Certara, Inc 10-Q for FY2022 Q2

Certara, Inc. (CERT)

10-Q 2022-08-09 For: 2022-06-30

Added on April 08, 2026

About this 10-Q

Certara, Inc filed this 10-Q on August 9, 2022, covering the quarter ended June 30, 2022 (FY2022 Q2).

Headline figures

Quarter ended June 30, 2022, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $82.76M; up 18.1% from $70.1M a year earlier
Net loss: $589K; compared with a net loss of $2.86M a year earlier
Diluted EPS: $0.00; compared with -$0.02 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 June 30, 2022 and December 31, 2021	6

	Condensed Consolidated Statements of Operations and Comprehensive Loss for the three and six months ended June 30, 2022 and 2021	7

	Condensed Consolidated Statements of Stockholders’ Equity for the three and six months ended June 30, 2022 and 2021	8

	Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 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	47

4.	Controls and Procedures	47


	PART II – OTHER INFORMATION

1.	Legal Proceedings	48

1A.	Risk Factors	48

2.	Unregistered Sales of Equity Securities and Use of Proceeds	48

3.	Defaults Upon Senior Securities	48

4.	Mine Safety Disclosures	48

5.	Other Information	48

6.	Exhibits	48

SIGNATURES		50


	JUNE 30,		DECEMBER 31,
(IN THOUSANDS, EXCEPT PER SHARE AND SHARE DATA)	2022		2021
Assets
Current assets:
Cash and cash equivalents	$	194,755	$	185,797
Accounts receivable, net of allowance for credit losses of $474 and $262, respectively		73,873		69,555
Restricted cash		3,495		827
Prepaid expenses and other current assets		13,896		18,548
Total current assets		286,019		274,727
Other assets:
Property and equipment, net		2,749		2,935
Operating lease right-of-use assets		12,303		12,634
Goodwill		700,800		703,371
Intangible assets, net of accumulated amortization of $191,994 and $169,329, respectively		493,051		511,823
Deferred income taxes		4,146		4,073
Other long-term assets		2,681		2,167
Total assets	$	1,501,749	$	1,511,730
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	5,243	$	7,458
Accrued expenses		22,387		29,830
Current portion of deferred revenue		46,122		45,496
Current portion of long-term debt		3,020		3,020
Current operating lease liabilities		4,599		5,040
Other current liabilities		174		1,381
Total current liabilities		81,545		92,225
Long-term liabilities:
Deferred revenue, net of current portion		2,282		1,531
Deferred income taxes		70,378		76,098
Operating lease liabilities, net of current portion		8,295		8,256
Long-term debt, net of current portion and debt discount		290,868		291,746
Non-current finance lease liabilities		—		25
Total liabilities		453,368		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 June 30, 2022 and December 31, 2021, respectively		—		—
Common shares, $0.01 par value, 600,000,000 shares authorized, 159,991,357 and 159,660,048 shares issued as of June 30, 2022 and December 31, 2021, respectively; 159,882,362 and 159,658,948 shares outstanding as of June 30, 2022 and December 31, 2021, respectively		1,600		1,596
Additional paid-in capital		1,136,831		1,119,821
Accumulated deficit		(73,983)		(75,604)
Accumulated other comprehensive loss		(13,718)		(3,926)
Treasury stock at cost, 108,995 and 1,100 shares at June 30, 2022 and December 31, 2021, respectively		(2,349)		(38)
Total stockholders’ equity		1,048,381		1,041,849
Total liabilities and stockholders’ equity	$	1,501,749	$	1,511,730


	THREE MONTHS ENDED JUNE 30,				SIX MONTHS ENDED JUNE 30,
(IN THOUSANDS, EXCEPT PER SHARE AND SHARE DATA)	2022		2021		2022		2021
Revenues	$	82,760	$	70,096	$	164,311	$	136,814
Cost of revenues		35,194		27,542		67,983		53,558
Operating expenses:
Sales and marketing		7,121		4,589		13,232		8,341
Research and development		7,741		4,626		15,289		9,332
General and administrative		17,778		18,034		36,117		34,596
Intangible asset amortization		10,355		9,479		20,504		18,935
Depreciation and amortization expense		422		552		904		1,154
Total operating expenses		43,417		37,280		86,046		72,358
Income from operations		4,149		5,274		10,282		10,898
Other income (expenses):
Interest expense		(3,879)		(6,332)		(7,107)		(10,260)
Other, net		2,521		(346)		3,362		(463)
Total other expenses		(1,358)		(6,678)		(3,745)		(10,723)
Income (loss) before income taxes		2,791		(1,404)		6,537		175
Provision for income taxes		3,380		1,453		4,916		1,980
Net income (loss)		(589)		(2,857)		1,621		(1,805)
Other comprehensive loss:
Foreign currency translation adjustment		(7,520)		302		(10,704)		(1,243)
Change in fair value from interest rate swap, net of tax of $362, $0, $422, $161, respectively		848		—		912		477
Reclassification of fair value of interest rate swap, net of tax of $0,$(765),0,$(765)		—		2,268		—		2,268
Total other comprehensive income (loss)		(6,672)		2,570		(9,792)		1,502
Comprehensive loss	$	(7,261)	$	(287)	$	(8,171)	$	(303)

Net income (loss) per share attributable to common stockholders:
Basic	$	(0.00)	$	(0.02)	$	0.01	$	(0.01)
Diluted	$	(0.00)	$	(0.02)	$	0.01	$	(0.01)
Weighted average common shares outstanding:
Basic		156,478,724		147,485,566		156,209,335		147,323,724
Diluted		156,478,724		147,485,566		159,293,362		147,323,724


									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 March 31, 2021	152,979,479	$	1,529	$	889,679	$	(61,286)	$	(2,655)	$	—	$	827,267
Equity-based compensation expense	—		—		7,530		—		—		—		7,530
Common shares issued for employee share-based compensation	14,769		—		—		—		—		—		—
Restricted stock forfeiture	(129,327)		—		—		—		—		—		—
Reclassification of fair value of interest rate swap, net of tax	—		—		—		—		2,268		—		2,268
Net loss	—		—		—		(2,857)		—		—		(2,857)
Foreign currency translation adjustment	—		—		—		—		302		—		302
Balance as of June 30, 2021	152,864,921	$	1,529	$	897,209	$	(64,143)	$	(85)	$	—	$	834,510

Balance as of December 31, 2020	152,979,479	$	1,529	$	884,528	$	(62,338)	$	(1,587)	$	—	$	822,132
Equity-based compensation expense	—		—		12,681		—		—		—		12,681
Common shares issued for employee share-based compensation	14,769		—		—		—		—		—		—
Restricted stock forfeiture	(129,327)		—		—		—		—		—		—
Change in fair value from interest rate swap, net of tax	—		—		—		—		477		—		477
Reclassification of fair value of interest rate swap, net of tax	—		—		—		—		2,268		—		2,268
Net loss	—		—		—		(1,805)		—		—		(1,805)
Foreign currency translation adjustment	—		—		—		—		(1,243)		—		(1,243)
Balance as of June 30, 2021	152,864,921	$	1,529	$	897,209	$	(64,143)	$	(85)	$	—	$	834,510


	SIX MONTHS ENDED JUNE 30,
(IN THOUSANDS)	2022		2021
Cash flows from operating activities:
Net income (loss)	$	1,621	$	(1,805)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization of property and equipment		904		1,154
Amortization of intangible assets		25,161		20,227
Amortization of debt issuance costs		771		747
(Recovery of) provision for credit losses		217		(61)
Loss on retirement of assets		7		282
Equity-based compensation expense		17,014		12,681
Unrealized loss on interest rate swap		—		2,390
Deferred income taxes		(5,607)		(1,971)
Changes in assets and liabilities
Accounts receivable		(5,706)		620
Prepaid expenses and other assets		4,586		197
Accounts payable and other liabilities		(7,934)		(13,848)
Deferred revenue		3,186		(1,057)
Other current liabilities		(1,529)		155
Changes in operating lease assets and liabilities, net		371		(155)
Net cash provided by operating activities		33,062		19,556
Cash flows from investing activities:
Capital expenditures		(859)		(511)
Capitalized development costs		(5,172)		(3,374)
Business acquisitions, net of cash acquired		(5,883)		(14,114)
Net cash used in investing activities		(11,914)		(17,999)
Cash flows from financing activities:
Proceeds from borrowings on long-term debt		—		89
Payments on long-term debt and finance lease obligations		(1,654)		(2,323)
Payment of debt issuance costs		—		(2,931)
Payments on financing component of interest rate swap		(1,085)		—
Payment of taxes on shares withheld for employee taxes		(2,312)		—
Net cash used in financing activities		(5,051)		(5,165)
Effect of foreign exchange rate changes on cash and cash equivalents, and restricted cash		(4,471)		(88)
Net (decrease) increase in cash and cash equivalents, and restricted cash		11,626		(3,696)
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	$	198,250	$	269,595
Supplemental disclosures of cash flow information
Cash paid for interest	$	7,468	$	7,114
Cash paid for taxes	$	5,558	$	4,420
Supplemental schedule of non-cash investing and financing activities
Liabilities assumed in connection with business acquisition	$	—	$	1,912


	LEVEL 1		LEVEL 2		LEVEL 3		TOTAL
Asset
Interest rate swap asset	$	—	$	1,391	$	—	$	1,391
Total	$	—	$	1,391	$	—	$	1,391


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	$	1,510	$	3,020	$	3,020	$	3,020	$	288,410	$	298,980



Lease Position	Balance Sheet Classification		JUNE 30, 2022		DECEMBER 31, 2021

Assets
Operating lease assets	Operating lease right-of-use assets	$	12,303	$	12,634
Finance lease assets	Property and equipment, net		133		271
Total lease assets		$	12,436	$	12,905

Liabilities
Current
Operating	Current operating lease liabilities	$	4,599	$	5,040
Finance	Other current liabilities		174		293

Noncurrent
Operating	Operating lease liabilities, net of current portion		8,295		8,256
Finance	Non-current finance lease liabilities		—		25
Total lease liabilities		$	13,068	$	13,614


	OPERATING		FINANCE
	LEASES		LEASES

Remainder of 2022	$	2,390	$	153
2023		3,947		25
2024		3,278		—
2025		2,508		—
2026		1,350		—
Thereafter		140		—
Total future lease payments		13,613		178
Less: imputed interest		(719)		(4)
Total	$	12,894	$	174


		WEIGHTED-
		AVERAGE
		GRANT DATE
	SHARES	FAIR VALUE
Non-vested restricted stock as of December 31, 2021	3,910,722	$	23.18
Granted	—		—
Vested	(582,762)		23.19
Forfeited	—		—
Non-vested restricted stock as of June 30, 2022	3,327,960	$	23.18


	THREE MONTHS ENDED				SIX MONTHS ENDED
	JUNE 30,				JUNE 30,
	2022		2021		2022		2021
Revenue⁽¹⁾:
Americas	$	62,633	$	49,109	$	122,417	$	95,683
EMEA		13,623		13,689		29,557		27,915
Asia Pacific		6,504		7,298		12,337		13,216
Total	$	82,760	$	70,096	$	164,311	$	136,814


	2021				2022
	Q1		Q2		Q1		Q2

Bookings (in millions)	81.9		75.1		108.5		100.3
Renewal Rate	92	%	90	%	92	%	92	%


	THREE MONTHS ENDED JUNE 30,				CHANGE
	2022		2021		$		%

	( in thousands)
Software	$	28,724	$	20,112	$	8,612	43	%
Services		54,036		49,984		4,052	8	%
Total revenues	$	82,760	$	70,096	$	12,664	18	%




		Incorporated by Reference
Exhibit Number	Exhibit Title		Form	File No.	Exhibit	Filing Date

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: August 9, 2022	By:	/s/ William F. Feehery
	Name:	William F. Feehery
	Title:	Chief Executive Officer (Principal Executive Officer)
Date: August 9, 2022	By:	/s/ M. Andrew Schemick
	Name:	M. Andrew Schemick
	Title:	Chief Financial Officer (Principal Financial Officer)


August 9, 2022		/s/ William Feehery
		William Feehery
		Chief Executive Officer (Principal Executive Officer)