Certara Reports First Quarter 2021 Financial Results and Updates Full Year 2021 Guidance
Highlights:
- Revenue was
$66.7 million , representing growth of 16% over the first quarter of 2020. - Net income was
$1.1 million , compared to a net income of$1.0 million in the first quarter of 2020. - Adjusted EBITDA was
$23.9 million , representing growth of 20% over the first quarter of 2020. - 2021 guidance range was updated to
$277 million -$285 million of revenue,$100 million -$102 million of adjusted EBITDA, and effective annual tax rate was lowered to 40% - 45%.
“Certara realized a successful start to the year, which reflects increased adoption of our proprietary end-to-end platform globally. As the COVID-19 pandemic continues to impact lives worldwide, I want to thank our
First Quarter 2021 Results
“In the first quarter, we delivered double-digit growth in revenue and profitability by executing on our customer commitments. With first quarter bookings growth of 34% year-over-year, we have solid momentum towards achieving our business and financial goals for the year,” said
Total revenue for the first quarter of 2021 was
Total cost of revenue for the first quarter of 2021 was
Total operating expenses for the first quarter of 2021 were
Net income for the first quarter of 2021 was
Adjusted EBITDA for the first quarter of 2021 was
Adjusted Net Income for the first quarter of 2021 was
| Three Months Ended |
|||||||
| 2021 | 2020 | ||||||
| Key Financials (in millions, except per share data) | |||||||
| Revenue | $ | 66.7 | $ | 57.4 | |||
| Net Income | $ | 1.1 | $ | 1.0 | |||
| Diluted Earnings Per Share | $ | 0.01 | $ | 0.01 | |||
| Adjusted EBITDA | $ | 23.9 | $ | 19.9 | |||
| Adjusted Net Income | $ | 9.4 | $ | 2.1 | |||
| Adjusted Diluted Earnings Per Share | $ | 0.06 | $ | 0.02 | |||
| Cash and Cash Equivalents | $ | 273.0 | $ | 271.4 | |||
2021 Financial Outlook
Full year 2021 revenue to be in the range of
Full year 2021 Adjusted EBITDA to be in the range of
Full year 2021 Adjusted Diluted Earnings Per Share is expected to be in the range of
Fully diluted shares for 2021 will be 153 million to 155 million; and
Effective annual tax rate for 2021 will be in the range of 40% to 45%.
| In millions, except per share data | Full Year 2021 (Range) | ||
| Revenue | $ | 277 - |
|
| Adjusted EBITDA | $ | 100 - |
|
| Adjusted Diluted Earnings Per Share | $ | 0.20 - |
|
Webcast and Conference Call Details
About
Please visit our website at www.certara.com. We intend to use our website as a means of disclosing material, non-public information and for complying with our disclosure obligations under Regulation FD.
Such disclosures will be included in the Investor Relations section of our website at https://ir.certara.com. Accordingly, investors should monitor such portion of our website, in addition to following our press releases,
Forward-Looking Statements
This press release contains certain statements that constitute forward-looking statements within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, with respect to the Company’s future business and financial performance, earnings per share, share count and effective tax rate. These statements typically contain words such as “believe,” “may,” “potential,” “will,” “plan,” “could,” “estimate,” “expects” and “anticipates” or the negative of these words or other similar terms or expressions. Any statement in this press release that is not a statement of historical fact is a forward-looking statement and involves significant risks and uncertainties. Although we believe that the expectations reflected in these forward-looking statements are reasonable, we cannot provide any assurance that these expectations will prove to be correct. You should not rely upon forward-looking statements as predictions of future events and actual results, events, or circumstances. Actual results may differ materially from those described in the forward-looking statements and are subject to a variety of assumptions, uncertainties, risks and factors that are beyond our control, including the Company’s ability to compete within its market; any deceleration in, or resistance to, the acceptance of model-informed biopharmaceutical discovery; changes or delays in relevant government regulation; increasing competition, regulation and other cost pressures within the pharmaceutical and biotechnology industries; trends in research and development (R&D) spending; consolidation within the biopharmaceutical industry; reduction in the use of the Company’s products by academic institutions; pricing pressures; the Company’s ability to successfully enter new markets, increase its customer base and expand its relationships with existing customers; the occurrence of natural disasters and epidemic diseases, such as the recent COVID-19 pandemic; any delays or defects in the release of new or enhanced software or other biosimulation tools; failure of our existing customers to renew their software licenses or any delays or terminations of contracts or reductions in scope of work by its existing customers; our ability to accurately estimate costs associated with its fixed-fee contracts; our ability to retain key personnel or recruit additional qualified personnel; risks related to our contracts with government customers; our ability to sustain recent growth rates; any future acquisitions and our ability to successfully integrate such acquisitions; our ability to successfully operate a global business; our ability to comply with applicable laws and regulations; risks related to litigation; the adequacy of its insurance coverage and ability to obtain adequate insurance coverage in the future; our ability to perform in accordance with contractual requirements, regulatory standards and ethical considerations; the loss of more than one of our major customers; future capital needs; the ability of our bookings to accurately predict future revenue and our ability to realize revenue on backlog; disruptions in the operations of the third-party providers who host our software solutions or any limitations on their capacity; our ability to reliably meet data storage and management requirements, or the experience of any failures or interruptions in the delivery of our services over the internet; our ability to comply with the terms of any licenses governing use of third-party open source software; any breach of its security measures or unauthorized access to customer data; our ability to adequately enforce or defend ownership and use of our intellectual property and other proprietary rights; any allegations of infringement, misappropriation or violations of a third party’s intellectual property rights; our ability to meet obligations under indebtedness and have sufficient capital to operate our business; any limitations on our ability to pursue business strategies due to restrictions under our current or future indebtedness; any impairment of goodwill or other intangible assets; our ability to use our net operating losses and R&D tax credit carryforwards; the accuracy of management’s estimates and judgments relating to critical accounting policies and changes in financial reporting standards or interpretations; any inability to design, implement, and maintain effective internal controls; the costs and management time associated with operating as a publicly traded company; and the other factors detailed under the captions “Risk Factors” and “Special Note Regarding Forward-Looking Statements” and elsewhere in our
A Note on Non-GAAP Financial Measures
This press release contains “non-GAAP measures” that are financial measures that either exclude or include amounts that are not excluded or included in the most directly comparable measures calculated and presented in accordance with
You should refer to the footnotes below as well as the “Non-GAAP Financial Measures” section in this press release below for a further explanation of these measures and reconciliations of these non-GAAP measures in specific periods to their most directly comparable financial measure calculated and presented in accordance with GAAP for those periods.
Management uses various financial metrics, including total revenues, income (loss) from operations, net income (loss), and certain non-GAAP measures, including those discussed above, to measure and assess the performance of the Company’s business, to evaluate the effectiveness of its business strategies, to make budgeting decisions, to make certain compensation decisions, and to compare the Company’s performance against that of other peer companies using similar measures. In addition, management believes these metrics provide useful measures for period-to-period comparisons of the Company’s business, as they remove the effect of certain non-cash expenses and other items not indicative of its ongoing operating performance.
Management believes that Adjusted EBITDA, Adjusted Net Income (Loss) and Adjusted Diluted Earnings Per Share are helpful to investors, analysts, and other interested parties because they can assist in providing a more consistent and comparable overview of our operations across our historical periods. In addition, these measures are frequently used by analysts, investors, and other interested parties to evaluate and assess performance.
Please note that the Company has not reconciled the Adjusted EBITDA and Adjusted Diluted Earnings Per Share forward-looking guidance included in this press release to the most directly comparable GAAP measures because this cannot be done without unreasonable effort due to the variability and low visibility with respect to costs related to acquisitions, financings, and employee stock compensation programs, which are potential adjustments to future earnings. We expect the variability of these items to have a potentially unpredictable, and a potentially significant, impact on our future GAAP financial results.
(1) Adjusted EBITDA represents net income excluding interest expense, provision (benefit) for income taxes, depreciation and amortization expense, intangible asset amortization, equity-based compensation expense, acquisition and integration expense and other items not indicative of our ongoing operating performance.
(2) Adjusted Net Income and Adjusted Diluted Earnings Per Share exclude the effect of the items discussed in footnote (1) above from GAAP net income and GAAP diluted earnings per share, respectively, as well as currency gain (loss) and adjust the provision for income taxes for such charges.
In evaluating Adjusted EBITDA, Adjusted Net Income, Adjusted Diluted Earnings Per Share, you should be aware that in the future the Company may incur expenses similar to those eliminated in this presentation and this presentation should not be construed as an inference that future results will be unaffected by unusual items.
Contacts:
Investor Relations Contact:
ir@certara.com
Media Contact:
Kekst CNC
Daniel.yunger@kekstcnc.com
ariane.lovell@finnpartners.com
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
| Three Months Ended |
||||||||
| (in thousands, except per common share and share data) | 2021 | 2020 | ||||||
| Revenue | $ | 66,718 | $ | 57,449 | ||||
| Cost of revenues | 26,016 | 22,183 | ||||||
| Operating expenses: | ||||||||
| Sales and marketing | 3,752 | 2,938 | ||||||
| Research and development | 4,706 | 2,875 | ||||||
| General and administrative | 16,562 | 11,541 | ||||||
| Intangible asset amortization | 9,456 | 9,359 | ||||||
| Depreciation and amortization expense | 602 | 553 | ||||||
| Total operating expenses | 35,078 | 27,266 | ||||||
| Income from operations | 5,624 | 8,000 | ||||||
| Other income (expenses): | ||||||||
| Interest expense | (3,928 | ) | (6,858 | ) | ||||
| Miscellaneous, net | (117 | ) | 525 | |||||
| Total other income (expenses) | (4,045 | ) | (6,333 | ) | ||||
| Income before income taxes | 1,579 | 1,667 | ||||||
| Provision for income taxes | 527 | 621 | ||||||
| Net income | $ | 1,052 | $ | 1,046 | ||||
| Net income per share attributable to common stockholders: | ||||||||
| Basic | $ | 0.01 | $ | 0.01 | ||||
| Diluted | $ | 0.01 | $ | 0.01 | ||||
| Weighted average common shares outstanding: | ||||||||
| Basic | 147,160,084 | 132,407,786 | ||||||
| Diluted | 152,084,745 | 132,407,786 | ||||||
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
| (in thousands, except per share and share data) | 2021 | 2020 | ||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 272,988 | $ | 271,382 | ||||
| Accounts receivable, net of allowance for doubtful accounts of |
54,402 | 54,091 | ||||||
| Restricted cash | 733 | 1,909 | ||||||
| Prepaid expenses and other current assets | 19,438 | 19,202 | ||||||
| Total current assets | 347,561 | 346,584 | ||||||
| Other assets: | ||||||||
| Property and equipment, net | 3,505 | 3,872 | ||||||
| Long-term deposits | 1,184 | 1,163 | ||||||
| 519,226 | 518,592 | |||||||
| Intangible assets, net of accumulated amortization of |
388,225 | 396,445 | ||||||
| Deferred income taxes | 2,923 | 2,744 | ||||||
| Total assets | $ | 1,262,624 | $ | 1,269,400 | ||||
| Liabilities and stockholders' equity | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | 6,593 | $ | 6,394 | ||||
| Accrued expenses | 19,415 | 30,729 | ||||||
| Current portion of deferred revenue | 29,802 | 30,662 | ||||||
| Current portion of interest rate swap liability | 2,603 | 2,605 | ||||||
| Current portion of long-term debt | 4,680 | 4,680 | ||||||
| Current portion of capital lease obligations | 279 | 275 | ||||||
| Total current liabilities | 63,372 | 75,345 | ||||||
| Long-term liabilities: | ||||||||
| Capital lease obligations, net of current portion | 246 | 318 | ||||||
| Deferred revenue, net of current portion | 853 | 545 | ||||||
| Deferred income taxes | 76,085 | 75,894 | ||||||
| Long-term portion of interest rate swap liability | 430 | 1,066 | ||||||
| Long-term debt, net of current portion and debt discount | 293,689 | 294,100 | ||||||
| Other long-term liabilities | 682 | — | ||||||
| Total liabilities | 435,357 | 447,268 | ||||||
| Commitments and contingencies | ||||||||
| Stockholders' equity: | ||||||||
| Preferred shares, |
— | — | ||||||
| Common shares, |
1,529 | 1,529 | ||||||
| Additional paid-in capital | 889,679 | 884,528 | ||||||
| Accumulated deficit | (61,286 | ) | (62,338 | ) | ||||
| Accumulated other comprehensive loss | (2,655 | ) | (1,587 | ) | ||||
| Total stockholders' equity | 827,267 | 822,132 | ||||||
| Total liabilities and stockholders' equity | $ | 1,262,624 | $ | 1,269,400 | ||||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
| Three Months Ended |
||||||||
| (in thousands) | 2021 | 2020 | ||||||
| Cash flows from operating activities: | ||||||||
| Net income | $ | 1,052 | $ | 1,046 | ||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
| Depreciation and amortization of property and equipment | 602 | 553 | ||||||
| Amortization of intangible assets | 10,102 | 9,930 | ||||||
| Amortization of debt issuance costs | 378 | 382 | ||||||
| Recovery of doubtful accounts | (1 | ) | (17 | ) | ||||
| Equity-based compensation expense | 5,151 | 538 | ||||||
| Deferred income taxes | 12 | 1,084 | ||||||
| Changes in assets and liabilities, net of acquisitions: | ||||||||
| Accounts receivable | (2 | ) | 49 | |||||
| Prepaid expenses and other current assets | (673 | ) | (2,025 | ) | ||||
| Accounts payable and accrued expenses | (11,180 | ) | (1,274 | ) | ||||
| Deferred revenue | (507 | ) | (1,443 | ) | ||||
| Net cash provided by operating activities | 4,934 | 8,823 | ||||||
| Cash flows from investing activities: | ||||||||
| Capital expenditures | (222 | ) | (459 | ) | ||||
| Capitalized development costs | (1,192 | ) | (1,875 | ) | ||||
| Business acquisitions, net of cash acquired | (2,044 | ) | (675 | ) | ||||
| Net cash used in investing activities | (3,458 | ) | (3,009 | ) | ||||
| Cash flows from financing activities: | ||||||||
| Payments on long-term debt and capital lease obligations | (855 | ) | (849 | ) | ||||
| Proceeds on line of credit | — | 19,880 | ||||||
| Net cash provided by (used in) financing activities | (855 | ) | 19,031 | |||||
| Effect of foreign exchange rate changes on cash, cash equivalents, and restricted cash | (191 | ) | (251 | ) | ||||
| Net increase in cash, cash equivalents, and restricted cash | 430 | 24,594 | ||||||
| Cash, cash equivalents, and restricted cash, at beginning of period | 273,291 | 29,762 | ||||||
| Cash, cash equivalents, and restricted cash, at end of period | $ | 273,721 | $ | 54,356 | ||||
NON-GAAP FINANCIAL MEASURES
The following table reconciles Net income to Adjusted EBITDA:
| Three Months Ended |
||||||||
| (in thousands) | 2021 | 2020 | ||||||
| Net income(a) | $ | 1,052 | $ | 1,046 | ||||
| Interest expense(a) | 3,928 | 6,858 | ||||||
| Interest income(a) | (70 | ) | (11 | ) | ||||
| Provision for income taxes(a) | 527 | 621 | ||||||
| Depreciation and amortization expense(a) | 602 | 553 | ||||||
| Intangible asset amortization(a) | 10,102 | 9,930 | ||||||
| Currency gain (loss) (a) | 191 | (282 | ) | |||||
| Equity-based compensation expense(b) | 5,151 | 538 | ||||||
| Acquisition-related expenses(c) | 1,596 | 455 | ||||||
| Transaction related expenses(d) | 685 | — | ||||||
| Severance expense(e) | — | 195 | ||||||
| Reorganization expense(f) | — | 5 | ||||||
| First-year Sarbanes-Oxley implementation costs (g) | 107 | — | ||||||
| Adjusted EBITDA | $ | 23,871 | $ | 19,908 | ||||
The following table reconciles Net income to Adjusted Net Income:
| Three Months Ended |
|||||||
| (in thousands) | 2021 | 2020 | |||||
| Net income(a) | $ | 1,052 | $ | 1,046 | |||
| Currency gain (loss) (a) | 191 | (282 | ) | ||||
| Equity-based compensation expense(b) | 5,151 | 538 | |||||
| Acquisition-related expenses(c) | 1,596 | 455 | |||||
| Transaction related expenses(d) | 685 | — | |||||
| Severance expense(e) | — | 195 | |||||
| Reorganization expense(f) | — | 5 | |||||
| First-year Sarbanes-Oxley implementation costs (g) | 107 | — | |||||
| Income tax expense impact of adjustments(h) | 665 | 103 | |||||
| Adjusted Net Income | $ | 9,447 | $ | 2,060 | |||
The following table reconciles diluted earnings per share to Adjusted Diluted Earnings Per Share:
| Three Months Ended |
||||||
| 2021 | 2020 | |||||
| Diluted earnings per share(a) | $ | 0.01 | $ | 0.01 | ||
| Currency gain (loss) (a) | — | — | ||||
| Equity-based compensation expense(b) | 0.03 | 0.01 | ||||
| Acquisition-related expenses(c) | 0.01 | — | ||||
| Transaction related expenses(d) | 0.01 | — | ||||
| Severance expense(e) | — | — | ||||
| Reorganization expense(f) | — | — | ||||
| First-year Sarbanes-Oxley implementation costs (g) | — | — | ||||
| Income tax expense impact of adjustments(h) | — | — | ||||
| Adjusted Diluted Earnings Per Share | $ | 0.06 | $ | 0.02 | ||
| Diluted weighted average common shares outstanding | 152,084,745 | 132,407,786 | ||||
(a) Represents amounts as determined under GAAP.
(b) Represents expense related to equity-based compensation. Equity-based compensation has been, and will continue to be for the foreseeable future, a recurring expense in our business and an important part of our compensation strategy.
(c) Represents costs associated with mergers and acquisitions and any retention bonuses pursuant to the acquisitions.
(d) Represents costs associated with our secondary offering that are not capitalized.
(e) Represents charges for severance provided to former executives and non-executives.
(f) Represents expense related to reorganization, including legal entity reorganization.
(g) Represents the first year Sarbanes-Oxley costs for accounting and consulting fees related to the Company's preparation to comply with Section 404 of the Sarbanes-Oxley Act in 2021.
(h) Represents the income tax effect of the non-GAAP adjustments calculated using the applicable statutory rate by jurisdiction.
Source: Certara