Certara, Inc 10-Q for FY2022 Q1

Certara, Inc. (CERT)

10-Q 2022-05-05 For: 2022-03-31

Added on April 08, 2026

About this 10-Q

Certara, Inc filed this 10-Q on May 5, 2022, covering the quarter ended March 31, 2022 (FY2022 Q1).

Headline figures

Quarter ended March 31, 2022, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $81.55M; up 22.2% from $66.72M a year earlier
Net income: $2.21M; up 110.1% from net income of $1.05M a year earlier
Diluted EPS: $0.01; unchanged from $0.01 a year earlier

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Title of Each Class	Trading symbol	Name of Exchange on which registered
Common stock, par value $0.01 per share	CERT	The Nasdaq Stock Market LLC


Large accelerated filer	⌧	Accelerated filer	☐

Non-accelerated filer	☐	Smaller reporting company	☐	Emerging growth company	☐

Item		Page
	PART I – FINANCIAL INFORMATION

1.	Financial Statements (Unaudited)	6

	Condensed Consolidated Balance Sheets as of March 31, 2022 and December 31, 2021	6

	Condensed Consolidated Statements of Operations and Comprehensive Loss for the three months ended March 31, 2022 and 2021	7

	Condensed Consolidated Statements of Stockholders’ Equity for the three months ended March 31, 2022 and 2021	8

	Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2022 and 2021	10

	Notes to Condensed Consolidated Financial Statements	11

2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	27

3.	Quantitative and Qualitative Disclosures About Market Risk	42

4.	Controls and Procedures	42


	PART II – OTHER INFORMATION

1.	Legal Proceedings	43

1A.	Risk Factors	43

2.	Unregistered Sales of Equity Securities and Use of Proceeds	43

3.	Defaults Upon Senior Securities	43

4.	Mine Safety Disclosures	43

5.	Other Information	43

6.	Exhibits	43

SIGNATURES		45


	MARCH 31,		DECEMBER 31,
(IN THOUSANDS, EXCEPT PER SHARE AND SHARE DATA)	2022		2021
Assets
Current assets:
Cash and cash equivalents	$	184,315	$	185,797
Accounts receivable, net of allowance for credit losses of $296 and $262, respectively		72,719		69,555
Restricted cash		745		827
Prepaid expenses and other current assets		17,407		18,548
Total current assets		275,186		274,727
Other assets:
Property and equipment, net		2,927		2,935
Operating lease right-of-use assets		13,631		12,634
Goodwill		704,788		703,371
Intangible assets, net of accumulated amortization of $181,138 and $169,329, respectively		504,310		511,823
Deferred income taxes		4,086		4,073
Other long-term assets		2,098		2,167
Total assets	$	1,507,026	$	1,511,730
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	6,255	$	7,458
Accrued expenses		18,592		29,830
Current portion of deferred revenue		48,168		45,496
Current portion of long-term debt		3,020		3,020
Current operating lease liabilities		4,897		5,040
Other current liabilities		685		1,381
Total current liabilities		81,617		92,225
Long-term liabilities:
Deferred revenue, net of current portion		1,080		1,531
Deferred income taxes		75,268		76,098
Operating lease liabilities, net of current portion		9,348		8,256
Long-term debt, net of current portion and debt discount		291,308		291,746
Non-current finance lease liabilities		—		25
Total liabilities		458,621		469,881
Commitments and contingencies
Stockholders' equity:
Preferred shares, $0.01 par value, 50,000,000 shares authorized, no shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively		—		—
Common shares, $0.01 par value, 600,000,000 shares authorized, 159,657,174 and 159,658,948 shares outstanding as of March 31, 2022 and December 31, 2021, respectively		1,596		1,596
Additional paid-in capital		1,127,334		1,119,821
Accumulated deficit		(73,394)		(75,604)
Accumulated other comprehensive loss		(7,046)		(3,926)
Treasury stock at cost, 2,874 and 1,100 shares at March 31, 2022 and December 31, 2021, respectively		(85)		(38)
Total stockholders’ equity		1,048,405		1,041,849
Total liabilities and stockholders’ equity	$	1,507,026	$	1,511,730


	THREE MONTHS ENDED MARCH 31,
(IN THOUSANDS, EXCEPT PER SHARE AND SHARE DATA)	2022		2021
Revenues	$	81,551	$	66,718
Cost of revenues		32,789		26,016
Operating expenses:
Sales and marketing		6,111		3,752
Research and development		7,548		4,706
General and administrative		18,339		16,562
Intangible asset amortization		10,149		9,456
Depreciation and amortization expense		482		602
Total operating expenses		42,629		35,078
Income from operations		6,133		5,624
Other income (expenses):
Interest expense		(3,228)		(3,928)
Miscellaneous, net		841		(117)
Total other expenses		(2,387)		(4,045)
Income before income taxes		3,746		1,579
Provision for income taxes		1,536		527
Net income		2,210		1,052
Other comprehensive loss:
Foreign currency translation adjustment		(3,184)		(1,545)
Change in fair value of interest rate swap, net of tax $60 and $161, respectively		64		477
Total other comprehensive loss		(3,120)		(1,068)
Comprehensive loss	$	(910)	$	(16)

Net income per share attributable to common stockholders:
Basic	$	0.01	$	0.01
Diluted	$	0.01	$	0.01
Weighted average common shares outstanding:
Basic		155,936,953		147,160,084
Diluted		159,160,321		152,084,745


									ACCUMULATED
					ADDITIONAL			OTHER				TOTAL
(IN THOUSANDS,	COMMON STOCK				PAID-IN		ACCUMULATED		COMPREHENSIVE		TREASURY		STOCKHOLDERS'
EXCEPT SHARE DATA)	SHARES	AMOUNT			CAPITAL		DEFICIT		LOSS		STOCK		EQUITY
Balance as of December 31, 2020	152,979,479	$	1,529	$	884,528	$	(62,338)	$	(1,587)	$	—	$	822,132
Equity-based compensation awards	—		—		5,151		—		—		—		5,151
Change in fair value from interest rate swap, net of tax	—		—		—		—		477		—		477
Net income	—		—		—		1,052		—		—		1,052
Foreign currency translation adjustment, net of tax	—		—		—		—		(1,545)		—		(1,545)
Balance as of March 31, 2021	152,979,479	$	1,529	$	889,679	$	(61,286)	$	(2,655)	$	—	$	827,267


	THREE MONTHS ENDED MARCH 31,
(IN THOUSANDS)	2022		2021
Cash flows from operating activities:
Net income	$	2,210	$	1,052
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization of property and equipment		482		602
Amortization of intangible assets		12,450		10,102
Amortization of debt issuance costs		386		378
(Recovery of) provision for credit losses		34		(1)
Loss on retirement of assets		5		—
Equity-based compensation expense		7,513		5,151
Deferred income taxes		(715)		12
Changes in assets and liabilities, net of acquisitions:
Accounts receivable		(3,244)		(2)
Prepaid expenses and other assets		653		(673)
Accounts payable and other liabilities		(11,830)		(11,109)
Deferred revenue		2,556		(507)
Other current liabilities		(792)		—
Changes in operating lease assets and liabilities, net		95		(71)
Net cash provided by operating activities		9,803		4,934
Cash flows from investing activities:
Capital expenditures		(506)		(222)
Capitalized development costs		(2,187)		(1,192)
Business acquisitions, net of cash acquired		(5,983)		(2,044)
Net cash used in investing activities		(8,676)		(3,458)
Cash flows from financing activities:
Payments on long-term debt and finance lease obligations		(826)		(855)
Payments on financing component of interest rate swap		(646)		—
Payment of taxes on shares withheld for employee taxes		(48)		—
Net cash used in financing activities		(1,520)		(855)
Effect of foreign exchange rate changes on cash and cash equivalents, and restricted cash		(1,171)		(191)
Net (decrease) increase in cash and cash equivalents, and restricted cash		(1,564)		430
Cash and cash equivalents, and restricted cash, at beginning of period		186,624		273,291
Cash and cash equivalents, and restricted cash, at end of period	$	185,060	$	273,721
Supplemental disclosures of cash flow information
Cash paid for interest	$	3,547	$	3,552
Cash paid for taxes	$	2,769	$	1,644
Supplemental schedule of non-cash investing and financing activities
Liabilities assumed in connection with business acquisition	$	—	$	921


	LEVEL 1		LEVEL 2		LEVEL 3		TOTAL
Asset
Interest rate swap asset	$	—	$	181	$	—	$	181
Total	$	—	$	181	$	—	$	181


Fair value of consideration:	Pinnacle
Cash paid to sellers	$	249,115
Cash paid to others and escrow		17,200
Unregistered shares of Certara, Inc. (2,239,717 shares)		72,760
Total consideration	$	339,075

Assets acquired and liabilities assumed:
Cash and cash equivalents	$	19,409
Accounts receivable		2,925
Other current assets		619
Property and equipment		258
Deferred tax assets		2,907
Identifiable intangible assets:
Trademark		15,800
Acquired software		103,000
Customer relationships		24,600
Goodwill		180,947
Long-term deposits		34
Current liabilities		(794)
Current portion of deferred revenue		(10,630)
Net assets acquired	$	339,075


	Remainder of 2022		2023		2024		2025		2026		TOTAL
Maturities	$	2,265	$	3,020	$	3,020	$	3,020	$	288,410	$	299,735



Lease Position	Balance Sheet Classification		March 31, 2022		December 31, 2021

Assets
Operating lease assets	Operating lease right-of-use assets	$	13,631	$	12,634
Finance lease assets	Property and equipment, net		202		271
Total lease assets		$	13,833	$	12,905

Liabilities
Current
Operating	Current operating lease liabilities	$	4,897	$	5,040
Finance	Other current liabilities		246		293

Noncurrent
Operating	Operating lease liabilities, net of current portion		9,348		8,256
Finance	Non-current finance lease liabilities		—		25
Total lease liabilities		$	14,491	$	13,614


	OPERATING		FINANCE
	LEASES		LEASES

Remainder of 2022	$	3,936	$	228
2023		4,019		25
2024		3,341		—
2025		2,551		—
2026		1,359		—
Thereafter		133		—
Total future lease payments		15,339		253
Less: imputed interest		(1,094)		(7)
Total	$	14,245	$	246


		WEIGHTED-
		AVERAGE
		GRANT DATE
	SHARES	FAIR VALUE
Non-vested restricted stock as of December 31, 2021	3,910,722	$	23.18
Granted	—		—
Vested	(328,138)		23.17
Forfeited	—		—
Non-vested restricted stock as of March 31, 2022	3,582,584	$	23.18


	THREE MONTHS ENDED
	MARCH 31,
	2022		2021
Revenue⁽¹⁾:
Americas	$	59,784	$	46,574
EMEA		15,934		14,226
Asia Pac		5,833		5,918
Total	$	81,551	$	66,718


	2022			2021
	Q1			Q1

Bookings (in millions)	$	108.5		$	81.9
Renewal Rate		92	%		92	%


	THREE MONTHS ENDED MARCH 31,				CHANGE
	2022		2021		$		%

	( in thousands)
Software	$	29,193	$	21,904	$	7,289	33	%
Services		52,358		44,814		7,544	17	%
Total revenues	$	81,551	$	66,718	$	14,833	22	%




		Incorporated by Reference
Exhibit Number	Exhibit Title		Form	File No.	Exhibit	Filing Date
10.1	Form of 2022 Performance Stock Unit Grant Notice and Agreement for Certara, Inc. 2020 Incentive Plan†
31.1	Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certification of Principal Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002+
32.2	Certification of Principal Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002+
101.INS	XBRL Instance Document –the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document
104	Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101)


	CERTARA, INC.

Date: May 5, 2022	By:	/s/ William F. Feehery
	Name:	William F. Feehery
	Title:	Chief Executive Officer (Principal Executive Officer)
Date: May 5, 2022	By:	/s/ M. Andrew Schemick
	Name:	M. Andrew Schemick
	Title:	Chief Financial Officer (Principal Financial Officer)