approach '26, I feel cautiously optimistic, reflecting what I've heard from other companies and analysts. Many trends seem to be heading in the right direction, and I am particularly focused on the December discretionary spending numbers while encouraging the team to improve our execution.

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

This is Anna Kruszenski on for Luke. It would be great to hear more about which areas you see the most opportunity on AI enablement. And 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?

Sorry, this is Jon. I missed the name upfront. Anna, it's great to meet you. That's an excellent question. AI is transforming our operations significantly. We view it through multiple lenses, particularly on the software side, where we are actively integrating AI into all of our main products. For instance, Phoenix has several AI-driven modules and enhanced features, which aligns with how we’re developing many of our other offerings. We launched several AI-focused products at the end of last year, with more set to debut in the beginning of this year, which we're very enthusiastic about. One notable launch from last year is CertaraIQ, which plays a key role in the QSP sector—this area is rapidly evolving and relies heavily on AI. We are optimistic not only about these products in the long run but also regarding their synergy with our QSP services. Additionally, while some of our initiatives may not fall into the immediate category, they are designed to integrate functions in a true AI-native manner, which is innovative and groundbreaking. We are closely monitoring and accelerating these core product developments. Concurrently, there’s a great deal happening on the execution side as well. Over the past several weeks, we have made significant strides in our software development, ensuring that we are utilizing top-tier processes, rolling out new tools, and expediting our internal timelines. This will continue as an initiative for us this year to enhance internal workflows, enabling us to operate with greater speed and efficiency. In the broader context of AI, we see numerous opportunities to bolster our services by addressing some of our operational infrastructure needs. Thus, we are committed to this internal initiative, which we believe will yield improvements in productivity and efficiency in both the short and medium term.

That was super helpful color. And then 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?

Yes. Great. Thanks. So look, both on the portfolio side and the go-to-market side are areas in which I'm going to 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 and the translation into organic revenue growth hasn't materialized. So 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, I think there's a couple of different dimensions of it. We talked about customer centricity as one key piece. How do we optimize the relationships that we have and really bring the best of the issues that they're facing into our organization to respond to them most effectively? There's elements of pricing and contracting and kind of just core kind of operational elements that we have. There's an organizational focus around getting a number of our executives out in front of clients and having kind of that second-order, second-level nature of conversation. I'm a big believer in targeting and AI-driven productivity around kind of sales initiatives and sales efforts. And so how are we doing in terms of kind of automating our initiatives and making sure we're having the right conversations with the right people at the right times? Obviously, then there's a range of other questions in terms of do we have the right people in the right places. We've got a diverse portfolio with a combination of services and kind of tech services and pure SaaS offerings, which all have slightly different service offerings. So how do you kind of rationalize across those three to make sure that you're optimizing it directly with customers? Low-hanging fruit will be things like pricing and customer centricity initiatives and targeting and incentives, things that you'd expect and then more medium-term, really looking to transform some of the types of relationships we can have with the client.

Our next question comes from the line of Scott Schoenhaus from KeyBanc.

Welcome, Jon Resnick. I guess a follow-up to that question in the fourth-quarter software bookings. As you look to sort of automate the process and put these price incentives in, how much of that pipeline that didn't get converted, do you think can be converted over the next 90 days? And then when can we see a bookings re-acceleration on the software side?

Yes, Scott. Regarding the pipeline conversion execution, we don't expect that to improve in Q1. As mentioned in the prepared remarks, we anticipate being at the lower end of our revenue growth guidance range of flat to 4%. This is partly due to a difficult comparison with the previous year. However, we expect to see acceleration in the following quarters, driven by increased conversion and better visibility, along with easier comparisons as the year progresses.

And 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?

Yes. Let me tackle Scott, the first question. So I appreciate a number of you have been asking about this for a long period of time. I have the luxury of 50 days or so to take a look at it. It's a bit of a riddle here, right? So you have a business that's clearly been compressing year-over-year. What you'd expect, I guess, along with market trends, right? 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, 1.5 book-to-bill in Q4. And you have to remember, at its core, it's a pretty profitable offering. So the first thing I did when I joined and we were active in strategic review was really look at the options on the table to ensure that we were, a, fully evaluating, for example, the contributions to the profit margin, those paid dividends in terms of our ability to invest in MIDD and invest in some of the other areas of high growth. So I wanted to make sure we had a good hard look at that and that 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 in the final stretches here. We should have a resolution answer for you in the near term. It's something that 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.

Our next question comes from the line of David Windley from Jefferies.

John Resnick, good to talk to you live and John Gallagher to you again. On the software sales, the software bookings, is the pipeline conversion there a reflection at all of customers perhaps hitting the pause button as they evaluate how AI might influence how they use tools like this?

David, it's great to speak with you. I have an answer to the question you raised on my first day here. I spend a lot of time engaging with customers and have asked them directly about their technology strategies. I've connected with our major accounts at various levels to understand their perspectives. There are indeed industry-wide questions about investment decisions, which can create some paralysis for clients, and we observe this across different segments. However, that's not the main issue here. No one I've talked to is considering the situation in that light. What we're encountering is more of a lag on the Pinnacle side related to studies, the introduction of some of our new products, and the time needed to bring those to market. There are also dynamics associated with transitioning clients to the cloud, which we are very enthusiastic about regarding the new CertaraIQ offering that had a soft launch and we expect to see accelerate this year. Overall, it's more about timing and some market events, and I didn't sense that AI was a significant factor. From every sales rep and client I've communicated with, there’s no indication that AI is the cause of the slowdown in Q4.

Got it. John, given that you mentioned it's 56 or 57 days, it might be a bit unfair. As you assess the business and determine where to direct sales efforts and innovation investments, it seems there has been a trade-off between later-stage clinical development and opportunities to streamline processes for greater client impact and a larger total addressable market for Certara versus some recent acquisitions or strategic discussions that have focused on early development, perhaps in a capture-the-molecule approach at the late discovery preclinical stage. How do you evaluate those two options, and which one do you prefer to pursue?

That's not the question I expected. I thought you would ask about the total addressable market versus execution. There is definitely a market for the question you've asked earlier. I think we made that clear in our prepared remarks. This market is ready for growth, and as I mentioned in my opening remarks, we have a lot of opportunities to improve execution. Whether it's on the debt side later or earlier in discovery, there are trade-offs in those different markets, including price points and fragmentation. We will be a bit selective about our choices moving forward. John Gallagher also touched on this, as the core MIDD portfolio we have grew in the double digits that you might expect from this franchise. The area where we're focusing on biosimulation and computational work grew by 10%. There are various ways to utilize that growth, such as at the point of regulatory submission or in trial optimization and design. In some of the case studies we've highlighted, we've pointed you to earlier usage, like the use of QSP to select targets. As we integrate Chemaxon and D360 and other offerings that are closer to the discovery stage, we see significant value in incorporating PBPK and QSP earlier in that process. I don't think the trade-off is so much about whether to engage in discovery, but how we can concentrate on those core growth areas where we have a strong legacy and differentiation. These are the kinds of developments you can expect from us in the upcoming weeks and months.

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

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, but 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 time frame 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% plus 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 in the space are benchmarking about 10% to 15% there. So wondering how we should interpret that within your kind of blended flat to 4% guidance.

Let me take a moment to address your question, and then I'll let John add his thoughts. First, I believe you’ve highlighted some important points. I don’t see why our expectations should differ from those of our peers. There are plenty of opportunities available. We aren’t prepared to offer a multiyear plan today, but we will provide that information throughout this year. We are currently revising our long-range plans and processes, and I will provide a clear timeline and expectations once that is done. The commentary we shared today clearly shows the potential opportunities we have, the various use cases we can pursue, and the significant improvements we can make in our execution. We will have those answers for you during the year, potentially as early as the next set of calls in Q3, when we can provide multiyear guidance and a clear path forward. Would you like to add anything, John?

Yes. Yes. 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, some help from the end markets, which we seem to be getting. 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 we've discussed here would set us on that path. We look forward to giving an update in the coming quarters on just what that timeline looks like. But when you look at adoption of MIDD versus 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.

Our next question comes from the line of Sean Dodge from BMO Capital Markets.

This is Thomas Kelliher, on for Sean. Welcome, Jon. 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 we're seeing a bit more pressure? Or on the flip side of that, do you see some areas where you have an opportunity to maybe better align price with value?

Thank you, Thomas, for the question. I appreciate it. I want to address your inquiry directly without revealing our entire pricing strategy. There are several aspects to consider. We have some core products in our portfolio that require a more disciplined approach to pricing and opportunity. There are certain products that fall into this category where I believe we can increase prices, which is justified by the value they provide and the investments we're making. I assume one of your underlying questions is about how the pricing landscape is changing as we expand our SaaS model and enhance our internal offerings, which we believe add significant value. If you look at some case studies we've shared or other public examples demonstrating our impact—such as avoiding trials or optimizing them and conducting meta-analyses to save money—we believe we offer substantial value to our clients. We're focused on better aligning our operations to participate in that value creation. The traditional models of user fees and seat licenses are likely to change significantly in the coming years. We are well-positioned to partner with clients over the long term and showcase how we are helping them reduce costs, speed up processes, and mitigate risks, so we can tap into additional value. That's our focus moving forward. While I can't provide every detail, I believe we have a solid approach that aligns well with our clients' objectives.

I totally appreciate some of the sensitivity there. Maybe going back to the Tier 1 bookings, there’s kind of a disconnect between software and services. How should we think about that? Is demand for maybe some of the regulatory services, for example, could those be potential leading indicators on the software side of the business as well? Any color there would be helpful.

The strength in service bookings in Q4 is a positive sign for the overall market. As John mentioned earlier, it likely reflects the willingness to spend on discretionary items. We observed robust bookings in both the regulatory sector and biosim services. As we look ahead to 2026, we are entering the year with increased optimism and a perspective of a more stable end market environment.

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

It's Christine Rains on for Max. 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?

So the margin guidance of 30% to 32% aligns with what we provided last year. We mentioned it was an investment year, which was reflected in our R&D expenses during 2025. The situation in 2026 is comparable as we've set a similar margin range. It does represent a decrease, as you noted, from our exit margin last year of 32%. This decline is due to further investments in R&D related to MIDD and integrating our platforms, which we plan to continue. In the fourth quarter of last year, we launched three new software products, and we aim to keep introducing new software and enhancing our existing offerings throughout 2026. While we are committed to the 30% to 32% margin range, I believe we managed our investments well last year, as evidenced by their reflection in R&D. We are identifying operational efficiencies and still achieving results towards the higher end of our guidance. This year, we are already exploring ways to invest while monitoring our cost structure. Additionally, Jon mentioned a cost avoidance strategy we've identified in our 2026 plan amounting to $10 million. I hope this provides clarity on our approach. We are making investments this year, which will be visible in R&D, hence the margin guidance of 30% to 32%.

Great. That's super helpful. Given this innovation ramp, I'm hoping you can discuss your CapEx and free cash flow assumptions for this year.

Yes. 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 investment. So 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. So the trend that you saw in 2025 or the levels of capitalization that you saw in 2025 would be similar based on the earlier comments that I made would be similar in 2026.

Our next question comes from the line of John Park from Morgan Stanley.

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?

I think anyone would agree that nobody has all the right answers. That's the honest truth. This is a changing environment with many variables. We feel confident in our ability to address a wide range of questions. Strategically, we are always aware of what complementary capabilities exist alongside our own. We can certainly meet client demands effectively. When it comes to the complex inquiries our clients have regarding trials, trial design, execution, and chemical entity business design, we can provide answers across a vast spectrum. Therefore, I have no concerns about the effectiveness of our current portfolio. We will always seek out additional opportunities to complement our offerings and support our growth. However, overall, we have more than sufficient resources in our current portfolio to actively collaborate with our clients on the various challenges they are encountering.

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 other than statements? I know it's probably way too early for drug approval rates to change, but are they optimistic when it comes to maybe going one phase to another?

I think I would answer the question a bit differently, if that's okay. I view it as whether we are witnessing a move towards more of our services as the FDA encourages a shift to computational and modeling-based methods. The answer is a definite yes; the FDA and the life sciences sector tend to progress slowly. These cycles take time. You experience changes in regulatory guidance, ongoing trials, and various other factors that require time to evolve. However, if you consider the growth in our QSP business and the core expansion in our PBPK business, these trends indicate that these alternative methodologies are being adopted and gaining acceptance. Looking ahead, we believe that the FDA's direction represents a significant advantage for our offerings. We are already observing positive signs in some of our core services and the technologies that support them. Therefore, we remain optimistic about how these guidelines and the regulatory agencies' direction will enhance our capacity to assist clients in a more comprehensive and beneficial manner.

Thank you for your participation in today's conference. This does conclude the question-and-answer session and concludes the program. You may now disconnect.