Certara, Inc. (NASDAQ:CERT) Q4 2025 Earnings Call Transcript

Certara, Inc. (NASDAQ:CERT) Q4 2025 Earnings Call Transcript February 26, 2026

Certara, Inc. misses on earnings expectations. Reported EPS is $0.09 EPS, expectations were $0.11.

Operator: Good day, and thank you for standing by. Welcome to Certara Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions] Please be advised that today’s conference is being recorded. I would now like to hand the conference over to your first speaker today, David Deuchler, Investor Relations. Please go ahead.

David Deuchler: 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.

Jon Resnick: 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 by the opportunity ahead. As the new CEO coming in with fresh eyes, I have approached the first 50 days plus 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 3 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 time lines. 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 time lines now hitting 10 to 15 years. Now more than ever, our customers are looking for partners who can reduce total development costs, accelerate time lines, 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 time lines. 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 of 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 3 potential explanations for this disconnect. First, the true potential and market acceptance of AI-enabled technology, data, 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 3 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 100x 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 4 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 and customer engagement, it surfaces new use cases and build 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. And as CEO, I intend to lead that change with urgency and clarity. We are moving forward with 3 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 road maps, 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 remains 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.

John Gallagher: Thank you, John. Hello, everyone. Total revenue for the 3 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. Operator, can you please open the line for questions?

Operator: [Operator Instructions] Our first question comes from the line of Jeff Garro from Stephens.

Jeffrey Garro: Maybe start with one for Jon R with your first call here. And 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.

Q&A Session

Jon Resnick: Great. Thanks, Jeff, very much for the question. Yes, as I said before, it is great to be here. I — as you commented, it’s been a pretty intensive 56 now 57 days. I’ve gone as deep as I possibly could go with capacity in the last couple of months really trying to understand pretty much exactly what you’re asking about here. Gone deep into kind of each of our products, done probably 100 skip over conversations, talked to dozens of customers really trying to get a good feel for exactly how we do stand here as a business. I was attracted to come here pretty simply. I look at it and I look at the external marketplace, the amount of opportunity that sits here. This company sits on the right side of kind of every trend.

Pharma $250 billion per year and what I’ll call inefficient allocation of R&D spend and they’re driving demand for efficiency, regulator acceptance and you have this company that sits there with so many assets and so many tools and such a phenomenal track record, it just struck me as an undervalued gem in this space with tons of potential upsides and tons of potential opportunity to grow and to build as this market continues to evolve. As I go through some of the different products, you said services, but services and software, I’d say that, first of all, on the software side, the software, I found those products to be incredibly differentiated. As you talk to customers, it’s amazing how deeply embedded each of our major assets are in their workflow.

These are — there’s decades of teams who’ve grown up using Simcyp and using Phoenix and using the capabilities that exist to do their job every day. There’s a high degree of dependence on the asset. So they’re not only market-leading, but just incredibly well entrenched. Equally, I think our relationships exist with 20 regulators around the world who are also using the assets. So you have this highly entrenched set of workflow used by regulators and used by the life science industry and in this kind of highly scrutinized space where documentation and validation and transparency are essential areas where they have incredibly high track record of. So a very strong proposition. And the services side, I see it’s incredibly reinforcing. As I noted in my opening remarks, we’re strongest when the technology, software products and the services work hand-in-hand.

This ability not only to have market-leading computational capability and workflow capability, but to be able to wrap the world’s leading scientists in QSP and PBPK and [ QSF ] around those capabilities makes it an enduring proposition.

Jeffrey Garro: 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 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.

Jon Resnick: 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. There’s kind of — as you look at the industry, there’s kind of twofold here. There’s kind of the power users who are sitting at levels in organizations who we serve with distinction and pride every day. And that 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 that more senior levels to start to work through some of those more longitudinal approaches to accelerate first in human, to accelerate regulatory time lines.

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.

Operator: Our next call is coming from Michael Cherny from Leerink Partners.

Michael Cherny: 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?

John Gallagher: Mike, yes, as it relates to the guidance, I think about it in 2 components. One is services. 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.

Michael Cherny: 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?

John Gallagher: 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.

Jon Resnick: Michael, thanks for the welcome. It’s Jon Resnick. I — again, it’s wonderful to kind of look at things as very kind of kind of fresh eyes and clean eyes. First of all, in general, I think our view on the market is that it is strengthening, I think, consistent with what others are reporting. I was pretty encouraged by the December services bookings. From my standpoint, services tend to be a more discretionary item, which ebbs and flows over time. And independent of some of the slowdown that we saw last year or 2 years ago, that seems to be a really good leading indicator for us of some opening and perhaps a leading indicator of more spend into ’26. The other thing I’d say on seat licensing, in particular, things like with Pinnacle, there tends to be a little bit of a lag.

You’re still going to pay for the reduction in studies from a couple of years ago. I think we’re all looking at the same data that seat licensing is starting to come back up. And as that starts to rise, you’ll start to see some improvement in Pinnacle as well tied to studies — sorry, tied to study. So as the number of studies starts to elevate — starts to lift, you’ll start to see stronger performance, but there’s a little bit of a lag time between the 2. So yes, look, I think as we enter ’26, I think we’re cautiously optimistic similar to what I’ve heard other peer companies and observers talk about things a lot of the trends seem to be moving in the right direction and that December discretionary spend number is one certainly I’m anchoring on and asking the team to work hard on the execution side.

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

Anna Kruszenski: 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?

Jon Resnick: Sorry — this is Jon. I missed the name upfront.

Anna Kruszenski: This is Anna Kruszenski on for Luke.

Jon Resnick: Anna, how are you. Nice to meet you. So look, I think that’s a great question. So AI, in general, is a huge change agent here internally. And I think we think about it on a couple of different dimensions. We think about our software side of the business, AI is being actively embedded into all of our core assets. A good example would be Phoenix, where a bunch of modules and increased functionality are all AI-driven, consistent with the way we’re approaching a bunch of the other businesses. We have a handful of products that have been launched in the last — end of last year and will be launched early this year, which also are highly kind of AI-driven products, which we’re excited about one, which was launched last year, was CertaraIQ, which is in the QSP space, which is a very fast driving area for us, heavy kind of AI backbone to it.

We’re really optimistic about not only the product side there over time, but also the intersection between that and our QSP services. We also have a number of things. There was an earlier question about stitching together. We have a number of stuff that aren’t exactly horizon 1 offerings, but things that help stitch together stuff in more of a true kind of AI native way, which are groundbreaking and innovative. So there’s a lot of things happening on the core kind of product side, which we’ll be taking a close look at and accelerating. As you’d imagine, there’s equally as much going on and opportunities on the core execution side. So on the software development side, huge push over the last 6 weeks, 8 weeks really to make sure we’re using best-in-class process, rolling out tools, accelerating our internal time lines.

That will be an ongoing effort and initiative this year to accelerate our internal builds and to ensure that we’re moving at rate and speed and with a high degree of efficiency. More broadly, on the AI side, there’s a range of opportunities we see to enable our services business to help fix some of our operations infrastructure. So it will be a major push internally that we believe will drive both short-term and midterm productivity and efficiency enhancements.

Anna Kruszenski: 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?

Jon Resnick: 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 is 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 so we can 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 3 to make sure that you’re optimizing it directly with customer. 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.

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

Scott Schoenhaus: Welcome, Jon Resnick. I guess a follow-up to that question in 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 reacceleration on the software side?

John Gallagher: Yes, Scott. So — the pipeline conversion piece on the execution side here, we don’t — you heard in the prepared remarks, we don’t necessarily see that coming back in Q1. We indicated that Q1, we expect to be at the lower end of the overall flat to 4% revenue growth guidance range. Some of that’s due to a tough compare to the prior year. And then we’re expecting to see some acceleration in the subsequent quarters. Some of it due to increased conversion and visibility and then some of it because the comps get a bit easier as we move through the year, too.

Scott Schoenhaus: 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?

Jon Resnick: 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 kind of — 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.

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

David Windley: 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?

Jon Resnick: David, good to talk to you. And I have an answer to the question you asked me on my first day here, talked directly. The — look, I don’t hear that. As I said, I spend a lot of time talking to customers. And I asked this question very directly to every single one. And I tried to get to all of our major accounts in multiple levels in terms of the way that they were — they’re thinking about their technology stacks and the role that we see us sitting. Yes, is there an industry-wide set of questions about where are they going to make investments, how are they going to make investments, it does cause some paralysis on the client side. Yes, clearly, we see that across segments and across different components. I don’t think that’s the issue here.

Nobody who I spoke to is thinking within that context. I think what you ended up having here is just a little bit of issues around that lag on the Pinnacle side with studies, the newness of some of the new products that we have and the time it’s going to take to get those to market, some dynamics around the conversion as we start to convert clients to cloud, by the way, which we’re very excited about the newness of the CertaraIQ offering, which had a soft launch, which we expect to continue to accelerate in the year. So I think you’ve got a little bit more of a function of timing, a little bit of market events. I don’t hear and I didn’t hear AI as being the driver. There was — every sales rep, every client I spoke to, there was — there’s no indication that that’s the driver of that slowdown in Q4.

David Windley: Got it. And John — or Jon R, is maybe a little unfair given what did you say, 56 or 57 days still. But as you come into the business and kind of evaluate where do you aim sales efforts and where do you aim innovation investments, it seems like there’s — there has been a trade-off between like later-stage clinical development and opportunities to streamline there have perhaps bigger bang for the client and bigger TAM for Certara versus some of the recent maybe acquisitions or discussion and strategy at the company has aimed at early development, say, maybe not discovery, but kind of late discovery preclinical stage in more of a capture the molecule mindset. How do you weigh those 2 options and which one do you lean into?

Jon Resnick: So that’s not the question I thought you’re going to ask me. I thought you’re going to ask me the TAM versus execution question. There is definitely — the market exists to the question you’ve asked me directly before…

David Windley: That too, if you like…

Jon Resnick: I mean, I think we addressed that in the prepared remarks pretty clear. There is a — this market is ripe for growth. And as I said in my opening remarks, I think there’s a lot more opportunity for us to drive execution. I am — whether it’s on the debt side, later on in the debt side or earlier discovery, there’s trade-offs of those different markets, price point size, fragmentation. There’s a lot of different things that are going to play. So I think we’ll be a little bit selective around how we’re choosing what to do. I think — and John Gallagher alluded to this in his remarks, if you kind of look at the core MIDD portfolio that we have, it grew in those double-digit numbers that I think, David, you’d be expecting from this franchise.

So the core kind of where we’re doing the biosimulation and the computational work, that is 10%. Now there’s a range of places you can deploy that. You can deploy that at the point of regulatory submission. You can deploy that in trial optimization and trial design. Some of the case studies and examples that we’re highlighting, we were intentionally pointing you to earlier things, use of QSP to pick targets and as we kind of integrate Chemaxon and D360 and some of the different offerings that we have that are closer to the discovery stage, we think there’s going to be a lot more value by integrating PBPK and QSP earlier into that cycle. So I don’t know if the trade-off is much around do you play in discovery to play in that as much as how can we focus around those kind of core growth areas with our strong legacy and strong differentiation.

I think those are the types of things that you’ll be seeing from us over the next couple of weeks and months.

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

Brendan Smith: 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 derisk 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 are 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.

Jon Resnick: Let me — John, I’m going to take a quick stab, and then I’ll turn to you for some of the thinking. Yes. So first of all, I think you definitely kind of picked up on the points that we were there. Look, I don’t know why our expectations would be any different than anyone else in this peer group. There are no shortage of opportunities out there. We’re not going to provide a multiyear path today. We will certainly get that to you over the course of this year. We’re in the process of kind of updating those LRPs and those processes, and I will give you a very clear answer to timing and expectation at that point. The commentary that we had today is very clearly if you look at the opportunity, you look at the potential for this, you look at the range of use cases this can be deployed into and you look at what I alluded to around some of the opportunities around just execution, there’s huge windows for improvement in what we do.

But we will get you those answers over the course of the year, if not at the next set of calls early into Q3, we’ll be providing that multiyear guidance and a clear direction and path for you. Do you want to add anything?

John Gallagher: 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. And we look forward to giving an update in the coming quarters on just what that time line 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.

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

Thomas Kelliher: 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 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?

Jon Resnick: Yes. Thanks, Thomas. It’s a good question. I want to answer your question directly without necessarily communicating to the entire world what our pricing strategy is going to be on some of these dimensions. Look, I think there’s a handful of ways to think about it. There’s some core products in the portfolio that probably should be thinking in a little bit more disciplined way around how to — for pricing, for opportunity. So there’s a segment of products that fit right into that category where I think that there is more pricing potential. And I think it’s fair and commensurate with the value of the product and the level of investments that we’re putting into the product and the value that adding to the organization.

I mean I think one of the questions — behind the questions, I presume, is also how is the pricing environment changing as you start to extend the SaaS model and start to extend some of what you’re doing internally, the offerings that we bring, we believe add a tremendous amount of value. When — if you look at some of the case studies that we provided today or even other things in the public domain around impacts that we’re having, whether it’s trial avoidance or optimized trial or the ability to do meta-analysis on things and save considerable money, I think we think we’re bringing considerable value to our clients. And we certainly are looking at how do we better align things that we do to ensure that we’re participants in some of that value creation.

I think the world of flat — thinking the world about user fees and seat licenses and other things, I think it’s going to evolve considerably over the next few years. And I think we sit in a nice spot where we can partner with clients in a more longitudinal way and kind of demonstrate areas in which we’re helping them avoid cost, accelerate time line, derisk trials in a way that we can tap into a little bit more value. So that’s the focus that will be going on. I’m trying not to give you the 100% detail on it, but I think we have a good forward approach here, which we think will align nicely to where our clients want to go as well.

Thomas Kelliher: 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 indicator on the software side of the business as well? Any color there would be helpful.

John Gallagher: Yes, yes. The strength in the services bookings in Q4 is a good indicator of the overall market, we think, as John was saying before, it’s probably a good indication of the appetite for discretionary spend. And we saw it not only in the reg business. We did see — we had a strong Q4 bookings number in reg, but also in biosim services. So on both sides of that, we — and as we approached the year looking at 2026, we entered the year with a bit more optimism and a view toward a more stable end market environment as a result of that.

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

Christine Rains: 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?

John Gallagher: Christine, yes. So the margin guide of 30% to 32% is in line with the guide we provided last year. And we had noted that it was a year of investment, which you certainly saw that show up in our R&D expense during the course of 2025. 2026 is similar in the sense that we’ve guided a similar margin range. It is a step down, as you pointed out, from where we exited the year, and we did a full year of 32% last year. And that’s because we do have further investments in R&D related to MIDD and unifying our platforms and these are investments that we’re going to continue to make. We launched 4 new software — or sorry, 3 new software products in Q4 of last year. We intend to continue that path of launching new software and enhancements to our existing software during 2026.

And so that’s where we’re at. Now I balance that with the fact that, yes, we put 30% to 32% out. Last year, I think we did — I’d like to say we did a good job of managing the investments that clearly we were making, you see them show up in R&D. We’re finding operational efficiencies and still coming at the high end of that guide. As we look at this year, we’re already starting to look at how we can make the investments this year while also looking at the cost structure. And you heard Jon mention cost avoidance that we’ve looked at already in the ’26 plan of $10 million. So hopefully, that gives you a sense of how we’re thinking about it. We are investing this year. You’re going to see that in R&D and hence, the guide of 30% to 32%.

Christine Rains: 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.

John Gallagher: 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.

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

John Park: 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?

Jon Resnick: Personnel or IP, is that the question?

John Park: Yes. Or like what — do you think you have all the pieces together to really find the right solution for clients?

Jon Resnick: Look, I think anyone would say they never have all the right answers. I mean that’s the honest answer. This is a dynamic space with a range of different things. I think we feel pretty darn good about our ability to respond to a range of questions. I think strategically, we always kind of have our eye on what else is out there with complementary capabilities to what we do. But there’s no shortage of ability for us to match kind of client demand. You take the toughest questions that our clients have about trial, trial design, execution, chemical entity business design, we can answer a range — a massive range of things. So I have no concern about the fitness of the current portfolio to execute. Obviously, we’ll always continue to look for things to complement us and things to continue to help us create scale and grow as a business and round out our offering.

But on the whole, we have more than enough in the current portfolio to very actively work with our clients on any number of challenges that they’re facing.

John Park: 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 change, but are they optimistic when it comes to maybe going one phase to another?

Jon Resnick: So I think — look, I think I would answer the question slightly different, if you don’t mind. The way I tend to think about it is, are we seeing a shift towards more of our services as the FDA starts to push people to more computational and modeling-based approaches. And I think the answer is certainly, yes, the FDA and the life sciences industry does not move quickly. These cycles are long. So you get changes in regulatory guidance, you have in-flight trials, you have a whole range of other things that take time to move. But if you look at underneath the growth in our QSP business and the core growth in our PBPK business, those are reflective of these alternative approaches being used and growing acceptance. So look, as we kind of look — we look at the direction of travel, the FDA, we certainly think that’s a huge tailwind for our offerings.

We’re starting certainly to see the leading indicators in some of our core service offerings and the technology that underpins them. So we’re optimistic about the way those guidelines and the direction of travel for the regulatory bodies and how that plays into our ability to support clients in a broader and more helpful.

Operator: 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.