Certara, Inc. (NASDAQ:CERT) Q4 2022 Earnings Call Transcript

Andrew Schemick: Yes, I can start Bill on this one. In terms of the reg and access services, which we grouped together. Year-over-year, it was down 3% and that’s inclusive of the large projects that we’ve discussed for the past — last quarter and previously relating to China and some rig ops work. So underlying that is a pretty healthy business and with a lot of opportunity. In the fourth quarter, we did see return to growth there but we’re remaining optimistic as we kind of build our bookings and our pipeline through the first half of the year. So we incorporated those single digits into our guidance.

Operator: Our next question will come out from the line of Vikram Purohit from Morgan Stanley.

Vikram Purohit: So two from our side. First on the revenue guidance for 2023. Could you just kind of help us unpack the scenarios that are implied by the bookends of that guidance? And then secondly, on Pinnacle 21, I know you spoke about it a little bit. But I was wondering if you could provide some more detail on how cross-selling opportunities are materializing from that acquisition? And maybe mention a sample project type or two where you’ve had the opportunity to bring together offerings from both Certara and Pinnacle 21 into one offering, and maybe talk a bit about how cross selling there could continue throughout the year?

William Feehery: I’ll start first with the guidance bookends. So the three factors I mentioned on the call, we went in the year with the conservative mindset given macroeconomic environment today, but with high visibility. We have about 80% to 85% visibility into the low end of the range, and that’s a conservative visibility metric, just accounting for the work that we’ve sold and assuming a 90% renewal rate, which doesn’t factor in expansion opportunities with existing clients. So the midpoint, our base case is really bookended by conservatism around regulatory and just the general environment. And the upside is related to opportunities associated with our new software products where we don’t really have a track record to extrapolate the growth forward. Is that helpful?

Vikram Purohit: It is. Thank you.

Andrew Schemick: And then I can address the part about Pinnacle 21. So we have seen a number of cross selling opportunities. The simplest one was there are services opportunities tied to Pinnacle 21’s user base that we’re able to tap into. We’ve also tied Pinnacle 21 into our integral data repository, which is provided maybe the most direct example of cross selling opportunities in terms of additional software sales of that product tied to Pinnacle 21. So there’s just a couple of things that are going on right now.

Operator: Our next question comes to line of Luke Sergott from Barclays.

Luke Sergott: Can you just give us a sense of the pacing throughout the year with regards to your guidance, and how the margin expansion, how the growth — how you guys are thinking about that kind of rolling on?

William Feehery: The 2022 pacing, if you will, on the revenue side, was more consistent with what we had historically excluding 2021 where we had a bigger back half of the year versus the first half of the year. So in laying out our plan and our forecast, we see a very similar spread of revenue throughout the year. The difference with 2022 was earlier in the year we made some accelerated investments and the expectation is that those investments will be weighted towards the early half of the year, but less significant in terms of the impact on the EBITDA margin. So a little closer relationship between the revenue and the EBITDA margin.

Luke Sergott: And then last from me, a lot of issues — a lot of news on the non-human primate supply chain. I know it’s going to take a long time for the FDA to adopt a biosimulation for — to replace those. But what are you guys doing from — or having conversations with the FDA regarding alternate data, and if you are even involved in those conversations?