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What changed in Certara, Inc.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of Certara, Inc.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+577 added−568 removedSource: 10-K (2025-02-26) vs 10-K (2024-02-29)

Top changes in Certara, Inc.'s 2024 10-K

577 paragraphs added · 568 removed · 413 edited across 9 sections

Item 1. Business

Business — how the company describes what it does

84 edited+32 added−24 removed25 unchanged
Biggest changeWe supports two versions of Pinnacle 21- a fully featured enterprise version, which contains workflow and reporting tools needed by large-scale drug development customers, and a basic free community version designed for small organizations who want to try the software. • Pinnacle 21 Data Exchange - Allows sponsors and data providers to define data standards and specifications (metadata) and ensure that data adheres to these specifications to make the process of acquiring external data from laboratory and clinical sources more efficient and predictable during the drug development process. • Metadata Repository – A cloud-based Clinical Metadata Repository & Study Data Tabulation Model ("SDTM") automation suite to enable faster study design using controlled and standardized data. 10 T able of Contents Regulatory Science • CoAuthor – Structured and Assisted Content Authoring with Generative AI - Approval for a new drug or biologic requires expert development of numerous regulatory documents, which is a time intensive process often requiring inputs from a variety of data sources and types.
Biggest changeWe support two versions of Pinnacle 21 – a fully featured enterprise version, which contains workflow and reporting tools needed by large-scale drug development customers, and a more basic free community version designed for small organizations who want to try the software. • Pinnacle 21 Data Exchange – Allows sponsors and data providers to define data standards and specifications (metadata) and ensure that data adheres to these specifications to make the process of acquiring external data from laboratory and clinical sources more efficient and predictable. • Metadata Repository – A cloud-based Clinical Metadata Repository & Study Data Tabulation Model automation suite to enable faster study design using controlled and standardized data.
The following filings are available through our Investor Relations website as soon as reasonably practicable after we file them with, or furnish them to, the SEC: Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and our Proxy Statement for our annual meeting of stockholders, Sustainability Report, as applicable (as well as any amendments to those reports).
The following filings are available through our Investor Relations website as soon as reasonably practicable after we file them with, or furnish them to, the SEC: Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and our Proxy Statement for our annual meeting of stockholders, as applicable (as well as any amendments to those reports).
Submission programs require the coordinated technology-enabled expertise that Certara regulatory writing solutions offers delivering quality and speed at scale. Regulatory Operations : We manage the submission of regulatory documents using the GlobalSubmit platform. Submission management services include submission leadership, program management and planning, due diligence and readiness preparation, submission compilation, and eCTD publishing using Global Submit.
Submission programs require the coordinated technology-enabled expertise that Certara regulatory writing solutions offers delivering quality and speed at scale. Regulatory Operations: We manage the submission of regulatory documents using our GlobalSubmit platform. Submission management services include submission leadership, program management and planning, due diligence and readiness preparation, submission compilation, and eCTD publishing using Global Submit.
Our principal clinical data suite is the Pinnacle 21 family of products. • Pinnacle 21 ("P21" ) - A cloud-based platform for clinical data automation, standardization, and validation with industry standards. Pinnacle 21 is widely utilized across the pharmaceutical industry and by its regulators to validate that clinical data meets the required standards for regulatory submittal.
Our principal clinical data suite is the Pinnacle 21™ family of products. • Pinnacle 21 – A cloud-based platform for clinical data automation, standardization, and validation with industry standards. Pinnacle 21 is widely utilized across the pharmaceutical industry and by its regulators to validate that clinical data meets the required standards for regulatory submittal.
The Simcyp Simulator has been applied to small molecules, biologics, antibody-drug conjugates ("ADCs"), generics, and new modality drugs. Simcyp was started over 20 years ago and has been expanded each year with extensions and additions to its biosimulation models and is designed to produce “regulatory quality” results that customers can use in their drug approval applications.
The Simcyp Simulator has been applied to small molecules, biologics, antibody-drug conjugates (“ADCs”), generics, and new modality drugs. Simcyp was started over 20 years ago and has been expanded each year with extensions and additions to its biosimulation models and is designed to produce “regulatory quality” results that customers can use in their drug approval applications.
Health Insurance Portability and Accountability Act of 1996 (“HIPAA”), as amended by the Health Information Technology for Economic and Clinical Health Act (“HITECH”) and other U.S. privacy, security and breach notification and healthcare information laws; the European Union’s General Data Protection Directive (“GDPR” and its national implementing laws) and other European privacy laws as well as privacy laws in other jurisdictions around the world.
Health Insurance Portability and Accountability Act of 1996 (“HIPAA”), as amended by the Health Information Technology for Economic and Clinical Health Act (“HITECH”) and other U.S. privacy, security and breach notification and healthcare information laws; the European Union’s General Data Protection Directive (“GDPR” and its national implementing laws) and other European privacy laws; and additional privacy laws in other jurisdictions around the world.
By offering solutions including both software and services, we provide flexible offerings for life sciences companies of all sizes and requirements. Services are complemented by scientific and regulatory expertise to conduct and interpret biosimulation results and make recommendations on the next best action to take to move a program forward.
By offering both software and services solutions, we provide flexible offerings for life sciences companies of all sizes and requirements. Services are complemented by scientific and regulatory expertise to conduct and interpret biosimulation results and make recommendations on the next best action to move a program forward.
Foreign Corrupt Practices Act (“FCPA”) and similar anti-bribery laws, such as the U.K. Bribery Act of 2010 (“Bribery Act”), which generally prohibit companies and their intermediaries from making improper payments to foreign government officials for the purpose of obtaining or retaining business.
Foreign Corrupt Practices Act (“FCPA”) and similar anti-bribery laws, such as the U.K. Bribery Act of 2010 (“U.K. Bribery Act”), which generally prohibit companies and their intermediaries from making improper payments to foreign government officials for the purpose of obtaining or retaining business.
In the biosimulation software market, we compete with other technology companies including Mathworks, Ansys, Simulations plus, and NONMEM, a division of ICON. Other competitors include open-sourced solutions such as R and PK-Sim and internally developed software from biopharmaceutical companies.
In the biosimulation software market, we compete with other technology companies including Mathworks, Dassault Systemes, Ansys, Simulations Plus, and NONMEM, a division of ICON. Other competitors include open-sourced solutions such as R and PK-Sim and internally developed software from biopharmaceutical companies.
The diversity and depth of expertise, experience, and backgrounds fuel innovation by bringing rich ideas, problem-solving capabilities, and mutual respect. We are dedicated to attracting, retaining, and growing leading scientists and experts, who are passionate about developing medicines that matter.
The breadth and depth of expertise, experience, and backgrounds fuel innovation by bringing rich ideas, problem-solving capabilities, and mutual respect. We are dedicated to attracting, retaining, and growing leading scientists and experts, who are passionate about developing medicines that matter.
Our Growth Strategy Our growth strategy is to build upon our platforms creating more value through increased automation and connectivity. We continue to innovate in biosimulation, develop more AI enabled offerings across our portfolio, engage with regulatory agencies, and land and expand our customer partnerships.
Our Growth Strategy Our growth strategy is to build upon our platforms creating more value through increased automation and connectivity. We continue to innovate in biosimulation, develop more AI-enabled offerings across our portfolio, engage with regulatory agencies, and land and expand our customer relationships.
The pharmaceutical industry spends more than $260 billion annually on research and development. On average, it takes 10-15 years and costs $6.2 billion to develop one new medicine, including the cost of failures.
The pharmaceutical industry spends more than $270 billion annually on research and development. On average, it takes 10-15 years and costs $6.2 billion to develop one new medicine, including the cost of failures.
We are not presently a party to any legal proceedings relating to intellectual property that, in the opinion of our management, would individually or taken together have a material adverse effect on our business, financial condition, results of operations or cash flows. Human Capital We are a globally diverse team united in our purpose to accelerate medicine to patients.
We are not presently a party to any legal proceedings relating to intellectual property that, in the opinion of our management, would individually or taken together have a material adverse effect on our business, financial condition, results of operations or cash flows. Human Capital We are a global team united in our purpose to accelerate medicine to patients.
For example, we are using machine learning to automate and speed the process of biosimulation, and we have created an AI application to aid creating regulatory documents from scientific analyses and clinical data. We believe that AI predictive models will continue to enhance the accuracy and usefulness of biosimulation models and be utilized broadly across drug development.
For example, we are using machine learning to automate and speed the process of biosimulation, and we have created an AI application to aid in drafting regulatory documents from scientific analyses and clinical data. We believe that AI predictive models will continue to enhance the accuracy and usefulness of biosimulation models and will be utilized broadly across drug development.
Artificial intelligence (AI) and machine learning technologies are being incorporated across our software and services portfolios providing opportunities to expand the number of data sources utilized, better predict outcomes, and streamline reporting.
AI and machine learning technologies are being incorporated across our software and services portfolios, providing opportunities to expand the number of data sources utilized, better predict outcomes, and streamline reporting.
The Certara suite of applications replace costly manual processes in which pharmaceutical companies collect laboratory and clinical data from many sources, standardize, validate, analyze the data, and include it in reporting and downstream systems.
The Certara suite of applications replaces costly manual processes in which pharmaceutical companies collect laboratory and clinical data from many sources, standardize, validate, analyze the data, and include it in reporting and downstream systems.
They provide early-phase development plans and study designs across the development life cycle, often incorporating biosimulation along with regulatory support. Regulatory Science: Certara provides expert services for regulatory submissions from early-stage INDs, new drug applications ("NDAs"), and MAAs that require CMC (Chemistry, Manufacturing, and Controls), nonclinical, and clinical expertise.
They provide early-phase development plans and study designs across the development life cycle, often incorporating biosimulation along with regulatory support. Regulatory Science: Certara provides expert services for regulatory submissions from early-stage INDs, new drug applications, and MAAs that require Chemistry, Manufacturing, and Controls (“CMC”), nonclinical, and clinical expertise.
In 2023, we extended the capabilities of MIDD and regulatory offerings with the launch of an AI platform designed for life sciences, Certara.AI. It is a secure, flexible platform for deploying life science specific Generative Pre-Trained Transformers ("GPTs") across an organization’s data, enabling faster search, connectivity, and content generation.
In 2023, we extended the capabilities of MIDD and regulatory offerings with the launch of an AI platform designed for life sciences, Certara.AI. Certara.AI is a secure, flexible platform for deploying life science-specific Generative Pre-Trained Transformers (“GPTs”) across an organization’s data, enabling faster search, connectivity, and content generation.
Consequently, we must comply with relevant laws and regulations relating to certain aspects of the drug and biologic development and approval process. For example, our customers may require that documents or records we produce that may be used in the approval process be compliant with part 11 of Title 21 of the U.S.
Consequently, we must 16 Table of Contents comply with relevant laws and regulations relating to certain aspects of the drug and biologic development and approval process. For example, our customers may require that documents or records we produce that may be used in the approval process be compliant with part 11 of Title 21 of the U.S.
There are many successful examples of currently approved drugs where models were used in first-in-human dose predictions, clinical trial design, and for drug interaction label claims. Biosimulation is also used to support drug development beyond the approval stage; examples include determining formulation or manufacturing changes and label extensions.
There are many examples of currently approved drugs where models were successfully used in discovery, preclinical, first-in-human dose predictions, clinical trial design, and for drug interaction label claims. Biosimulation is also used to support drug development beyond the approval stage; examples include determining formulation or manufacturing changes and label extensions.
We help support these decisions with comprehensive regulatory science solutions that include technology platforms along with regulatory submission and regulatory writing expertise. In addition, recognizing that time 8 T able of Contents to approval is one of the most valuable components of the drug development journey, we designed our regulatory solutions to accelerate the regulatory writing and filing process.
We help support these decisions with comprehensive regulatory science solutions that include technology platforms along with regulatory submission and regulatory writing expertise. In addition, recognizing that time to approval is one of the most valuable components of the drug development journey, we designed our regulatory solutions to accelerate the regulatory writing and filing process.
Simcyp Simulator The Simcyp Simulator is a mechanistic biosimulation platform for physiologically-based pharmacokinetic ("PBPK") simulation. It is frequently utilized for determining first-in-human dosing, optimizing clinical study design, evaluating new drug formulations, setting the dose in untested populations, performing virtual bioequivalence analyses, and predicting drug-drug interactions ("DDIs").
Simcyp™ Simulator The Simcyp Simulator is a mechanistic biosimulation platform for physiologically based pharmacokinetic (“PBPK”) simulation. It is frequently utilized for determining first-in-human dosing, optimizing clinical study design, evaluating new drug formulations, setting the dose in untested populations, performing virtual bioequivalence analyses, and predicting drug-drug interactions (“DDIs”).
Our software and scientists incorporate modern advances in scientific understanding, drug development experience, data analysis, and artificial intelligence resulting in significant opportunities to decrease the cost and increase the odds of new drug approval and commercial success.
Our software and scientists incorporate modern advances in scientific understanding, drug development experience, data analysis, and AI, resulting in significant opportunities to decrease the cost and increase the odds of new drug approval and commercial success.
Phoenix has four modules that support pharmacometrics and workflow. • Phoenix WinNonlin – A platform for non-compartmental analysis ("NCA"), pharmacokinetic/pharmacodynamic ("PK/PD"), and toxicokinetic ("TK") modeling with a proven 30-year history and extensive use across the biopharmaceutics industry. • Phoenix Hosted – A hosted (i.e. online) version of Phoenix, which provides a secured and validated Certara Amazon Web Services("AWS") workspace allowing for much quicker transit time from compliant data sources.
Phoenix has four modules that support pharmacometrics and workflow. • Phoenix WinNonlin – A platform for non-compartmental analysis, PK/PD, and TK modeling with a proven 30-year history and extensive use across the biopharmaceutics industry. • Phoenix Hosted – A hosted (i.e., online) version of Phoenix, which provides a secured and validated Certara Amazon Web Services (“AWS”) workspace allowing for much quicker transit time from compliant data sources.
Our organization has been purposefully designed to include all of these capabilities to collectively enable a new model of drug development for our clients. 7 T able of Contents Our goal is to enable the life science industry to use data, modeling, and analytics to make better decisions during drug development and commercialization to increase productivity rates and vastly reduce development costs.
Our organization has been purposefully designed to include all of these capabilities to collectively enable a new model of drug development for our clients. 7 Table of Contents Our goal is to enable the life sciences industry to use data, modeling, and analytics to make better decisions during drug development and commercialization to increase productivity rates and vastly reduce development costs.
Item 1. Business. Our Company We are a leading provider of biosimulation technology and solutions for using Model-Informed Drug Development ("MIDD") in the global biopharmaceutical industry. MIDD is an approach that utilizes biological and statistical models derived from preclinical and clinical data to inform decision-making in drug development and commercialization.
Item 1. Business. Our Company We are a global leader in biosimulation technology and solutions for using Model-Informed Drug Development (“MIDD”) in the global biopharmaceutical industry. MIDD is an approach that utilizes biological and statistical models derived from preclinical and clinical data to inform decision-making in drug development and commercialization.
While the CJEU upheld the adequacy of the standard contractual clauses (a standard form of contract approved by the European Commission as an adequate personal data transfer mechanism,), it made clear that reliance on them alone may not necessarily be sufficient in all circumstances; this has created uncertainty.
While the Court of Justice of the European Union (the “CJEU”) has upheld the adequacy of the standard contractual clauses (a standard form of contract approved by the European Commission as an adequate personal data transfer mechanism), it made clear that reliance on them alone may not necessarily be sufficient in all circumstances; this has created uncertainty.
Embedded within some of our biosimulation tools, including the Simcyp Simulator, are several decades’ worth of proprietary data that have been compiled and collated from both public and private sources. These data, in tandem with our proprietary source code and algorithms, create powerful modeling tools that cannot be readily duplicated.
Embedded within some of our biosimulation tools, including the Simcyp Simulator, are several decades’ worth of proprietary data that have been compiled and collated from both public and private sources. These data, in tandem with our proprietary source code and algorithms, create powerful modeling tools that cannot be easily or practically duplicated independently.
Drug Development and Regulatory Strategy: Our experts develop and deliver drug development and regulatory plans and provide high-level regulatory input to customer projects, incorporating biosimulation and supporting decision making through critical development and investment stage gates. 11 T able of Contents Pharmacometrics: Pharmacometrics uses mathematical and statistical models to quantify drug, disease, and trial information to help address these decisions.
Drug Development and Regulatory Strategy : Our experts develop and deliver drug development and regulatory plans and provide high-level regulatory input to customer projects, incorporating biosimulation and supporting decision making through critical development and investment stage gates. Pharmacometrics: Pharmacometrics uses mathematical and statistical models to quantify drug, disease, and trial information to help address these decisions.
With increasing adoption of technology across all stages of drug discovery and development, we believe our end-to-end platform and growth strategies position us to further penetrate the rapidly growing technology-driven biopharmaceutical R&D market of the future that leverages advanced modeling and analytics. Traditional drug discovery and development is costly and prone to failure.
With increasing adoption of technology across all stages of drug discovery and development, we believe our end-to-end platform and growth strategies position us to further penetrate the rapidly growing technology-driven biopharmaceutical R&D market of the future that leverages advanced modeling and analytics.
Combining data integration, structured content authoring, and AI, CoAuthor enables writers to create and assemble regulatory submissions and medical publications faster and with confidence in the quality of their results. • Global Submit eCTD Submissions Management - The Electronic Common Technical Document ("eCTD") is a standard format required for submitting applications to regulatory authorities.
Combining data integration, structured content authoring and AI, CoAuthor enables writers to create and assemble regulatory submissions and medical publications faster and with confidence in the quality of their results. • GlobalSubmit™ eCTD Submissions Management – T he Electronic Common Technical Document (“eCTD”) is a standard format required for submitting applications to regulatory authorities.
As exciting new research and technologies areas and opportunities arise, we continually attract and hire specialized talent and acquire complementary businesses to expand our offerings accordingly.
As new research and technologies areas and opportunities arise, we seek to attract and hire specialized talent and acquire complementary businesses to expand our offerings accordingly.
Our internet website and the information contained therein or connected to or linked from our internet web site are not incorporated information and do not constitute a part of this Annual Report. 18 T able of Contents
Our internet website and the information contained therein or connected to or linked from our internet web site are not incorporated information and do not constitute a part of this Annual Report.
CoAuthor by Certara powers efficient and expedited creation of regulatory documents and medical communications.
CoAuthor powers efficient and expedited creation of regulatory documents and medical communications.
Our Phoenix™ PK/PD suite is the life sciences industry’s premier software for managing, analyzing and reporting pharmacokinetic ("PK"), pharmacodynamic ("PD"), and toxicokinetic ("TK") data.
Our Phoenix™ PK/PD suite is the life sciences industry’s premier software for managing, analyzing and reporting pharmacokinetic (“PK”), pharmacodynamic (“PD”), and toxicokinetic (“TK”) data.
Our software products are licensed by more than 57,000 users and are also used by 23 global drug regulatory agencies, including the FDA, Japan’s Pharmaceuticals and Medical Devices Agency (“PMDA”), and China Food and Drug Administration ("cFDA"). Our Solutions We offer differentiated and comprehensive solutions for MIDD, which include software and technology-enabled services.
Our software products are licensed by more than 94,000 users and are also used by 23 global drug regulatory agencies, including the FDA, Japan’s Pharmaceuticals and Medical Devices Agency (the “PMDA”), and China’s National Medical Products Administration (the “NMPA”). Our Solutions We offer differentiated and comprehensive solutions for MIDD, which include software and technology-enabled services.
The GDPR permits data protection authorities to impose large administrative penalties for violations of the GDPR or UK GDPR, including potential fines of up to €20 million or 4% of annual global revenues, whichever is greater, for each law.
Data protection authorities are authorized to impose 17 Table of Contents large administrative penalties for violations of the GDPR or UK GDPR, including potential fines of up to €20 million or 4% of annual global revenues, whichever is greater, for each law.
Customers use our solutions to implement MIDD with the aim of improving certainty, accuracy, commercial success and the speed decisions are made during the drug development process. Life sciences companies make many decisions during the MIDD process that have regulatory considerations.
Customers use our solutions to implement MIDD with the aim of improving certainty, accuracy, commercial success and the speed at which decisions can be made during the drug development process. 8 Table of Contents Life sciences companies make many decisions during the MIDD process that have regulatory considerations.
The scientific principles underlying our work with customers in biosimulation and MIDD must be transparent and fully explainable during the regulatory process, so we have become experts at incorporating data and results into regulatory documents. Our software and regulatory services streamline the creation of regulatory filings and speed regulatory data flow to maximize the chances of successful commercialization.
The scientific principles underlying our work must be transparent and fully explainable during the regulatory process, so we have developed expertise in incorporating data and results into regulatory documents. Our software and regulatory services streamline the creation of regulatory filings and speed regulatory data flow to maximize the chances of successful commercialization.
We have worked with nearly 2,400 life sciences companies and academic institutions and have collaborated on more than 8,000 customer projects in the last decade across a wide variety of therapeutic areas ranging from cancer and hematology to diabetes and hundreds of rare diseases.
Food and Drug Administration (the “FDA”) from 2014 through 2024. We have worked with more than 2,400 life sciences companies and academic institutions and have collaborated on more than 9,000 customer projects in the last decade across a wide variety of therapeutic areas ranging from cancer and hematology to diabetes and hundreds of rare diseases.
We generally compete in the biosimulation software market based on the quality and capabilities of our products, our scientific and technical expertise, our ability to innovate and develop solutions attractive to customers, our regulatory agency partnerships, and price, among other factors. Our technology-enabled services generally compete with in-house teams at biopharmaceutical companies.
We compete in both the biosimulation software market and technology-enabled services markets, with outcomes typically based on the quality and capabilities of our products, our scientific, technical and regulatory expertise, our ability to innovate and develop solutions attractive to customers, our regulatory agency partnerships, and price, among other factors.
We remain focused on reducing the cost, time, and probability of failure of clinical trials for our customers so that they can materially accelerate the availability of future therapies that are needed by patients worldwide.
We remain focused on reducing the cost, time, and probability of failure of clinical trials for our customers so that they may potentially accelerate and lower overall cost of the delivery of future therapies that are needed by patients worldwide.
Quantitative Systems Pharmacology ("QSP") One of the most scientifically exciting areas of biosimulation is QSP, an approach which combines computational modeling and experimental data to examine the relationships between a drug, the biological system, and the disease process. With the 2023 acquisition of Applied Biomath, we boast one of the largest QSP teams of experts in the pharmaceutical industry.
Quantitative Systems Pharmacology (“QSP”) : One of the most scientifically innovative areas of biosimulation is QSP, an approach which combines computational modeling and experimental data to examine the relationships between a drug, the biological system, and the disease process. We believe that Certara has one of the largest teams of QSP experts in the pharmaceutical industry.
From 2013, we have acquired 20 companies of which 13 included software or technology such as Simcyp, the core of our mechanistic biosimulation platform, Pinnacle 21, which enhances our software offerings in data management and the regulatory drug approval process, and Vyasa, which brings state-of-the-art AI capabilities to our end-to-end platform.
Since 2013, we have acquired 21 companies, 14 of which include software or technology, with such key acquisitions including Simcyp, the core of our mechanistic biosimulation platform, Pinnacle 21, which enhances our software offerings in data management and the regulatory drug approval process, and Vyasa TM , which brings state-of-the-art AI capabilities to our end-to-end platform.
Our processes and systems are further protected by trade secrets and expertise, which we secure by requiring and strictly enforcing confidentiality obligations with our employees, contractors, customers, and other third parties, and invention assignment agreements with our employees, as well as through administrative and technical safeguards. 15 T able of Contents We also maintain a portfolio of issued and pending patents in several jurisdictions in which we do business.
Our processes and systems are further protected by trade secrets principles and expert knowledge bases, which we seek to secure by requiring and enforcing confidentiality obligations with our employees, contractors, customers, and other third parties, and invention assignment agreements with our employees, in collaboration with administrative and technical safeguards. 15 Table of Contents We maintain a portfolio of issued and pending patents in several jurisdictions in which we do business.
As of December 31, 2023, we employed 1,391 professionals in 28 countries, including 1,338 full-time employees and 53 part-time employees, of which 433 held PhD. in their respective disciplines, including clinical pharmacology and pharmacometrics. Most of the senior management team and the members of our board of directors also hold either PhDs and/or other advanced degrees.
As of December 31, 2024, we employed 1,546 professionals in 30 countries, including 1,487 full-time employees and 59 part-time employees, of which 408 held PhD or doctor of medicine degrees in their respective disciplines, including clinical pharmacology and pharmacometrics. Most of the senior management team and the members of our board of directors also hold PhDs and/or other advanced degrees.
Code of Federal Regulations, which relates to the creation, modification, maintenance, storage, retrieval, or transmittal of electronic records submitted to the FDA.
Code of Federal Regulations, which relates to the creation, modification, maintenance, archival, retrieval, transmittal or distribution of electronic records under records requirements in FDA regulations and submitted to the FDA.
It enhances productivity and supports compliance requirements by managing complex time-based drug data, the foundation for all PK/PD modeling. • Phoenix NLME - A population modeling and simulation software for nonlinear mixed effects ("NLME") models, a type of pharmacometric model often used by pharmacometricians to model absorption effects. • Pirana Modeling Workbench - A workbench provides modelers with a structure to facilitate the iterative processes used to create population PK/PD models and perform simulations using AI and machine learning resulting in more efficient analysis Preclinical & Clinical Data Pipeline and Automation Suite Our data suite allows customers to efficiently standardize preclinical and clinical data during the drug development process, utilize that data to support MIDD, and efficiently submit it to regulatory authorities for approval.
It enhances productivity and supports compliance requirements by managing complex time-based drug data, the foundation for all PK/PD modeling. • Phoenix NLME – A population modeling and simulation software for nonlinear mixed effects (“NLME”) models, a type of pharmacometric model often used by pharmacometricians to model absorption effects. • Pirana Modeling Workbench – A workbench providing modelers with a structure to facilitate the iterative processes used to create population PK/PD models and perform simulations using AI and machine learning resulting in more efficient analysis.
The major Simcyp products are described below. • Simcyp Discovery – Targeted to scientists working on pre-Investigational New Drug ("IND") and translational stages. • Simcyp Biopharmaceutics – Tailored for formulation scientists, who use it to identify and refine promising drug formulations in a cost-effective manner. • Simcyp Secondary Intelligence - Integrates toxicology with quantitative analysis of large networks of molecular and functional biological changes to identify drug toxicity and adverse drug reactions earlier.
The major Simcyp products are described below. • Simcyp Discovery – Targeted to scientists working on pre-Investigational New Drug (“IND”) and translational stages. • Simcyp Biopharmaceutics – Tailored for formulation scientists, who use it to identify and refine promising drug formulations in a cost-effective manner. • Simcyp Secondary Intelligence – Integrates toxicology with quantitative analysis of large networks of molecular and functional biological changes to identify drug toxicity and adverse drug reactions earlier. 9 Table of Contents Empirical Biosimulation Software Platform In addition to mechanistic modeling, MIDD requires empirical statistical modeling to account for all the data available on a drug including population variability.
We also have applied for and/or obtained and maintain registration in the United States and other countries for numerous trademarks, including Certara, Simcyp, Phoenix, Pinnacle 21, Virtual Twin, WinNonlin, Vyasa, and BaseCase. We pursue trademark registrations to the extent we believe doing so would be beneficial to our competitive position.
We do not currently consider any of our issued patents to be independently material to our business. We maintain registration in the United States and other countries for numerous trademarks, including Certara, Simcyp, Phoenix, Pinnacle 21, Virtual Twin, WinNonlin, Vyasa, and BaseCase. We pursue trademark registrations to the extent we believe doing so would be beneficial to our competitive position.
Advance Our Technology The science, technology, and data behind biosimulation continue to advance rapidly, and our top investment priority is to develop additional functionality and uses for biosimulation to improve decision making and patient outcomes. We release new software, additional features, and upgrades on a frequent and regular basis.
Advance Our Technology The science, technology, and data behind biosimulation continue to advance rapidly, and our top investment priority is to develop additional functionality and uses for biosimulation to improve decision making and patient outcomes.
Continual ongoing development of source code and algorithms as well as new version release of modeling tools also ensures that our proprietary software products are difficult to copy.
Continual ongoing development of source code and algorithms as well as new version release of modeling tools also contribute to the competitive value of our proprietary software products.
Our global commercial team collaborates with our scientists, subject matter experts, and technologists to engage with customers and prospects to understand their needs and offer tailored solutions with our biosimulation software and technology-enabled services.
Sales and Marketing Our sales and marketing functions pursue a coordinated approach with a global commercial team of business development, product management, and marketing experts. Our global commercial team collaborates with our scientists, subject matter experts, and technologists to engage with customers and prospects to understand their needs and offer tailored solutions with our biosimulation software and technology-enabled services.
These analyses are utilized to support the design of clinical trials and other drug development and/or regulatory decisions and are generally expected by regulators to support the justification of approved dosage regimens. 9 T able of Contents According to the FDA, “the single-most important strength of such analyses is its ability to integrate knowledge across the development program and compounds, and biology.” We integrate drug development knowledge by providing customers with a powerful combination of scientific expertise, bringing experts with experience in thousands of projects across the industry, together with our industry-standard software applications.
These analyses are utilized to support the design of clinical trials and other drug development and/or regulatory decisions and are generally expected by regulators to support the justification of approved dosage regimens. We provide customers with a powerful combination of scientific expertise, bringing experts with experience in thousands of projects across the industry, together with our industry-standard software applications.
We also currently rely on the standard contractual clauses to transfer personal data outside the EEA, including to the United States, among other data transfer mechanisms pursuant to the GDPR.
Data Privacy Framework (“EU-U.S DPF”), the UK Extension to the EU-U.S DPF, and the Swiss-U.S. Data Privacy Framework. We also currently rely on the standard contractual clauses to transfer personal data outside the EEA, including to the United States, among other data transfer mechanisms pursuant to the GDPR.
Our employees, distributors, and agents are required to comply with these laws, and we have implemented policies, procedures, and training, to minimize the risk of violating these laws. Our Corporate Information Certara, Inc. was incorporated in Delaware on June 27, 2017.
Our employees, distributors, and agents are required to comply with these laws, and we have implemented policies, procedures, and training, to minimize the risk of violating these laws.
This unique approach has been shared with US, European Union ("EU"), and Japanese regulators, all committed to advancing the use of QSP in drug discovery, development, and regulatory review.
Currently, QSP platforms are available for immunogenicity, immuno-oncology, and capabilities for neurodegenerative diseases are in development. This unique approach has been shared with U.S., European Union (“EU”), and Japanese regulators, all committed to advancing the use of QSP in drug discovery, development, and regulatory review.
Empirical Biosimulation Software Platform In addition to mechanistic modeling, MIDD requires empirical statistical modeling to account for all the data available on a drug including population variability. We have a large group of pharmacometrics scientists, who use clinical and preclinical data to quantify the impact of drugs on diseases and predict clinical efficacy and safety outcomes across various patient populations.
We have a large group of pharmacometrics scientists, who use clinical and preclinical data to quantify the impact of drugs on diseases and predict clinical efficacy and safety outcomes across various patient populations.
The insights delivered by our QSP team help answer critical questions about novel therapies required for development progression, including “which drug candidate is optimal” and “which patient populations are most likely to respond.” Our QSP team works with our QSP technology platform and Certara.AI to deliver a comprehensive solution.
The insights delivered by our QSP team help answer critical questions about novel therapies required for development progression, including “which drug candidate is optimal” and “which patient populations are most likely to respond.” We have differentiated our approach to QSP by building robust, regulatory-ready software platforms for reproducible model development that are further enabled by Certara.AI.
In 2023, we acquired three new businesses including Formedix, which added a metadata repository and clinical data flow automation to our data platform. Additionally, we acquired Applied Biomath, a company focused on QSP to expand and complement Certara’s existing QSP capabilities. Inspire Our People Our nearly 1,400 employees are the key to our success.
More recently, in 2023, we also acquired Formedix, which added a metadata repository and clinical data flow automation to our data platform, and Applied Biomath, a company focused on QSP to expand and complement our existing QSP capabilities.
The collection, retention, use, disclosure and other processing of such information is highly regulated, including under the laws described above. These data privacy and cybersecurity laws govern the use, handling and disclosure of information about individuals.
The collection, retention, use, disclosure and other processing of such information is highly regulated, including under the laws described above. In each use case, we examine and apply the data privacy and cybersecurity laws that may govern our potential processing of any subject data.
We believe we are still in the early stages of a long-term trend that will continue to advance traditional drug discovery and development into a technology-driven era of advanced modeling, analytics, and AI enabled solutions. Our end-to-end platform is well positioned to continue benefiting from market trends.
As technology and analytics become increasingly powerful along with AI and the application of new solutions is validated, we anticipate further demand for these innovations. We believe we are still in the early stages of a long-term trend that will continue to advance traditional drug discovery and development into a technology-driven era of advanced modeling, analytics, and AI enabled solutions.
Our GlobalSubmit™ eCTD submissions management software provides regulatory teams with the tools they need to efficiently publish, validate, and review eCTD submissions. Scientific Informatics for Discovery Certara D360 – D360™ is a scientific informatics system for small molecule and biologics discovery research.
Our 11 Table of Contents GlobalSubmit eCTD submissions management software provides regulatory teams with the tools they need to efficiently publish, validate, and review eCTD submissions.
It provides researchers with self-service data access, integrated data visualizations, analysis and collaboration tools for prioritization, development of Structure Activity Relationship ("SAR") and many other scientific data workflows to improve the effectiveness of data-driven research. In 2023, D360 incorporated AI enabled capabilities including advanced deep learning analytics for automated property predictions.
It provides researchers with self-service data access, integrated data visualizations, analysis and collaboration tools for prioritization, development of Structure Activity Relationship (“SAR”) and many other scientific data workflows to improve the effectiveness of data-driven research. Chemaxon Marvin – Marvin is a universal chemical drawing tool for chemists involved in research and drug discovery.
All our proprietary software products are copyright protected, and further reinforced by contractual provisions in our software license agreements prohibiting our users from reverse engineering, deriving, or otherwise using the source code and underlying algorithms for anything other than the permitted and intended use.
Our proprietary software products are copyright protected, and may be further defined by contractual provisions in our software license agreements limiting permitted uses and also prohibiting specific acts of infringement, such as reverse engineering, deriving, or otherwise using the source code and underlying algorithms in all cases or beyond the terms of a license, as the case may be.
Our Customers Our customers include life sciences companies of all sizes along with contract research organizations, academic institutions, and global regulators. Certara software and service have been used by nearly 2,400 biopharmaceutical companies and academic institutions across 66 countries, including 38 of the top 40 biopharmaceutical companies by R&D spend in 2022.
Certara software and services have been used by more than 2,400 biopharmaceutical companies and academic institutions across 70 countries, including 38 of the top 40 biopharmaceutical companies by R&D spend in 2023.
To help ensure compliance with GLP and GCP, we have established a robust quality management system that includes standard operating procedures, working practice documents and processes, and quality assurance personnel to audit deliverables intended to be used in our customers’ drug and biologic approval applications. 16 T able of Contents Privacy and Cybersecurity Laws The collection, use, disclosure, disposal, protection, and other processing of information about individuals, in particular healthcare data, is highly regulated both in the United States, EU and other jurisdictions, including but not limited to, under the U.S.
To help ensure compliance with GLP and GCP, we have established a robust quality management system that includes standard operating procedures, working practice documents and processes, and quality assurance personnel to audit deliverables intended to be used in our customers’ drug and biologic approval applications.
In 2023, we introduced 32 new software applications and upgrades, including Simcyp Biopharmaceutics and CoAuthor, a structured content authoring tool that utilizes Certara.AI to generate content for regulatory submissions preparation and medical writing. Grow Within Our Existing Customer Base As we continue to expand our portfolio of offerings, we integrate our solutions and sell more across our end-to-end platform.
In 2024, we introduced 36 new software applications and upgrades, including Phoenix Version 8.5, next-generation CoAuthor and Certara Cloud. 13 Table of Contents Grow Within Our Existing Customer Base As we continue to expand our portfolio of offerings, we integrate our solutions and sell more across our end-to-end platform.
The solutions offered by our competitors vary in size, capabilities and breadth. In addition to other solution providers, a significant competitor remains the status quo method of conducting research without fully leveraging modeling, simulation, AI, dataflow and analytics platforms to inform and de-risk decisions across each phase of research and development.
In addition to competition from other solution providers, another challenge is that some biopharmaceutical industry participants may still rely on or over-index the status quo method of conducting research without fully leveraging the benefits of modeling, simulation, AI, dataflow and analytics platforms to inform and de-risk decisions across each phase of research and development.
At the same time, scientific advances are driving increased complexity as the R&D pipeline shifts from small molecules to biologics and cell and gene therapies. With greater investment dollars being spent and increasing competition in the race to develop novel medicines, the speed and efficiency with which drugs are developed and brought to market have never been more critical.
With greater investment dollars being spent and increasing competition in the race to develop novel medicines, the speed and efficiency with which drugs are developed and brought to market have never been more critical. As a result, the demand for and willingness to adopt innovative approaches to discovery, development, and commercialization are rapidly increasing.
Legal developments in Europe have created complexity and uncertainty regarding transfers of personal data from the EEA to the United States, including the Court of Justice of the European Union (the “CJEU”) decision 17 T able of Contents to invalidate the EEA to U.S. personal data transfer framework as well as decisions from regulators in Austria, Denmark, France and Italy regarding transfers made via Google.
Legal developments in Europe have created complexity and uncertainty regarding transfers of personal data from the EEA to the United States, including the European Commission’s adequacy decision with respect to the transfer of personal data from the EU to the United States and establishment of the EU-U.S.
Our internet website and the information contained therein or connected to or linked from our internet web site are not incorporated information and do not constitute a part of this Annual Report or any amendment thereto. Available Information Our Investor Relations website is located at https://ir.certara.com.
Our internet website and the information contained therein or connected to or linked from our internet website are not incorporated information and do not constitute a part of this Annual Report or any amendment thereto. 18 Table of Contents Available Information The SEC maintains a website at www.sec.gov that contains reports, proxy and information statements, and other information about reporting issuers, like us, that file electronically with the SEC.
We deliver software and technology-enabled services. Our strategy is to create and apply validated software applications that can be used broadly in the life science industry. We offer services, leveraging our technology, delivered by scientists with extensive drug development experience to aid our customers in applying biosimulation and MIDD to their specific projects.
We leverage our validated software applications to deliver technology-enabled services. Our services are delivered by scientists with extensive drug development experience who aid our customers in applying biosimulation and MIDD to their specific projects. According to our internal data, Certara’s customers have received 90% or more of all novel drug approvals by the U.S.
The processing of any personal data regarding individuals in the European Economic Area (“EEA”), including personal health data, is subject to the GDPR as of May 25, 2018.
The interpretation and application of these new state privacy laws and their pending regulations are uncertain. The processing of any personal data regarding individuals in the European Economic Area (“EEA”) is subject to the GDPR.
We strive to encourage intellectual curiosity and offer a myriad of professional development opportunities to enable our colleagues to grow their skills. We continue to invest in our people to help them thrive, both personally and professionally, and solidify our position as an employer of choice with an award-winning culture in our industry.
We strive to encourage intellectual curiosity and offer a variety of professional development opportunities to enable our colleagues to grow their skills.
Certara supports applications to all major health agencies, including the FDA, Europe’s European Medicines Agency ("EMA"), Health Canada, Japan’s PMDA, and China’s NMPA. Our Markets Our addressable market within the biopharmaceutical industry is large and rapidly expanding. Our core biosimulation market is estimated at $3.4 billion for 2023 and growing at 17% annually by Grand View Research.
Certara supports applications to all major health agencies, including the FDA, the European Medicines Agency (the “EMA”), Health Canada, Japan’s PMDA, and China’s NMPA. 12 Table of Contents Our Markets Our markets within the biopharmaceutical industry are large and growing. Traditional drug discovery and development is costly and prone to failure.
As a result, the demand for and willingness to adopt innovative approaches to discovery, development, and commercialization are rapidly increasing. Continued development and innovation in software and technology such as biosimulation, virtual trials, and real-world evidence tools are helping biopharmaceutical companies increase efficiency and decrease costs.
Continued development and innovation in software and technology such as biosimulation, virtual trials, and real-world evidence tools are helping biopharmaceutical companies increase efficiency and decrease costs. This is further bolstered by regulatory agencies that have increasingly issued guidance supporting the adoption of many of these innovations.
Our scientists and experts have authored thousands of scientific publications, posters, and articles to share 14 T able of Contents biosimulation knowledge and methods to advance adoption. We also partner with software distributors in global regions to expand our reach. Competition The market for our biosimulation products and related services for the biopharmaceutical industry is competitive and highly fragmented.
Additionally, in an effort to further expand our reach to potential customers, we may partner with software distributors in regions or categories where we may have less dedicated presence or activity today. Competition The market for our biosimulation products and related services for the biopharmaceutical industry is competitive and highly fragmented.
Our scientists and regulatory and market access experts, business developers, marketing professionals, and business leaders work together to ensure a high-quality customer experience and nurture long-term partnerships. As a result, our customer relationships grow steadily over time, driven by higher adoption of biosimulation with additional user licenses and more modules.
We actively cross-sell our software and technology-enabled services throughout our end-to-end platform. Our scientists and regulatory and market access experts, business developers, marketing professionals, and business leaders work together to provide a high-quality customer experience and nurture long-term partnerships.
Expand Our Customer Base Globally 13 T able of Contents We are growing our footprint globally to match that of the biopharmaceutical industry. There are more than 5,500 biopharmaceutical companies worldwide with active R&D pipelines as of January 2023, up from nearly 2,400 in 2011, according to Citeline’s Pharma R&D Annual Review 2023.
There are more than 5,500 biopharmaceutical companies worldwide with active R&D pipelines as of January 2023, up from nearly 2,400 in 2011. As of December 31, 2024, we had employees in 30 countries, including approximately 576 in the US, 688 in Europe, and 180 in Asia.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeWe believe that AI predictive models will continue to enhance the accuracy and usefulness of biosimulation models and be utilized broadly across drug development and we plan to develop and incorporate additional AI technology in future products and services.
Biggest changeWe believe that AI predictive models will continue to enhance the effectiveness of biosimulation models and be utilized impactfully within drug development, and we plan to develop and incorporate additional AI technology in more products and services. 25 Table of Contents As we benefit from the advanced speed and automation of AI, we may encounter new entrants to our sector and competitors deploying and leveraging AI, similarly or more effectively, to achieve outcomes that result in competitive harm and loss of business for our products and services.
All of these events could have a material adverse effect on our business, results of operations or financial condition. Consolidation within the biopharmaceutical industry may reduce the pool of potential customers for our products and services or reduce the number of licenses for our software products.
All of these events could have a material adverse effect on our business, financial condition and results of operations. Consolidation within the biopharmaceutical industry may reduce the pool of potential customers for our products and services or reduce the number of licenses for our software products.
Factors that may affect the renewal rate for our customers and our ability to sell additional solutions to them include: • the price, performance and functionality of our software solutions; • the availability, price, performance and functionality of competing products; • the effectiveness of our professional services; • ability to develop complementary software solutions, applications and services; • the stability, performance and security of our technological infrastructure; and • the business environment of our customers.
Factors that may affect the renewal rate for our customers and our ability to sell additional solutions to them include: • the price, performance and functionality of our software solutions; • the availability, price, performance and functionality of competing products; • the effectiveness of our professional services; • the ability to develop complementary software solutions, applications and services; • the stability, performance and security of our technological infrastructure; and • the business environment of our customers.
Any failure to offer high-quality technical support, or a market perception that we do not offer high-quality support, could adversely affect our renewal rates and our ability to sell additional solutions to existing or to sell to prospective customers. Factors that are not within our control may also contribute to a reduction in our software revenues.
Any failure to offer high-quality technical support, or a market perception that we do not offer high-quality support, could adversely affect our renewal rates and our ability to sell additional solutions to existing customers or to sell to prospective customers. Factors that are not within our control may also contribute to a reduction in our software revenues.
Such actions may include sanctions, such as warning or untitled letters, injunctions, or failure of such regulatory authorities to grant marketing approval of products, delay, suspension, or withdrawal of approvals, license revocation, loss of accreditation; product seizures or recalls; operational restrictions; civil or criminal penalties or prosecutions, damages or fines.
Such actions may include sanctions, such as warning or untitled letters, injunctions, or failure of such regulatory authorities to grant marketing approval of products, delay, suspension, or withdrawal of approvals, license revocation, loss of accreditation; product seizures or recalls; operational restrictions; or civil or criminal penalties or prosecutions, damages or fines.
If all or some jurisdictions within the European Union or the United Kingdom determine that the standard contractual clauses do not provide sufficient safeguards to transfer personal data to the United States, our ability to effect cross-border transfers of personal data will be severely limited or cause us to need to establish systems to maintain certain data in the EEA or UK, and thereby divert resources from other aspects of our operations, all of which may adversely affect our business or we may face governmental enforcement actions, litigation, fines and penalties or adverse publicity, which could have an adverse effect on our reputation and business.
If all or some jurisdictions within the European Union or the United Kingdom determine that the standard contractual clauses do not provide sufficient safeguards to transfer personal data to the United States, our ability to effect cross-border transfers of personal data will be severely limited or cause us to need to establish systems to maintain certain data sovereignty in the EEA or UK, and thereby divert resources from other aspects of our operations, all of which may adversely affect our business or we may face governmental enforcement actions, litigation, fines and penalties or adverse publicity, which could have an adverse effect on our reputation and business.
Although our officers, directors, employees, distributors, and agents are required to comply with these laws, we cannot be sure that our internal policies and procedures will always protect us from liability for violations of these laws committed by persons associated with us, including our employees or third parties acting on our behalf.
Although our officers, directors, employees, distributors, and agents are required to comply with these laws and are subject to our internal policies and procedures, we cannot be sure that our internal policies and procedures will always protect us from liability for violations of these laws committed by persons associated with us, including our employees or third parties acting on our behalf.
Although we have processes intended to fully comply with all license requirements in our software, certain open source software licenses require, among other things, that a licensor that distributes the open source software as a component of the licensor’s proprietary software to provide or offer to provide to the customer-licensee part or all of the source code to the licensor’s proprietary software.
Although we have processes intended to comply with the license requirements in our software, certain open source software licenses require, among other things, that a licensor that distributes the open source software as a component of the licensor’s proprietary software to provide or offer to provide to the customer-licensee part or all of the source code to the licensor’s proprietary software.
Any delays in the release schedule for new or enhanced products or services may delay market acceptance of these products or services and may result in delays in new customer orders for these new or enhanced products or services or the loss of customer orders, which may have a material adverse effect on our business, financial condition and results of operations.
Furthermore, any delays in the release schedule for new or enhanced products or services may delay market acceptance of these products or services and may result in delays in new customer orders for these new or enhanced products or services or the loss of customer orders, which may have a material adverse effect on our business, financial condition and results of operations.
FDA may also issue or finalize guidance documents that may have implications for our customers and our products, platforms, and services. We may be subject to inspection by regulatory authorities in connection with our customers’ marketing applications and other regulatory submissions.
The FDA may also issue or finalize guidance documents that may have implications for our customers and our products, platforms, and services. We may be subject to inspection by regulatory authorities in connection with our customers’ marketing applications and other regulatory submissions.
In addition, political and economic changes, including international conflicts and terrorist acts, throughout the world may interfere with our or our customers’ activities in particular locations and result in a material adverse effect on our business, financial condition and operating results.
In particular, political and economic changes, including international conflicts and terrorist acts, throughout the world may interfere with our or our customers’ activities in particular locations and result in a material adverse effect on our business, financial condition and operating results.
We are a global company with offices in many countries. Disruptions in the infrastructure, either on a local or global scale, caused by these types of events could adversely affect our ability to serve our customers.
We are a global company with offices in many countries, and disruptions in the infrastructure, either on a local or global scale, caused by these types of events could adversely affect our ability to serve our customers.
Additionally, we rely on third parties and their security procedures for the secure storage, processing, maintenance, and transmission of information that is critical to our operations and such third- parties may also suffer cybersecurity incidents.
Additionally, we rely on third parties and their cybersecurity procedures for the secure storage, processing, maintenance, and transmission of information that is critical to our operations and such third parties may also suffer cybersecurity incidents.
The failure to adequately protect our intellectual property and other proprietary rights may have a material adverse effect on our business, results of operations or financial condition.
The failure to adequately protect our intellectual property and other proprietary rights may have a material adverse effect on our business, financial condition and results of operations.
Customers terminate, delay or reduce the scope of these types of contracts for a variety of reasons, including but not limited to: • lack of available funding or financing; • mergers or acquisitions involving the customer; • a change in customer priorities; • impacts to client trial operations; • delay or termination of a specific product candidate development program; and • the customer decides to shift business to a competitor or to use internal resources.
Customers terminate, delay or reduce the scope of these types of contracts for a variety of reasons, including but not limited to: • lack of available funding or financing; • mergers or acquisitions involving the customer; • a change in customer priorities; • impacts to client trial operations; • delay or termination of a specific product candidate development program; and • a decision to shift business to a competitor or to use internal resources.
There has been a steady increase in the recognition by regulatory and academic institutions of the role that modeling and simulation can play in the biopharmaceutical development and approval process, as demonstrated by new regulations and guidance documents describing and encouraging the use of modeling and simulation in the biopharmaceutical discovery, development, testing and approval process, which has directly led to an increase in the demand for our services.
There has been a steady level of recognition by regulatory and academic institutions of the role that modeling and simulation can play in the biopharmaceutical development and approval process, as demonstrated by regulations and guidance documents describing and encouraging the use of modeling and simulation in the biopharmaceutical discovery, development, testing and approval process, which has directly led to an increase in the demand for our services.
The FCPA and the Bribery Act prohibit us and our officers, directors, employees and third parties acting on our behalf, including agents, from corruptly offering, promising, authorizing or providing anything of value to a “foreign official” for the purposes of influencing official decisions or obtaining or retaining business or otherwise obtaining favorable treatment.
Bribery Act prohibit us and our officers, directors, employees and third parties acting on our behalf, including distributors and agents, from corruptly offering, promising, authorizing or providing anything of value to a “foreign official” for the purposes of influencing official decisions or obtaining or retaining business or otherwise obtaining favorable treatment.
Furthermore, as supervisory authorities issue further guidance on personal data export mechanisms, including circumstances where the standard contractual clauses cannot be used, and/or start taking enforcement action, we could suffer additional costs, complaints and/or regulatory investigations or fines, and/or if we are otherwise unable to transfer personal data between and among countries and regions in which we operate, it could affect the manner in which we provide our services, the geographical location or segregation of our relevant systems and operations, and could adversely affect our financial results.
Furthermore, as supervisory authorities issue further guidance on personal data export mechanisms, including circumstances where the standard contractual clauses cannot be used, and/or start taking enforcement action, we could suffer additional costs, complaints and/or regulatory investigations or fines, and/or if we are otherwise unable to transfer personal data between and among countries and regions in which we operate, it could affect the manner in which we provide our services, the geographical location or segregation of our relevant systems and operations.
In addition, there remains the possibility that others will “reverse engineer” our software products in order to introduce competing products, or that others will develop competing technology independently.
In addition, there remains the possibility that others will “reverse engineer” our software products to introduce competing products, or that others will develop competing technology independently.
We have performed an analysis for the period January 1, 2023 through December 31, 2023 and determined no ownership change occurred during this period. In addition, we determined that ownership changes occurred in prior periods and therefore our NOLs and R&D tax credit carryforwards reflect the amounts available after considering such limitations.
We have performed an analysis for the period January 1, 2024 through December 31, 2024 and determined no ownership change occurred during this period. In addition, we determined that ownership changes occurred in prior periods and therefore our NOLs and R&D tax credit carryforwards reflect the amounts available after considering such limitations.
However, the delay, loss or reduction in scope of a large contract or multiple smaller contracts could result in under-utilization of our personnel, a decline in revenue and profitability and adjustments to our bookings, any or all of which could have a material adverse effect on our business, results of operations, financial condition and/or cash flows.
However, the delay, loss or reduction in scope of a large contract or multiple smaller contracts could result in under-utilization of our personnel, a decline in revenue and profitability and adjustments to our bookings, any or all of which could have a material adverse effect on our business, financial condition and results of operations.
Our amended and restated certificate of incorporation provides, subject to limited exceptions, that unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware shall, to the fullest extent permitted by law, be the sole and exclusive forum for any (i) derivative action or proceeding 46 T able of Contents brought on behalf of our company, (ii) action asserting a claim of breach of a fiduciary duty owed by any current or former director, officer, employee or stockholder of our company to the Company or our stockholders, (iii) action asserting a claim against the Company or any current or former director, officer, employee or stockholder of the Company arising pursuant to any provision of the Delaware General Corporation Law (“DGCL”), or our amended and restated certificate of incorporation or our amended and restated bylaws (as either might be amended from time to time) or (iv) action asserting a claim governed by the internal affairs doctrine of the State of Delaware.
Our amended and restated certificate of incorporation provides, subject to limited exceptions, that unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware shall, to the fullest extent permitted by law, be the sole and exclusive forum for any (i) derivative action or proceeding brought on behalf of our company, (ii) action asserting a claim of breach of a fiduciary duty owed by any current or former director, officer, employee or stockholder of our Company to the Company or our stockholders, (iii) action asserting a claim against the Company or any current or former director, officer, employee or stockholder of the Company arising pursuant to any provision of the Delaware General Corporation Law (“DGCL”), or our amended and restated certificate of incorporation or our amended and restated bylaws (as either might be amended from time to time) or (iv) action asserting a claim governed by the internal affairs doctrine of the State of Delaware.
We provide biosimulation software platforms and services to the biopharmaceutical industry, both private and public companies as well as government and academic institutions.
We provide biosimulation software platforms and services to the biopharmaceutical industry, including both private and public companies, as well as government and academic institutions.
Our customers’ expenses could continue to increase as a result of the higher costs of developing more complex drugs and biologics and complying with more onerous government regulations. Furthermore, our customers finance their R&D spending from both private and public sources, including the capital markets.
Our customers’ expenses and obligations could continue to increase as a result of the higher costs of developing more complex drugs and biologics and complying with more onerous government regulations. Furthermore, our customers may finance their R&D spending from both private and public sources, including the capital markets.
In the event we are not able to secure indemnification or the indemnification and any insurance coverage is inadequate to cover our losses, we could suffer significant financial, operational, reputational and other harm and our business, results of operations, financial condition and/or cash flows could be materially adversely affected.
In the event we are not able to secure indemnification or the indemnification and any insurance coverage is inadequate to cover our losses, we could suffer significant financial, operational, reputational and other harm and our business, financial condition and results of operations could be materially adversely affected.
The following factors could result in our failure to achieve the expected synergies: • inability to integrate or benefit from acquired technologies or services in a profitable manner; • unanticipated costs or liabilities associated with the acquisition; • incurrence of acquisition-related costs; • difficulty integrating the accounting systems, operations and personnel of the acquired business; 29 T able of Contents • difficulties and additional expenses associated with supporting legacy products and hosting infrastructure of the acquired business; • difficulty converting the customers of the acquired business onto our solutions and contract terms, including disparities in the revenues, licensing, support or professional services model of the acquired company; • diversion of management’s attention from other business concerns; • adverse effects to our existing business relationships with business partners and customers as a result of the acquisition; • the potential loss of key employees; • use of resources that are needed in other parts of our business; and • use of substantial portions of our available cash to consummate the acquisition.
The following factors could result in our failure to achieve the expected synergies: • inability to integrate or benefit from acquired technologies or services in a profitable manner; • unanticipated costs or liabilities associated with the acquisition; • incurrence of acquisition-related costs; • difficulty integrating the accounting systems, operations and personnel of the acquired business; • difficulties and additional expenses associated with supporting legacy products and hosting infrastructure of the acquired business; • difficulty converting the customers of the acquired business onto our solutions and contract terms, including disparities in the revenues, licensing, support or professional services model of the acquired company; • diversion of management’s attention from other business concerns; 30 Table of Contents • adverse effects to our existing business relationships with business partners and customers as a result of the acquisition; • the potential loss of key employees; • use of resources that are needed in other parts of our business; and • use of substantial portions of our available cash to consummate the acquisition.
Despite this insurance, it is possible that claims or liabilities against us may not have been fully insured, or our insurance carriers may contest coverage, which could have a material adverse impact on our financial position or results of operations.
Despite this insurance, it is possible that claims or liabilities against us may not have been fully insured, or our insurance carriers may contest coverage, which could have a material adverse impact on our business, financial position and results of operations.
The FCPA further requires us to make and keep books, records and accounts that accurately reflect transactions and dispositions of assets and to maintain a system of adequate internal accounting controls. The Bribery Act also prohibits “commercial” bribery and accepting bribes.
The FCPA further requires us to make and keep books, records and accounts that accurately reflect transactions and dispositions of assets and to maintain a system of adequate internal accounting controls. The U.K. Bribery Act also prohibits “commercial” bribery and accepting bribes.
We maintain insurance coverage for protection against many risks of liability, including directors and officers liability, professional errors and omissions, breach of fiduciary duty, and cybersecurity risks. The extent of our insurance coverage is under continuous review and is modified as we deem it necessary.
We maintain insurance coverage for protection against many risks of liability, including directors and officers liability, professional errors and omissions, breach of fiduciary duty, and cybersecurity risks. The extent of our insurance coverage is under regular review and is modified as we deem it necessary.
The evolution of technology systems introduces ever more complex security risks that are difficult to predict and defend against. An increasing number of companies, including those with significant online operations, have recently disclosed breaches of their security, some of which involved sophisticated tactics and techniques allegedly attributable to criminal enterprises or nation-state actors.
The evolution of technology systems introduces ever more complex risks of cybersecurity threats that are difficult to predict and defend against. An increasing number of companies, including those with significant online operations, have recently disclosed breaches of their cybersecurity systems, some of which involved sophisticated tactics and techniques allegedly attributable to criminal enterprises or nation-state actors.
Even though we do not order healthcare services or bill directly to Medicare, Medicaid or other third party payors, as a result of contractual, statutory or regulatory requirements, we may be subject to healthcare fraud and abuse laws of both the federal government and the states in which we conduct our business.
Even though we do not order healthcare services or bill directly to Medicare, Medicaid or other third-party payors, as a result of contractual, statutory or regulatory requirements, we may be subject to healthcare fraud 43 Table of Contents and abuse laws of both the federal government and the states in which we conduct our business.
Our failure to comply with these laws and regulations may expose us to reputational harm as well as significant penalties, including criminal fines, imprisonment, civil fines, disgorgement of profits, injunctions and debarment from government contracts, as well as other remedial measures. Investigations of alleged violations can be expensive and disruptive.
Our failure to comply with these laws and regulations may expose us to reputational harm as well as significant penalties, including criminal 34 Table of Contents fines, imprisonment, civil fines, disgorgement of profits, injunctions and debarment from government contracts, as well as other remedial measures. Investigations of alleged violations can be expensive and disruptive.
We may not be able to effect any of these actions on a timely basis, on commercially reasonable terms or at all, and these actions may not be sufficient to meet our capital requirements. In addition, the terms of our existing or future debt agreements may restrict us from pursuing any of these alternatives.
We may not be able to effect any of these actions on a timely basis, on commercially reasonable terms or at all, and these actions may not be sufficient to meet 44 Table of Contents our capital requirements. In addition, the terms of our existing or future debt agreements may restrict us from pursuing any of these alternatives.
Our amended and restated certificate of incorporation provides that any director who is not employed by us or his or her affiliates will have any duty to refrain from engaging, directly or indirectly, in the same business activities or similar business activities or lines of business in which we operate.
Our amended and restated certificate of incorporation provides that any director who is not employed by us or his or her affiliates does not have a duty to refrain from engaging, directly or indirectly, in the same business activities or similar business activities or lines of business in which we operate.
Violations of these laws and regulations could harm our reputation and business, or materially adversely affect our business, results of operations, financial condition and/or cash flows. We operate in numerous countries around the world and are subject to the FCPA, the Bribery Act and similar anti-bribery laws in the countries in which we operate.
Violations of these laws and regulations could harm our reputation and business, or materially adversely affect our business, results of operations, financial condition and/or cash flows. We operate in numerous countries around the world and are subject to the FCPA, the U.K. Bribery Act and similar anti-bribery laws in the countries and jurisdictions in which we operate.
While the Court of Justice of the European Union (CJEU) upheld the adequacy of the standard contractual clauses (a standard form of contract approved by the European Commission as an adequate personal data transfer mechanism, and potential alternative to the Privacy Shield), it made clear that reliance on them alone may not necessarily be sufficient in all circumstances; and the validity of the standard contractual clauses as a transfer mechanism remains uncertain.
While the Court of Justice of the European Union (CJEU) has upheld the adequacy of the standard contractual clauses (a standard form of contract approved by the European Commission as an adequate personal data transfer mechanism, and potential alternative to the DPF), it made clear that reliance on them alone may not necessarily be sufficient in all circumstances; and the validity of the standard contractual clauses as a transfer mechanism remains uncertain.
Our debt could have important consequences to you, including the following: • it may be difficult for us to satisfy our obligations, including debt service requirements under our outstanding debt, resulting in possible defaults on and acceleration of such indebtedness; • our ability to obtain additional financing for working capital, capital expenditures, debt service requirements or other general corporate purposes may be impaired; • a portion of cash flow from operations may be dedicated to the payment of principal and interest on our debt, therefore reducing our ability to use our cash flow to fund our operations, capital expenditures, future business opportunities, acquisitions and other purposes; • we may be more vulnerable to economic downturns and adverse industry conditions and our flexibility to plan for, or react to, changes in our business or industry may be more limited; • our ability to capitalize on business opportunities and to react to competitive pressures, as compared to our competitors, may be compromised due to our level of debt; and • our ability to borrow additional funds or to refinance debt may be limited.
Our debt could have important consequences, including the following: • it may be difficult for us to satisfy our obligations, including debt service requirements under our outstanding debt, resulting in possible defaults on and acceleration of such indebtedness; • our ability to obtain additional financing for working capital, capital expenditures, debt service requirements or other general corporate purposes may be impaired; • a portion of cash flow from operations may be dedicated to the payment of principal and interest on our debt; • we may be more vulnerable to economic downturns and adverse industry conditions and our flexibility to plan for, or react to, changes in our business or industry may be more limited; • our ability to capitalize on business opportunities and to react to competitive pressures, as compared to our competitors, may be compromised due to our level of debt; and • our ability to borrow additional funds or to refinance debt may be limited.
For example, in 2023, we acquired Formedix Limited, which added a metadata repository and clinical data flow automation to our data platform. We also acquired Applied Biomath, a company focused on quantitative systems pharmacology (QSP) to expand and complement our existing QSP capabilities.
For example, in 2023, we acquired Formedix Limited, which added a metadata repository and clinical data flow automation to our data platform, as well as Applied Biomath, a company focused on quantitative systems pharmacology (QSP) to expand and complement our existing QSP capabilities.
Many of our customers also require that new versions of our software be internally validated before implementing it, which can result in implementation delays or the decision to skip smaller updates altogether. Any errors, defects, disruptions or other performance problems with our products could hurt our reputation and may damage our customers’ businesses.
Many of our customers also require that new versions of our software be internally validated before implementation, which can result in delays or the decision to skip smaller updates altogether. As such, any errors, defects, disruptions or other performance problems with our products could hurt our reputation and may damage our customers’ businesses.
If we are not able to collect amounts due from our customers in a timely fashion due to funding or liquidity challenges or for any other reason, we may be required to write-off significant accounts receivable and recognize bad debt expenses, which could materially and adversely affect our operating results.
If we are not able to collect amounts due from our customers in a timely fashion due to funding or liquidity challenges or for any other reason, we may be required to write-off significant accounts 21 Table of Contents receivable and recognize bad debt expenses, which could materially and adversely affect our operating results.
We have previously relied on our own Privacy Shield certification and our relevant customers’ and third parties’ Privacy Shield certification(s) for the purposes of transferring personal data from the EEA to the United States in compliance with the GDPR’s data export conditions.
We have previously relied on our own DPF certification and our relevant customers’ and third parties’ DPF certification(s) for the purposes of transferring personal data from the EEA to the United States in compliance with the GDPR’s data export conditions.
Alternatively, if a court were to find the choice of forum provisions that will be contained in our amended and restated certificate of incorporation to be inapplicable or unenforceable with respect to one or more of the specified types of actions or proceedings, we may incur additional costs associated with resolving such action in other jurisdictions, which could harm our business, operating results and financial condition.
Alternatively, if a court were to find the choice of forum provisions that will be contained in our amended and restated certificate of incorporation to be inapplicable or unenforceable with respect to one or more of the specified types of actions or proceedings, we may incur additional costs associated with resolving such action in other jurisdictions, which could harm our business, operating results and financial condition. 47 Table of Contents Item 1B.
Regulatory authorities may also disqualify certain data or analyses from consideration in connection with applications for regulatory approvals, which would result in our customers not being able to rely on our services in connection with their regulatory submissions and may subject our customers to additional or repeat clinical trials and delays in the development and regulatory approval process.
Regulatory authorities may also disqualify certain data or analyses from consideration in connection with applications for regulatory approvals, which would result in our customers not being able to rely on our services in connection with their regulatory 35 Table of Contents submissions and may subject our customers to additional or repeat clinical trials and delays in the development and regulatory approval process.
Our insurance may not be adequate to cover losses associated with such events, and in any case, such insurance may not cover all of the types of costs, expenses and losses we could incur to respond to and remediate a security breach.
Our insurance may not be adequate to cover losses associated with 40 Table of Contents such events, and in any case, such insurance may not cover all of the types of costs, expenses and losses we could incur to respond to and remediate a security breach.
Our customers have no obligation to renew their product licenses or subscriptions for our software solutions after the license term expires, which are typically between one and three years, and some of our contracts may be terminated or 26 T able of Contents reduced in scope either immediately or upon notice.
Our customers have no obligation to renew their product licenses or subscriptions for our software solutions after the license term expires, which are typically between one and three years, and some of our contracts may be terminated or reduced in scope either immediately or upon notice.
Should this occur, there could be a material adverse effect on our reputation, business, financial condition, and results of operations. These regulations often govern the handling of information about individuals, including personal health information and require the use of standard contracts, privacy and security standards and other administrative simplification provisions.
Should this occur, there could be a material adverse effect on our business, financial condition and results of operations. Data privacy and security laws and regulations often govern the handling of information about individuals, including personal health information and require the use of standard contracts, privacy and security standards and other administrative simplification provisions.
Furthermore, all of our debt under our Credit Agreement bears interest at variable rates. If these rates were to increase significantly, whether because of an increase in market interest rates or a decrease in our 41 T able of Contents creditworthiness, our ability to borrow additional funds may be reduced and the risks related to our debt would intensify.
Furthermore, all of our debt under our Credit Agreement bears interest at variable rates. If these rates were to increase significantly, whether because of an increase in market interest rates or a decrease in our creditworthiness, our ability to borrow additional funds may be reduced and the risks related to our debt would intensify.
Defense of these claims, regardless of their merit, would involve substantial litigation expense and would be a substantial diversion of employee resources from our business.
Defending these claims, regardless of their merit, would involve substantial litigation expense and would be a substantial diversion of employee resources from our business.
Our future capital requirements will depend on many factors, including: • the growth of our revenue; • the growth of our employee base; 33 T able of Contents • the timing and launch of new products; • the continued expansion of sales and marketing activities; and • mergers and acquisitions of technologies or services complementing or extending our biosimulation, regulatory science and market access businesses.
Our future capital requirements will depend on many factors, including: the growth of our revenue; the growth of our employee base; the timing and launch of new products; the continued expansion of sales and marketing activities; and mergers and acquisitions of technologies or services complementing or extending our biosimulation, regulatory science and market access businesses.
These and other adverse impacts on our customers and economic conditions may cause our customers to delay or cancel projects or significantly scale back their operations or R&D spending and limit the use of third parties, which could have a material adverse effect on our business.
These and other adverse impacts on our customers and general economic conditions may cause our customers to delay or cancel projects or significantly scale back their operations or R&D spending and limit the use of third parties, which could have a material adverse effect on our business, financial condition and results of operations.
Our strategy also includes expanding into new markets, new geographies, and new areas within our existing markets, either organically or by acquiring other companies in these markets. If our strategies are not executed successfully, our products and services may not achieve market acceptance or penetration in targeted new departments within our existing customers or new customers.
Our strategy also includes expanding into new markets, new geographies, and new areas within our existing markets, either organically or by acquiring other companies in these markets. If our strategies are not executed successfully, our products and services may not achieve market acceptance, penetration within our existing customers, or reach of new customers.
Furthermore, our sales process is dependent on the reputation of our solutions and business and on positive recommendations from our existing customers. Any dissatisfaction from existing customers may adversely impact our ability to sell our solutions to new customers.
Furthermore, our sales process is dependent on the reputation of our solutions and business and on positive recommendations from our 27 Table of Contents existing customers. Any dissatisfaction from existing customers may adversely impact our ability to sell our solutions to new customers.
The occurrence of any of these events could result in diminishing demand for our software, a reduction of our 25 T able of Contents revenues, an increase in collection cycles for accounts receivable, and require us to increase our warranty provisions or incur the expense of litigation or substantial liability.
The occurrence of any of these events could result in diminishing demand for our software, a reduction of our revenues, an increase in collection cycles for accounts receivable, and require us to increase our warranty provisions or incur the expense of litigation or substantial liability.
Despite our compliance efforts and activities we cannot assure compliance by our employees or representatives, such as our distributors or resellers, for which we may be held responsible, and any such violation could materially adversely affect our reputation, business, financial condition and results of operations.
Despite our efforts to enforce our policies, we cannot assure compliance by our employees or representatives, such as our distributors or resellers, for which we may be held responsible, and any such violation could materially adversely affect our reputation, business, financial condition and results of operations.
The steps we take to protect these rights may not be adequate to prevent 39 T able of Contents misappropriation of our technology by third parties or may not be adequate under the laws of some foreign countries, which may not protect our intellectual property rights to the same extent as do the laws of the United States.
The steps we take to protect these rights may not be adequate to prevent misappropriation of our technology by third parties or may not be adequate under the laws of some foreign countries, which may not protect our intellectual property rights to the same extent as do the laws of the United States.
Our attempts to protect our intellectual property may be challenged by others or invalidated through administrative process or litigation, and agreement terms that address non-competition are difficult to enforce in many jurisdictions and may not be enforceable in any particular case.
Our attempts to protect our intellectual property may be challenged by others or invalidated through 42 Table of Contents administrative process or litigation, and agreement terms that address non-competition are difficult to enforce in many jurisdictions and may not be enforceable in any particular case.
If we are awarded a government contract, such challenges or protests could be filed even if there are not any valid legal grounds on which to base the protest.
Such challenges or protests could be filed with respect to any government contract we are awarded, even if there are not any valid legal grounds on which to base the protest.
If there is a cybersecurity incident and we know or reasonably suspect that certain personal information has been subject to unauthorized or unlawful access or use, we may need to inform the affected individuals and may be subject to significant fines and penalties.
If there is a cybersecurity incident and we know or reasonably suspect that certain personal information has been subject to unauthorized or unlawful access or use, we may need to inform the affected individuals and make certain public disclosures; moreover, we may be subject to significant fines and penalties.
In the event of a successful claim of infringement against us, we may have to pay substantial damages (including treble damages and attorneys’ fees for willful infringement), pay royalties, redesign our infringing products, be forced to indemnify our customers or collaborators or obtain one or more licenses from third parties, which may be impossible or require substantial time and monetary expenditure.
In the event of a successful claim of infringement against us, we may have to pay substantial damages (including treble damages and attorneys’ fees for willful infringement), pay royalties, be forced to cease developing and commercializing or to redesign the infringing technology or product, be forced to indemnify our customers or collaborators or obtain one or more licenses from third parties, which may be impossible or require substantial time and monetary expenditure.
Our business involves sales to government and state-owned agencies and brings us and others acting on our behalf, into contact with government officials around the world.
Our business involves sales to government and state-owned agencies and brings us and others acting on our behalf, into contact with government officials around the world. The FCPA and the U.K.
We believe that our continued growth in revenue, as well as our ability to improve or maintain margins and profitability, will depend upon, among other factors, our ability to address the challenges, risks and difficulties described elsewhere in this “Risk Factors” section and the extent to which our various product offerings grow and contribute to our results of operations.
We believe that our continued growth in revenue, as well as our ability to improve or maintain margins and profitability, will depend upon, among other factors, our ability to address the challenges, risks and difficulties described elsewhere in this “Risk Factors” section and the extent to which our various product offerings grow (either through internal development or external acquisition) and contribute to our results of operations.
From time to time, we have had to commit unanticipated resources to complete fixed-fee projects, resulting in lower margins and profitability on those projects. We might experience similar situations in the future, which could have a material adverse impact on our results of operations and cash flows.
From time to time, we have had to commit unanticipated resources to complete fixed-fee projects, resulting in lower margins and profitability on those projects. We might experience similar situations in the future, which could have a material adverse impact on our business, financial condition and results of operations.
Future sales, or the perception of future sales, by us or our existing stockholders in the public market could cause the market price for our common stock to decline.
Risks Related to Ownership of Our Common Stock Future sales, or the perception of future sales, of our common stock by us or our existing stockholders in the public market could cause the market price for our common stock to decline.
If our TAM, or the size of any of the various markets in which we 30 T able of Contents operate, proves to be inaccurate, our future growth opportunities may be limited and there could be a material adverse effect on our prospects, business, financial condition and results of operations.
If our TAM, or the size of any of the various markets in which we operate, proves to be inaccurate, our future growth opportunities may be limited and there could be a material adverse effect on our business, financial condition and results of operations.
Because our products and services depend on our customers’ R&D expenditures, our revenues may be materially negatively affected by any economic, competitive, regulatory, demand, or other market impact that decreases our customers’ profitability or their ability to raise capital, which may cause them to decrease or delay R&D spend.
Because our products and services often depend on our customers’ R&D expenditures, our revenues may be materially negatively affected by any economic, competitive, regulatory, demand, or other market impact that decreases our customers’ financial performance, access to funds or their ability to raise capital, which may cause them to decrease or delay R&D spend.
We have government customers and have received government grants, which subject us to risks including early termination, audits, investigations, sanctions, or penalties. We derive limited revenue from contracts with U. S. government, including the FDA and the Center for Disease Control and Prevention within the Department of Health and Human Services.
We have government customers and have received government grants, which subject us to risks including early termination, audits, investigations, sanctions, or penalties. We derive revenue from contracts with U.S. government entities, including the FDA and the Center for Disease Control and Prevention within the Department of Health and Human Services, as well as foreign governments.
Insurance may not cover such claims, may not be sufficient for one or more of such claims and may not continue to be available on terms acceptable to us. A claim brought against us that is uninsured or underinsured could result in unanticipated costs, negatively affecting our business, financial condition and results of operations.
Insurance may not cover such claims, may not be sufficient for one or more of such claims and may not continue to be available on terms acceptable to us. A claim brought against us that is uninsured or underinsured could result in unanticipated costs and could have a material adverse impact on our business, financial condition and results of operations.
In these situations, we attempt to revise the scope of activity from the contract specifications and 27 T able of Contents negotiate contract modifications shifting the additional cost to the customer, but are not always successful.
In these situations, we attempt to revise the scope of activity from the contract specifications and negotiate contract modifications shifting the additional cost to the customer, but are not always successful.
We have acquired multiple businesses and technologies in the past and we regularly evaluate opportunities to acquire or invest in businesses, solutions or technologies that we believe could complement or expand our solutions, enhance our technical capabilities or otherwise offer growth opportunities.
We have acquired multiple businesses and technologies in the past, and we regularly evaluate opportunities to acquire or invest in businesses, solutions or technologies that we believe could complement or expand our solutions, enhance our technical capabilities or otherwise offer growth opportunities as well as opportunities to streamline our existing business.
We may not be able to maintain compliance with these covenants in the future, and in the event that we are not able to maintain compliance, we cannot assure you that we will be able to obtain waivers from the lenders or amend the covenants.
We may not be able to maintain compliance with these covenants in the future, and in the event that we are not able to maintain compliance, we may not be able to obtain waivers from the lenders or amend the covenants.
Some of our software solutions utilize software covered by open source licenses, and we expect to continue to incorporate open source software in our solutions in the future. Open source software is typically freely accessible, usable and modifiable, and is used by our development team in an effort to reduce development costs and speed up the development process.
Some of our software solutions utilize software covered by open source licenses, and we expect to continue to incorporate open source software in our solutions in the future. Open source software is often widely accessible, usable and modifiable and may be used by our development team in an effort to reduce development costs and speed up the development process.
Any of these events could create liability for us and damage our reputation, which could have a material adverse effect on our revenue, business, results of operations and financial condition and the market price of our shares. 36 T able of Contents If our security measures are breached or unauthorized or unlawful access to customer or other proprietary data occurs, our solutions may be perceived as not being secure, customers may reduce the use of or stop using our solutions and we may incur significant liabilities.
Any of these events could create liability for us and damage our reputation, which could have a material adverse effect on our business, financial condition and results of operations. 39 Table of Contents If our cybersecurity measures are breached or unauthorized or unlawful access to customer or other proprietary data occurs, our solutions may be perceived as not being secure, customers may reduce the use of or stop using our solutions and/or we may incur significant liabilities.
If the owner of the copyright of the relevant open source software were to allege that we had not complied with the conditions of one or more of these licenses, we could be required to incur significant legal expenses defending against such allegations and could be subject to significant damages, enjoined from the sale of our solutions that contain the open source software and required to comply with onerous conditions or restrictions on these solutions, which could disrupt the distribution and sale of these solutions.
While we have policies against using this type of open source code in our distributed software, if we were to utilize this type of open source code, and if the owner of the copyright of the relevant open source software were to allege that we had not complied with the conditions of one or more of these licenses, we could be required to incur significant legal expenses defending against such allegations and could be subject to significant damages, enjoined from the sale of our solutions that contain the open source software and required to comply with onerous conditions or restrictions on these solutions, which could disrupt the distribution and sale of these solutions.
These types of contracts customarily contain provisions that give the government substantial rights and remedies, many of which are not typically found in commercial contracts and which are unfavorable to contractors, including provisions that allow the government to unilaterally terminate or modify our federal government contracts, in whole or in part, at the government’s convenience or in the government’s best interest, including if funds become unavailable to the applicable government agency.
These arrangements subject us to statutes and regulations applicable to companies doing business with the government and customarily contain provisions that give the government substantial rights and remedies, many of which are not typically found in commercial contracts and which are unfavorable to contractors, including provisions that allow the government to unilaterally terminate or modify our federal government contracts, in whole or in part, at the government’s convenience or in the government’s best interest, including if funds become unavailable to the applicable government agency.
If academic institutions decide to use competitive products, or develop their own biosimulation products, or reduce the exposure to biosimulation tools in general, familiarity with our products by the future generations of pharmacometricians and clinical pharmacologists will be diminished, which could ultimately result in a reduction in demand for our products. We compete in a competitive and highly fragmented market.
If academic institutions decide to use competitive products, develop their own biosimulation products, or reduce their exposure to biosimulation tools in general, familiarity with our products by the future generations of pharmacometricians and clinical pharmacologists may be diminished, which could ultimately result in a reduction in demand for our products over time.
Changes in government or regulatory policy, or a reversal in the trend toward increasing the acceptance of and reliance upon in silico data (trials, studies, or experiments conducted via computer or computer simulation) in the drug approval process, could decrease the demand for our products and services or lead regulatory authorities to cease use of, or to recommend against the use of, our products and services.
Nonetheless, significant changes in government or regulatory policy, or a reversal in the level of adoption and reliance upon in silico data (trials, studies, or experiments conducted via computer or computer simulation) in the drug approval process, could result in the decrease in demand for our products and services or lead regulatory authorities to cease use of, or to recommend against the use of, our products and services.
If we are not able to reliably meet our data storage and management requirements, or if we experience any failure or interruption in the delivery of our services over the internet, customer satisfaction and our reputation could be harmed and customer contracts may be terminated.
If we are not able to reliably meet our data storage and management or other information technology requirements, or if we experience any technology failures in the delivery of our services over the internet or in the administration of our business, customer satisfaction and our reputation could be harmed and customer contracts may be terminated.
Our hosting services are subject to service-level agreements and, in the event that we fail to meet guaranteed service or performance levels, we could be subject to customer credits or termination of these customer contracts. If the cost of meeting these data storage and management requirements increases, our results of operations could be harmed.
Our hosting services are subject to service-level agreements and, if we fail to meet guaranteed service or performance levels, we could be subject to customer credits or termination of these customer contracts. If the cost of meeting these data storage and 38 Table of Contents management requirements increases, our business, financial condition and results of operations could be harmed.
The market for our biosimulation products and related services for the biopharmaceutical industry is competitive and highly fragmented. In biosimulation software, we compete with other scientific software providers, technology companies, in-house development by biopharmaceutical companies, and certain open source solutions. In the technology-driven services market, we compete with specialized companies, in-house teams at biopharmaceutical companies, and academic and government institutions.
We compete in a competitive and highly fragmented market. The market for our biosimulation products and related services for the biopharmaceutical industry is competitive and highly fragmented. In biosimulation software, we compete with other scientific software providers, technology companies, in-house development by biopharmaceutical companies, and certain open source solutions.
These requirements include, for example: • compliance with complex regulations for procurement, formation, administration, and performance of government contracts under the Federal Acquisition Regulations, agency-specific regulations supplemental to the Federal Acquisition Regulations, and regulations specific to the administration of grants by the U.S. government; • specialized disclosure and accounting requirements unique to government contracts and grants; • mandatory financial and compliance audits that may result in potential liability for price or cost adjustments, recoupment of government funds after such funds have been spent, civil and criminal penalties, or administrative sanctions such as suspension or debarment from doing business with the U.S. government; • public disclosures of certain contract, grant, and company information; and 28 T able of Contents • mandatory socioeconomic compliance requirements, including labor requirements, non-discrimination and affirmative action programs and environmental compliance requirements.
These requirements include, for example: • compliance with complex regulations for procurement, formation, administration, and performance of government contracts under the Federal Acquisition Regulations, agency-specific regulations supplemental to the Federal Acquisition Regulations, and regulations specific to the administration of grants by the U.S. government; • specialized disclosure and accounting requirements unique to government contracts and grants; • mandatory financial and compliance audits that may result in potential liability for price or cost adjustments, recoupment of government funds after such funds have been spent, civil and criminal penalties, or administrative sanctions such as suspension or debarment from doing business with the U.S. government; • public disclosures of certain contract, grant, and company information; and • a wide variety of individual and changing compliance requirements.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeAs of the date of this Annual Report on Form 10-K, we are not aware of any cybersecurity incidents, or a series of related incidents, that have had or are reasonably likely to have a material impact on the Company’s business strategy, results of operations or financial condition.
Biggest changeAs of December 31, 2024, we were not aware of any cybersecurity threats that have materially affected, or are reasonably likely to affect, the Company, including its business strategy, results of operations or financial condition. As discussed more fully under Part 1, Item 1A.
We also disclose information regarding our security and privacy program and practices on our website and in our public-facing notices. Furthermore, we conduct annual cybersecurity awareness training for our employees in order to provide them with the knowledge necessary to navigate the digital landscape securely.
We disclose information regarding our cybersecurity and privacy program and practices on our website and in our public-facing notices. Furthermore, we conduct annual cybersecurity awareness training for our employees in order to provide them with the knowledge necessary to navigate the digital landscape securely.
We maintain robust cybersecurity incident response procedures, which includes escalating incidents to the appropriate level of management, mitigation, remediation and the assessment of materiality of cybersecurity incidents, or a series of related incidents, that may materially affect or are reasonably likely to materially affect our business strategy, results of operations, or financial condition.
We maintain robust cybersecurity threat procedures, which includes escalating threats to the appropriate level of risk management, mitigation, remediation and the assessment of materiality of cybersecurity threats, or a series of related incidents, that may materially affect or are reasonably likely to materially affect our business strategy, results of operations, or financial condition.
We use various methods and tools to identify and assess cybersecurity risks across all assets in our technical landscape, such as vulnerability scanning, penetration testing, threat intelligence, risk assessments, and audits from customers.
For example, we use various methods and tools to identify and assess cybersecurity threats across all assets in our technical landscape, such as vulnerability scanning, penetration testing, threat intelligence, risk assessments, and audits from customers.
Our VP of Information Technology, has 30 years of experience in IT infrastructure, cybersecurity operations, and site reliability engineering for a wide range of software and service organizations, with the last 15 years focused on SaaS software businesses with access to sensitive customer data.
Our Head of Information Technology has more than 30 years of experience in IT infrastructure, cybersecurity operations, and site reliability engineering for a wide range of software and service organizations, with the last 16 years focused on SaaS software businesses with access to sensitive customer data.
They coordinate the response and remediation of cybersecurity incidents and data breaches and report on the status and effectiveness of the security and privacy program to the SPPO, the Board, the Audit Committee, and other stakeholders on a quarterly basis, or more frequently as needed.
The IT Security team and DCSDP coordinate the response and remediation of cybersecurity incidents and data breaches and report on the status and effectiveness of the security and privacy program to the SPPO, the Board and the Audit Committee on a quarterly basis, or more frequently as needed.
For more information on our cybersecurity related risks, see Part 1, Item 1A. Risk Factors entitled “Risks Related to Intellectual Property, Information Technology and Data Privacy” included elsewhere in this Annual Report on Form 10-K. Governance We have established a corporate governance structure that provides oversight and guidance for our security and privacy program.
Risk Factors entitled “Risks Related to Intellectual Property, Information Technology and Data Privacy” included elsewhere in this Annual Report on Form 10-K. Governance We have established a corporate governance structure that provides oversight and guidance for our cybersecurity and data privacy program.
We have established processes to ensure that management is informed about and monitors cybersecurity incident prevention, detection, mitigation, and remediation. These processes include regular reporting, escalation, and communication protocols, as well as periodic reviews and audits of the security and privacy program.
We have established processes to ensure that management is informed about and monitors cybersecurity threat prevention, detection, mitigation, and, if necessary, cybersecurity incident remediation. These processes include regular reporting, escalation, and communication protocols, as well as periodic reviews and audits of our cybersecurity and data privacy program.
Our VP of Information Technology and Director, Compliance Standards & Data Privacy ("DCSDP"), are responsible for the design, implementation, and monitoring of the security and privacy policies, standards, procedures, and controls that govern our information systems and data processing activities.
Our Head of Information Technology and our Director, Compliance Standards & Data Privacy (“DCSDP”), are responsible for the design, implementation, and monitoring of the cybersecurity and data privacy policies, standards, procedures, and controls that govern our information systems and data processing activities.
The SPPO is accountable to the VP of Information Technology, who is the accountable executive for the program. Our function and business unit executive leadership, acting in support of the SPPO and the Board, is responsible for ensuring organizational compliance with data protection regulations and controls across the organization.
The SPPO reports to our Head of Information Technology, who is the accountable executive for our cybersecurity program. Our function and business unit executive leadership, acting in support of our SPPO, is responsible for ensuring organizational compliance with data protection safeguard regulations and related risk controls across our organization.
We have defined roles and responsibilities for the management of cybersecurity risks, including specific executive-level and management-level positions or committees. Our security and privacy program is overseen by our Security and Privacy Program Office (“SPPO”), which is composed of corporate leadership from legal and IT.
We have defined roles and responsibilities for our assessment and management of risks related to cybersecurity threats, including specific executive-level and management-level positions or committees. Our cybersecurity and privacy program is overseen by our Security and Privacy Program Office (“SPPO”), which is composed of corporate leadership from legal and information technology (“IT”).
The Board of Directors (the “Board”) is ultimately responsible for the oversight of the Company’s security and privacy program. The Audit Committee, which supports the Board in the oversight of the program, is focused on cybersecurity and data privacy risk, including incident response planning, timely identification and assessment of incidents, incident recovery and business continuity considerations.
Our Board’s Audit Committee, which supports the Board in its oversight of our cybersecurity and data privacy program, is focused on cybersecurity and data privacy risk, including incident response planning, and timely identification and assessment of cybersecurity threats, cybersecurity incident recovery and business continuity considerations.
We embed security considerations into every aspect of our operations, and our focus encompasses a proactive approach that involves continuous monitoring to swiftly detect and respond to emerging threats to ensure that our customers' information remains secure in the face of evolving cybersecurity challenges.
We embed cybersecurity considerations into every material aspect of our operations, and our focus encompasses a proactive approach that involves continuous monitoring to swiftly detect and respond to cybersecurity threats.
Item 1C. Cybersecurity. We are committed to safeguarding our customers and the sensitive information shared in the application of software and services provided. Our cybersecurity program, risk management and governance reflect our dedication to not only meeting industry standards but exceeding them.
Item 1C. Cybersecurity. We are committed to safeguarding our customers’ information that is shared with us in the application of the software and services we contractually provide to them. Our information systems, including our cybersecurity program, risk management systems and processes and governance, reflect our dedication to meeting industry cybersecurity standards.
We also use third-party assessors and service providers, consultants, and auditors, to support our risk management processes and to provide independent validation and verification of our security posture. We have established processes to oversee and identify risks associated with our use of third-party assessors and service providers, such as due diligence, contractual obligations, monitoring and vendor evaluation and qualification.
We have established processes to oversee and identify risks from cybersecurity threats associated with our use of third-party assessors and service providers, such as due diligence, contractual language, monitoring and periodic vendor evaluation and qualification.
The DCSDP also has 30 years in IT with the last 12 focused on compliance and data privacy issues for Certara. 48 T able of Contents The VP of Information Technology and DCSDP also have a reporting responsibility to the General Counsel, and the Board via the Audit Committee.
The DCSDP also has over 30 years in IT with the last 13 focused on compliance and data privacy issues for Certara. Our Head of Information Technology and DCSDP report to our General Counsel, as well as to our Board through its Audit Committee.
Risk Management and Strategy We recognize that cybersecurity risks pose a significant threat to our business, customers, and stakeholders, and we have implemented a comprehensive security and privacy program to address these risks.
Risk Management and Strategy We have implemented a comprehensive cybersecurity and data privacy program as part of our risk management processes to assess, identify and manage risks posed to our business by cybersecurity threats.
With a foundation grounded in industry best practices, including NIST 800-53, ISO 27001, CIS Top 20, OWASP Top 10, and Security by 47 T able of Contents Design, we prioritize the identification and assessment of risks to create a protective shield around our customers' data.
Our cybersecurity risk management processes are grounded in industry best practices, including NIST 800-53, ISO 27001, CIS Top 18, OWASP Top 10, and Security by Design and are intended to prevent adverse effects on the confidentiality, integrity and availability of our information systems and information residing therein.
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This foundation guides our processes for assessing, identifying, and managing risks related to cybersecurity threats and incidents, as well as ensuring compliance with legal and contractual obligations. Our risk management processes are integrated into our overall business strategy and operations.
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Our cybersecurity processes have been integrated into our risk management processes in order for us to assess, identify, and manage risks related to cybersecurity threats and ensure compliance with our legal and contractual obligations, which require us to safeguard the confidential and sensitive information provided to us by our customers.
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We regularly engage third-party assessors, service providers, consultants, and auditors to support and review our risk management processes and to provide independent validation and verification of our security posture.
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Risk Factors, the sophistication of cyber threats continues to increase, and the preventative actions the Company takes to reduce the risk of cyber incidents and protect its systems and information may be insufficient.
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No matter how well designed or implemented the Company’s cybersecurity controls are, it will not be able to anticipate all security breaches, and it may not be able to implement effective preventive measures against cybersecurity breaches in a timely manner. See Part 1, 48 Table of Contents Item 1A.
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Our Board of Directors (the “Board”) is responsible for the oversight of our cybersecurity and privacy program and risks from cybersecurity threats.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeAs of December 31, 2023, our material operating locations, which we define as the facilities we lease with more than 10,000 square feet, were as follows: LOCATION APPROXIMATE SQUARE FOOTAGE LEASE EXPIRATION DATES Wilmington, Delaware, USA 18,250 2/28/2027 Princeton, New Jersey, USA 17,560 6/30/2025 Sheffield, UK 13,910 1/28/2028 Raleigh, North Carolina, USA 11,250 1/31/2028
Biggest changeWe believe that our facilities are suitable and adequate for our operations and we anticipate that additional suitable space will be available when needed. 49 Table of Contents As of December 31, 2024, our material active operating locations, which we define as the facilities we lease with more than 10,000 square feet, were as follows: LOCATION APPROXIMATE SQUARE FOOTAGE LEASE EXPIRATION DATES Sheffield, UK 13,910 1/28/2028 Raleigh, North Carolina, USA 11,250 1/31/2028 Radnor, Pennsylvania, USA 19,371 12/31/2034
Item 2. Properties. As of December 31, 2023, we had 36 offices in 16 countries, with our headquarters located in Princeton, New Jersey. We lease or sublease all of our offices. None of our facilities are used for anything other than general office use.
Item 2. Properties. As of December 31, 2024, we had 36 offices in 17 countries, with our headquarters located in Radnor, Pennsylvania. We lease or sublease all of our offices. None of our facilities are used for anything other than general office use.
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We believe that our facilities are suitable and adequate for our operations and we anticipate that additional suitable space will be available when needed.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Item 3. Legal Proceedings. From time to time, we may become involved in legal proceedings arising in the ordinary course of our business.
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Item 3. Legal Proceedings. To the extent applicable, the information required with respect to this item can be found under Note 11. “Commitments and Contingencies” in the notes to the consolidated financial statements and is incorporated by reference into this Item 3. Item 4. Mine Safety Disclosures. Not applicable. 50 Table of Contents PART II
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Management believes that there is no pending or threatened litigation to which the Company and any of its subsidiaries, or any of the Company or its subsidiaries’ properties is the subject of or party to, which, individually or in the aggregate, would have a material adverse effect on our business, results of operations, financial condition and/or cash flows. Item 4.
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Mine Safety Disclosures. Not applicable. 49 T able of Contents PART II

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeItem 4. Mine Safety Disclosures 49 PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 50 Item 6. [Reserved] 51 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 52 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 79 Item 8.
Biggest changeItem 4. Mine Safety Disclosures 50 PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 51 Item 6. [Reserved] 52 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 53 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 75 Item 8.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeAs discussed above, we have never declared or paid a cash dividend on our common stock and do not anticipate declaring or paying a cash dividend in the foreseeable future. 50 T able of Contents Issuer Purchases of Equity Securities The following table summarizes our purchases of common stock in the three months ended December 31, 2023: Total Number of Shares Purchased(a) Weighted Average Price Paid per Share Total Number of Shares Purchased Under Announced Programs Approximate Dollar Value of Shares That May Yet be Purchased Under Announced Programs 10/1/2023 to 10/31/2023 3,986 $ 14.54 0 $ 0 11/1/2023 to 11/30/2023 428 $ 12.19 0 $ 0 12/1/2023 to 12/31/2023 1,048 $ 14.41 0 $ 0 Total 5,462 $ 14.33 0 __________________________________ (a) Shares purchased were due to shares delivered by employees to us for the payment of taxes resulting from issuance of common stock upon the vesting of restricted stock or restricted stock units (RSUs) relating to stock-based compensation plans.
Biggest changeAs discussed above, we have never declared or paid a cash dividend on our common stock and do not anticipate declaring or paying a cash dividend in the foreseeable future. 51 Table of Contents Issuer Purchases of Equity Securities The following table summarizes our purchases of common stock in the three months ended December 31, 2024: Total Number of Shares Purchased(a) Weighted Average Price Paid per Share Total Number of Shares Purchased Under Announced Programs Approximate Dollar Value of Shares That May Yet be Purchased Under Announced Programs 10/1/2024 to 10/31/2024 37,989 $ 11.68 0 $ 0 11/1/2024 to 11/30/2024 10,927 $ 10.22 0 $ 0 12/1/2024 to 12/31/2024 9,004 $ 10.54 0 $ 0 Total 57,920 $ 11.23 0 __________________________________ (a) Shares purchased were due to shares delivered by employees to us for the payment of taxes resulting from issuance of common stock upon the vesting of restricted stock or restricted stock units (RSUs) relating to stock-based compensation plans.
Any determination to declare dividends in the future will be at the discretion of our Board, subject to applicable laws, and will be dependent on a number of factors, including our earnings, capital requirements and overall financial condition.
Any determination to declare dividends in the future will be at the discretion of our board of directors, subject to applicable laws, and will be dependent on a number of factors, including our earnings, capital requirements and overall financial condition.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. Market Information Our common stock has been listed on The Nasdaq Global Select Market (the “Nasdaq”) under the symbol “CERT” since December 11, 2020. Prior to that date, there was no public trading market for our common stock.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. Market Information Our common stock has been listed on The Nasdaq Stock Market LLC (“Nasdaq”) under the symbol “CERT” since December 11, 2020. Prior to that date, there was no public trading market for our common stock.
The following graph compares (i) the cumulative total stockholder return on our common stock from December 11, 2020 (the date our common stock commenced trading on the Nasdaq) through December 31, 2023 with (ii) the cumulative total return of the NASDAQ Index and the S&P Small Cap 600 HealthCare Index over the same period, assuming the investment of $100 in our common stock and in each index on December 11, 2020 and the reinvestment of dividends.
See “Risk Factors—Risks Related to Ownership of Our Common Stock.” Stock Performance Graph The following graph compares (i) the cumulative total stockholder return on our common stock from December 11, 2020 (the date our common stock commenced trading on Nasdaq through December 31, 2024 with (ii) the cumulative total return of the NASDAQ Index and the S&P Small Cap 600 HealthCare Index over the same period, assuming the investment of $100 in our common stock and in each index on December 11, 2020 and the reinvestment of dividends.
As of February 15, 2024, there were 34 holders of record of our common stock as reported by our transfer agent.
As of February 17, 2025, there were 30 holders of record of our common stock as reported by our transfer agent.
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Stock Performance Graph This performance graph shall not be deemed “soliciting material” or to be “filed” with the Securities and Exchange Commission, or the SEC, for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or the Exchange Act, or otherwise subject to the liabilities under that Section, and shall not be deemed to be incorporated by reference into any of our filings under the Securities Act of 1933, as amended, or the Securities Act.
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Unregistered Sales of Equity Securities (b) There were no unregistered sales of equity securities during the fourth quarter of fiscal 2024.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeOther companies, including other companies in our industry, may not use these measures and may calculate both differently than as presented, limiting the usefulness as a comparative measure. 56 T able of Contents The following table reconciles net income (loss) to adjusted EBITDA : YEAR ENDED DECEMBER 31, 2023 2022 2021 (in thousands) Net income (loss)(a) $ (55,357) $ 14,731 $ (13,266) Interest expense(a) 22,916 17,773 16,837 Interest income(a) (9,317) (1,294) (271) Provision for income taxes(a) 214 4,024 9,891 Depreciation and amortization expense(a) 1,552 1,731 2,135 Intangible asset amortization(a) 54,519 50,739 42,980 Currency (gain) loss(a) 638 (3,166) (175) Equity-based compensation expense(b) 28,300 30,345 29,483 Change in fair value of contingent consideration(d) 24,118 — — Goodwill impairment expense(e) 46,984 — — Acquisition-related expenses(f) 6,064 2,233 11,241 Integration expense(g) 121 — 31 Transaction-related expenses(h) — 1,136 2,754 Severance expenses(i) — 653 60 Reorganization expense(j) 1,660 — — Loss on disposal of fixed assets(k) 65 169 351 Executive recruiting expense(l) 631 139 733 First-year Sarbanes-Oxley implementation costs(m) — 961 929 Adjusted EBITDA $ 123,108 $ 120,174 $ 103,713 57 T able of Contents The following table reconciles net income (loss) to adjusted net income: YEAR ENDED DECEMBER 31, 2023 2022 2021 (in thousands) Net income (loss) (a) $ (55,357) $ 14,731 $ (13,266) Currency (gain) loss(a) 638 (3,166) (175) Equity-based compensation expense(b) 28,300 30,345 29,483 Amortization of acquisition-related intangible assets(c) 45,838 43,822 36,413 Change in fair value of contingent consideration(d) 24,118 — — Goodwill impairment expense(e) 46,984 — — Acquisition-related expenses(f) 6,064 2,233 11,241 Integration expense(g) 121 — 31 Transaction-related expenses(h) — 1,136 2,754 Severance expenses(i) — 653 60 Reorganization expense(j) 1,660 — — Loss on disposal of fixed assets(k) 65 169 351 Executive recruiting expense(l) 631 139 733 First-year Sarbanes-Oxley implementation costs(m) — 961 929 Income tax expense impact of adjustments(n) (30,041) (17,633) (15,344) Adjusted net income $ 69,021 $ 73,390 $ 53,210 58 T able of Contents The following table reconciles diluted earnings per share to adjusted diluted earnings per share: YEAR ENDED DECEMBER 31, 2023 2022 2021 Diluted earnings per share(a) $ (0.35) $ 0.09 $ (0.09) Currency (gain) loss(a) — (0.02) — Equity-based compensation expense(b) 0.18 0.19 0.19 Amortization of acquisition-related intangible assets(c) 0.29 0.28 0.24 Change in fair value of contingent consideration(d) 0.15 — — Goodwill impairment expense(e) 0.30 — — Acquisition-related expenses(f) 0.04 0.01 0.07 Integration expense(g) — — — Transaction-related expenses(h) — 0.01 0.02 Severance expenses(i) — — — Reorganization expense(j) 0.01 — — Loss on disposal of fixed assets(k) — — — Executive recruiting expense(l) — — — First-year Sarbanes-Oxley implementation costs(m) — 0.01 0.01 Income tax expense impact of adjustments(n) (0.19) (0.11) (0.10) Adjusted diluted earnings per share $ 0.43 $ 0.46 $ 0.34 Basic weighted average common shares outstanding 158,936,251 156,876,942 149,842,668 Effect of potentially dilutive shares outstanding (o) 943,886 2,477,452 4,401,021 Adjusted diluted weighted average common shares outstanding 159,880,137 $ 159,354,394 154,243,689 __________________________________ (a) Represents amounts as determined under GAAP.
Biggest changeThe following table reconciles net income (loss) to adjusted EBITDA : YEAR ENDED DECEMBER 31, 2024 2023 2022 (in thousands) Net income (loss)(a) $ (12,051) $ (55,357) $ 14,731 Interest expense(a) 21,520 22,916 17,773 Interest income(a) (9,034) (9,317) (1,294) (Benefit from) Provision for income taxes(a) (5,133) 214 4,024 Depreciation and amortization expense(a) 1,994 1,552 1,731 Intangible asset amortization(a) 66,039 54,519 50,739 Currency (gain) loss(a) 2,344 638 (3,166) Equity-based compensation expense(b) 34,774 28,300 30,345 Change in fair value of contingent consideration(d) 8,089 24,118 — Goodwill impairment expense(e) — 46,984 — Acquisition-related expenses(f) 5,426 6,064 2,233 Integration expense(g) — 121 — Transaction-related expenses(h) 2,625 — 1,136 Severance expenses(i) 183 — 653 Reorganization expense(j) 4,223 1,660 — Loss on disposal of fixed assets(k) 401 65 169 Executive recruiting expense(l) 646 631 139 First-year Sarbanes-Oxley implementation costs(m) — — 961 Adjusted EBITDA $ 122,046 $ 123,108 $ 120,174 57 Table of Contents The following table reconciles net income (loss) to adjusted net income: YEAR ENDED DECEMBER 31, 2024 2023 2022 (in thousands) Net income (loss) (a) $ (12,051) $ (55,357) $ 14,731 Currency (gain) loss(a) 2,344 638 (3,166) Equity-based compensation expense(b) 34,774 28,300 30,345 Amortization of acquisition-related intangible assets(c) 54,431 45,838 43,822 Change in fair value of contingent consideration(d) 8,089 24,118 — Goodwill impairment expense(e) — 46,984 — Acquisition-related expenses(f) 5,426 6,064 2,233 Integration expense(g) — 121 — Transaction-related expenses(h) 2,625 — 1,136 Severance expenses(i) 183 — 653 Reorganization expense(j) 4,223 1,660 — Loss on disposal of fixed assets(k) 401 65 169 Executive recruiting expense(l) 646 631 139 First-year Sarbanes-Oxley implementation costs(m) — — 961 Income tax expense impact of adjustments(n) (28,220) (30,041) (17,633) Adjusted net income $ 72,871 $ 69,021 $ 73,390 58 Table of Contents The following table reconciles diluted earnings per share to adjusted diluted earnings per share: YEAR ENDED DECEMBER 31, 2024 2023 2022 Diluted earnings per share(a) $ (0.08) $ (0.35) $ 0.09 Currency (gain) loss(a) 0.02 — (0.02) Equity-based compensation expense(b) 0.22 0.18 0.19 Amortization of acquisition-related intangible assets(c) 0.34 0.29 0.28 Change in fair value of contingent consideration(d) 0.05 0.15 — Goodwill impairment expense(e) — 0.30 — Acquisition-related expenses(f) 0.03 0.04 0.01 Integration expense(g) — — — Transaction-related expenses(h) 0.02 — 0.01 Severance expenses(i) — — — Reorganization expense(j) 0.03 0.01 — Loss on disposal of fixed assets(k) — — — Executive recruiting expense(l) — — — First-year Sarbanes-Oxley implementation costs(m) — — 0.01 Income tax expense impact of adjustments(n) (0.18) (0.19) (0.11) Adjusted diluted earnings per share $ 0.45 $ 0.43 $ 0.46 Basic weighted average common shares outstanding 160,392,805 158,936,251 156,876,942 Effect of potentially dilutive shares outstanding (o) 635,547 943,886 2,477,452 Adjusted diluted weighted average common shares outstanding 161,028,352 $ 159,880,137 159,354,394 __________________________________ (a) Represents a measure determined under GAAP.
(d) Represents expense associated with remeasuring fair value of contingent consideration of business acquisition. (e) Represents expense associated with goodwill impairment charge. (f) Represents costs associated with mergers and acquisitions and any retention bonuses pursuant to the acquisitions. (g) Represents integration costs related to post - acquisition integration activities.
(d) Represents expense associated with remeasuring fair value of contingent consideration of business acquisitions. (e) Represents expense associated with goodwill impairment charge. (f) Represents costs associated with mergers and acquisitions and any retention bonuses pursuant to the acquisitions. (g) Represents integration costs related to post-acquisition integration activities.
We recognize subscription fees ratably over the term of the subscription, usually one to three years. Any subscription revenue paid upfront that is not recognized in the current period is included in deferred revenue in our consolidated balance sheet until earned. • Software maintenance: Software maintenance revenue includes fees for providing updates and technical support for software offerings.
We recognize subscription fees ratably over the term of the subscription, usually over one to three years. Any subscription revenue paid upfront that is not recognized in the current period is included in deferred revenue in our consolidated balance sheet until earned. • Software maintenance: Software maintenance revenue includes fees for providing updates and technical support for software offerings.
The fair value of regulatory writing reporting unit was determined to be less than its carrying value, resulting in a goodwill impairment charge of $47.0 million for the reporting unit. The fair value of that reporting unit was estimated using a combination of the discounted cash flow method and the guideline public company method.
The fair value of the regulatory writing reporting unit was determined to be less than its carrying value, resulting in a goodwill impairment charge of $47.0 million for the reporting unit. The fair value of that reporting unit was estimated using a combination of the discounted cash flow method and the guideline public company method.
The quantitative assessments resulted in no impairment as the estimated fair value of each reporting unit exceeded its carrying value. During the third quarter of 2023, we performed an interim goodwill impairment test for regulatory writing reporting unit, which was integrated into the CDDS reporting unit at the end of third quarter 2023.
The quantitative assessments resulted in no impairment as the estimated fair value of each reporting unit exceeded its carrying value. During the third quarter of 2023, we performed an interim goodwill impairment test for the prior regulatory writing reporting unit, which was integrated into the CDDS reporting unit at the end of third quarter of 2023.
The total estimated consideration included a portion of contingent consideration that is payable over the next two years in cash, not to exceed $2.0 million. The fair value of the contingent consideration was estimated to be $0.8 million as of the acquisition date.
The total estimated consideration included a portion of contingent consideration that is payable over the next two years following the acquisition in cash, not to exceed $2.0 million. The fair value of the contingent consideration was estimated to be $0.8 million as of the acquisition date.
The second step requires to measure the largest amount of benefit, determined on a cumulative probability basis, that is more likely than not to be realized upon ultimate settlement with tax authority.
The second step requires the Company to measure the largest amount of benefit, determined on a cumulative probability basis, that is more likely than not to be realized upon ultimate settlement with tax authority.
We monitor two key performance indicators to evaluate retention and expansion: new bookings and renewal rates. • Bookings: Our new bookings represent the estimated contract value of a signed contract or purchase order where there is sufficient or reasonable certainty about the customer’s ability and intent to fund and commence the software and/or services.
We monitor two key performance indicators to evaluate retention and expansion: new bookings and net retention rates. • Bookings: Our new bookings represent the estimated contract value of a signed contract or purchase order where there is sufficient or reasonable certainty about the customer’s ability and intent to fund and commence the software and/or services.
(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 amortization costs associated with acquired intangible assets in connection with business acquisitions.
(b) Represents expense related to equity-based compensation. Equity-based compensation has been, and we expect will continue to be for the foreseeable future, a recurring expense in our business and an important part of our compensation strategy. (c) Represents amortization costs associated with acquired intangible assets in connection with business acquisitions.
We plan to continue to invest in sales and marketing to increase penetration of our existing client base and expand to new clients. • Research and Development. Research and development expense consist primarily of employee-related expenses, equity-based compensation, third-party consulting, allocated software costs and tax credits.
We plan to continue to invest in sales and marketing to increase penetration of our existing client base and expand to new clients. • Research and Development. Research and development expense consists primarily of employee-related expenses, equity-based compensation, third-party consulting, allocated software costs and tax credits.
We recognize benefits for these uncertain tax positions in the period during which, based on all available evidence, we believe it is more likely than not (a likelihood of more than 50%) that the position will be sustained upon examination. This process is inherently subjective since it requires our assessment of the probability of future outcomes.
We recognize benefits for these uncertain tax positions in the period during which, based on all available evidence, we believe it is more likely than not (a likelihood of more than 50%) that the position will be sustained upon examination. This process is inherently subjective since 74 Table of Contents it requires our assessment of the probability of future outcomes.
Revenue allocated to maintenance services is recognized ratably over the contract term beginning on the delivery date of each offering. Maintenance contracts generally have a term of one year. While transfer of control of the software training and implementation performance obligations are over time, the services are typically started and completed within a few days.
Revenue allocated to maintenance services is recognized ratably over the contract term beginning on the delivery date of each offering. 72 Table of Contents Maintenance contracts generally have a term of one year. While transfer of control of the software training and implementation performance obligations are over time, the services are typically started and completed within a few days.
Revenues are recognized over the time services are performed for time and materials, and over time by estimating progress to completion for fixed fee and prepaid services. Cost of Revenues Cost of revenues consists primarily of employee related expenses, equity-based compensation, the costs of third-party subcontractors, travel costs, distributor fees, amortization of capitalized software and allocated overhead.
Revenues are recognized over the time services are performed for time and materials, and over time by estimating progress to completion for fixed fee and prepaid services. 60 Table of Contents Cost of Revenues Cost of revenues consists primarily of employee related expenses, equity-based compensation, the costs of third-party subcontractors, travel costs, distributor fees, amortization of capitalized software and allocated overhead.
We have worked with nearly 2,400 life sciences companies and academic institutions and have collaborated on more than 8,000 customer projects in the last decade across a wide variety of therapeutic areas ranging from cancer and hematology to diabetes and hundreds of rare diseases.
We have worked with more than 2,400 life sciences companies and academic institutions and have collaborated on more than 9,000 customer projects in the last decade across a wide variety of therapeutic areas ranging from cancer and hematology to diabetes and hundreds of rare diseases.
Future payments of contingent consideration are based on achieving certain eligible revenue targets for each of the twelve-month periods ended December 31, 2023 and 2024, respectively. The fair value of the contingent consideration was estimated to be $5.4 million as of the acquisition date.
The fair value of the contingent consideration related to revenue threshold was estimated to be $4.4 million as of the acquisition date. Future payments of contingent consideration are based on achieving certain eligible revenue targets for each of the twelve-month periods ended December 31, 2023 and 2024, respectively.
Our software and regulatory services streamline the creation of regulatory filings and speed regulatory data flow to maximize the chances of successful commercialization. 52 T able of Contents AI and machine learning technologies are being incorporated across our software and services portfolios providing opportunities to expand the number of data sources utilized, better predict outcomes, and streamline reporting.
Our software and regulatory services streamline the creation of regulatory filings and speed regulatory data flow to maximize the chances of successful commercialization. AI and machine learning technologies are being incorporated across our software and services portfolios providing opportunities to expand the number of data sources utilized, better predict outcomes, and streamline reporting.
Since 2014, customers who leverage our solutions have received more than 90% of all new drug approvals by FDA.
Since 2014, customers who leverage our solutions have received 90% or more of all new drug approvals by FDA.
Components of Results of Operations Revenues Our business generates revenue from the sales of software products and delivery of consulting services. • Software.
Components of Results of Operations Revenues Our business generates revenue from the sale of software products and delivery of consulting services. • Software.
Liquidity and Capital Resources We have consistently generated positive cash flow from operations, providing $82.8 million, $92.5 million, and $60.4 million as a source of funds each year for the years ended December 31, 2023, 2022, and 2021, respectively.
Liquidity and Capital Resources We have consistently generated positive cash flow from operations, providing $80.5 million, $82.8 million, and $92.5 million as a source of funds each year for the years ended December 31, 2024, 2023, and 2022, respectively.
Net cash provided by operating activities for the year ended December 31, 2023 was $82.8 million, compared to $92.5 million for the year ended December 31, 2022.
Net cash provided by operating activities for the year ended December 31, 2024 was $80.5 million, compared to $82.8 million for the year ended December 31, 2023.
As a result, a valuation allowance of $31.5 million is recorded at December 31, 2023. Off-Balance Sheet Arrangements During the periods presented, we did not have, and currently we do not have, any significant off-balance sheet arrangements, as defined under the rules and regulations of the SEC.
As a result, a valuation allowance of $24 million is recorded at December 31, 2024. 71 Table of Contents Off-Balance Sheet Arrangements During the periods presented, we did not have, and currently we do not have, any significant off-balance sheet arrangements, as defined under the rules and regulations of the SEC.
While we believe we have, and will be able to generate, sufficient liquidity to fund our operations for the foreseeable future, our sources of liquidity could be affected by factors described under “Risk Factors” elsewhere in this report. 72 T able of Contents Cash Flows The following table presents a summary of our cash flows for the periods shown: YEAR ENDED DECEMBER 31, 2023 2022 2021 (in thousands) Net cash provided by operating activities $ 82,755 $ 92,543 $ 60,388 Net cash used in investing activities (79,550) (27,837) (269,922) Net cash provided by (used in) financing activities (9,447) (7,363) 123,391 Effect due to foreign exchange rate changes on cash, cash equivalents, and restricted cash 1,505 (4,279) (524) Net(decrease) increase in cash, cash equivalents and restricted cash $ (4,737) $ 53,064 $ (86,667) Cash paid for interest 19,089 17,268 14,169 Cash paid for income taxes 19,320 10,141 8,595 Operating Activities Our cash flows from operating activities primarily include net income (loss) adjusted for (i) non-cash items included in net income (loss), such as provisions for credit losses, depreciation and amortization, stock-based compensation, deferred taxes and other non-cash items and (ii) changes in the balances of operating assets and liabilities.
While we believe we have, and will be able to generate, sufficient liquidity to fund our operations for the foreseeable future, our sources of liquidity could be affected by factors described under “Risk Factors” elsewhere in this report. 69 Table of Contents Cash Flows The following table presents a summary of our cash flows for the periods shown: YEAR ENDED DECEMBER 31, 2024 2023 2022 (in thousands) Net cash provided by operating activities $ 80,466 $ 82,755 $ 92,543 Net cash used in investing activities (112,368) (79,550) (27,837) Net cash used in financing activities (21,010) (9,447) (7,363) Effect due to foreign exchange rate changes on cash, cash equivalents, and restricted cash (2,856) 1,505 (4,279) Net (decrease) increase in cash, cash equivalents and restricted cash $ (55,768) $ (4,737) $ 53,064 Cash paid for interest 22,737 19,089 17,268 Cash paid for income taxes 14,658 19,320 10,141 Operating Activities Our cash flows from operating activities primarily include net income (loss) adjusted for (i) non-cash items included in net income (loss), such as provisions for credit losses, depreciation and amortization, stock-based compensation, deferred taxes and other non-cash items and (ii) changes in the balances of operating assets and liabilities.
The contingent considerations for all acquisitions were classified as a liability and included in accrued expense and other long term liabilities on our consolidated balance sheet. The contingent consideration related with revenue threshold are remeasured on a recurring basis at fair value for each reporting period.
The contingent considerations for all acquisitions were classified as liability and included in accrued expense and other long term liabilities on the Company’s consolidated balance sheet. The contingent consideration related to eligible revenues that are remeasured on a recurring basis at fair value for each reporting period.
The change in investing activities was primarily due to a $48.9 million increase in cash payments in connection with business acquisitions, and a $2.4 million increase in cash utilized in capitalized development costs.
The change in investing activities was primarily due to a $27.1 million increase in cash payments in connection with business acquisitions, and a $5.9 million increase in cash utilized in capitalized development costs.
Additionally, we carried forward foreign NOLs of approximately $81.6 million which will start to expire in 2024, foreign research and development credits of $0.3 million which expire in 2029, and Canadian investment tax credits of approximately $3.8 million which expire between 2031 and 2041. Our carryforwards are subject to review and possible adjustment by the appropriate taxing authorities.
Additionally, we carried forward foreign NOLs of approximately $78.6 million which will start to expire in 2025, foreign research and development credits of $0.3 million which expire in 2029, and Canadian investment tax credits of approximately $3.9 million which expire between 2032 and 2042. Our carryforwards are subject to review and possible adjustment by the appropriate taxing authorities.
We believe that these are transitory impacts that we are well-equipped to manage going forward. non-GAAP measures Management uses various financial metrics, including total revenues, income from operations, net income, and certain metrics that are not required by, or presented in accordance with, GAAP, such as adjusted EBITDA, adjusted net income, and adjusted diluted earnings per share, to measure and assess the performance of our business, to evaluate the effectiveness of our business strategies, to make budgeting decisions, to make certain compensation decisions, and to compare our performance against that of other peer companies using similar measures.
For additional information, see “Business — Competition”. non-GAAP measures Management uses various financial metrics, including total revenues, income from operations, net income, as well as certain metrics that are not required by, or presented in accordance with, GAAP, such as adjusted EBITDA, adjusted net income, and adjusted diluted earnings per share, to measure and assess the performance of our business, to evaluate the effectiveness of our business strategies, to make budgeting decisions, to make certain compensation decisions, and to compare our performance against that of other peer companies using similar measures.
Our software products are licensed by more than 57,000 users and are also used by 23 global drug regulatory agencies, including the U.S. FDA, Japanese PMDA, and Chinese cFDA.
Our software products are licensed by more than 94,000 users and are also used by 23 global drug regulatory agencies, including the FDA and Japanese PMDA.
Our income tax expense for the year ended December 31, 2023 was primarily due to the impact 67 T able of Contents of non-deductible items, the impact of valuation allowances recorded against certain tax attributes, and the relative mix of domestic and international earnings.
Our income tax benefit for the year ended December 31, 2024 was primarily due to the impact of non-deductible items, the impact of valuation allowances recorded against certain tax attributes, and the relative mix of domestic and international earnings.
Drug development is necessarily a highly regulated process involving the collection of vast amounts of laboratory, clinical and evidence data, and there are many failures at every step along the way which add to total cost. The pharmaceutical industry spends more than $260 billion annually on R&D. Generally, companies spend an average of $6.2 billion per FDA-approved drug.
Drug development is necessarily a highly regulated process involving the collection of vast amounts of laboratory, clinical and evidence data, and there are many failures at every step along the way which add to total cost. On average, the pharmaceutical industry spends more than $270 billion annually on research and development("R&D").
If the carrying amount of a reporting unit exceeds its fair value, an impairment loss is recognized in an amount equal to that excess, limited to the total amount of goodwill allocated to that reporting unit. 77 T able of Contents We performed the annual goodwill impairment analysis during the fourth quarter.
If the carrying amount of a reporting unit exceeds its fair value, an impairment loss is recognized in an amount equal to that excess, limited to the total amount of goodwill allocated to that reporting unit. We performed the annual goodwill impairment analysis during the fourth quarters of 2024 and 2023.
The business combination was not significant to our consolidated financial statements. Based on the purchase price allocation, approximately $2.4 million, $1.0 million, $0.1 million, and $2.9 million of the purchase price was assigned to customer relationships, developed technology, non-compete agreements, and goodwill, respectively.
Based on the purchase price allocation, approximately $2.4 million, $1.0 million, $0.1 million, and $2.9 million of the purchase price was assigned to customer relationships, developed technology, non-compete agreements, and goodwill, respectively.
The increase in net other income (expense) was primarily due to a $3.0 million increase in remeasurement gains related to the fluctuation of foreign currency exchange rates and a $1.0 million increase in interest income.
The decrease in net other income (expense) was primarily due to a $1.7 million increase in remeasurement losses related to the fluctuation of foreign currency exchange rates, a $0.3 million increase in loss related to disposal fixed assets, and a $0.3 million decrease in interest income.
At December 31, 2023, the contingent consideration was remeasured to $5.4 million, resulting in fair value adjustment of $23 thousand and recorded in G&A on the accompanying consolidated statement of operations and comprehensive income (loss).
At December 31, 2024 and 2023, the contingent consideration was remeasured to zero and $5.4 million, respectively, resulting in fair value adjustments of $(0.7) million and $23.0 thousand. These adjustments were recorded in G&A expenses on the accompanying consolidated statement of operations and comprehensive income (loss).
Investing Activities Net cash used in investing activities for the year ended December 31, 2023 was approximately $79.6 million, an increase of $51.7 million, compared to $27.8 million in 2022.
Investing Activities Net cash used in investing activities for the year ended December 31, 2024 was approximately $112.4 million, an increase of $32.8 million, compared to $79.6 million in 2023.
Financing Activities During the year ended December 31, 2023, financing activities used cash of approximately $9.4 million, compared to $7.4 million in the same period of 2022.
Financing Activities During the year ended December 31, 2024, net cash used in financing activities was approximately $21.0 million, compared to $9.4 million in the same period of 2023.
We expect to continue to invest (i) in scientific talent to expand our ability to deliver solutions across the drug development spectrum; (ii) in sales and marketing to promote our solutions to new and existing customers and in existing and expanded geographies; (iii) in research and development to support existing solutions and innovate new technology; (iv) in other operational and administrative functions to support our expected growth; and (v) in complementary business. 54 T able of Contents We expect that our headcount will increase over time and also expect our total operating expenses will continue to increase over time.
We expect to continue to invest in (i) scientific talent to expand our ability to deliver solutions across the drug development spectrum; (ii) sales and marketing to promote our solutions to new and existing customers and in existing and expanded geographies; (iii) research and development to support existing solutions and innovate new technology; (iv) other operational and administrative functions to support our expected growth; and (v) complementary business.
While each of these factors presents significant opportunities for our business, they also pose important challenges that we must successfully address to sustain our growth and improve results of operations.
Key Factors Affecting Our Performance We believe that the growth of and future success of our business depends on many factors. While each of these factors presents significant opportunities for our business, they also pose important challenges that we must successfully address to sustain our growth and improve results of operations.
The income approach is based on the discounted cash flow method that discounts forecasted future cash flows expected to be generated which are based on the Company's estimates of financial performance including revenues, adjusted EBITDA, taxes, and working capital and capital asset requirements. When performing our market approach, we rely specifically on the guideline public company method.
The income approach is based on the 73 Table of Contents discounted cash flow method that discounts forecasted future cash flows expected to be generated which are based on the Company's estimates of financial performance including revenues, adjusted EBITDA, taxes, and working capital and capital asset requirements.
Any unrecognized portion of amounts paid in advance for licenses and services is recorded as deferred revenue. 76 T able of Contents Arrangements with Multiple Performance Obligations For contracts with multiple performance obligations, such as a software license plus software training, implementation, and/or maintenance/support, or in contracts where there are multiple software licenses, we determine if the products or services are distinct and allocates the consideration to each distinct performance obligation on a relative standalone selling price basis (“SSP”).
Arrangements with Multiple Performance Obligations For contracts with multiple performance obligations, such as a software license plus software training, implementation, and/or maintenance/support, or in contracts where there are multiple software licenses, we determine if the products or services are distinct and allocate the consideration to each distinct performance obligation on a relative standalone selling price basis (“SSP”).
The business combination was not material to our consolidated financial statements. The total estimated consideration included a portion of contingent consideration that is payable over two years in cash, not to exceed $9.0 million. The fair value of the contingent consideration related to revenue threshold was estimated to be $4.4 million as of the acquisition date.
The business combination was not material to our consolidated financial statements. 62 Table of Contents The total estimated consideration included a portion of contingent consideration that is payable over two years following the acquisition in cash, not to exceed $9.0 million.
While our significant accounting policies are described in more detail in the notes to our consolidated financial statements appearing elsewhere in this annual report, we believe the following accounting policies used in the preparation of our consolidated financial statements require the most significant judgments and estimates. 75 T able of Contents Revenue Recognition Application of GAAP related to the measurement and recognition of revenue requires us to make judgments and estimates.
While our significant accounting policies are described in more detail in the notes to our consolidated financial statements appearing elsewhere in this annual report, we believe the following accounting policies used in the preparation of our consolidated financial statements require the most significant judgments and estimates.
Our Operating Environment The acceptance of model-informed biopharmaceutical discovery and development by regulatory authorities affects the demand for our products and services. Support for the use of biosimulation in discovery and development from regulatory bodies, such as the FDA and EMA, has been critical to its rapid adoption by the biopharmaceutical industry.
Support for the use of biosimulation in discovery and development from regulatory bodies, such as the FDA and EMA, has been critical to its rapid adoption by the biopharmaceutical industry.
Depreciation and Amortization Expense YEAR ENDED DECEMBER 31, CHANGE 2023 2022 $ % (in thousands) Depreciation and amortization $ 1,552 $ 1,731 $ (179) (10) % % of total revenues — % 1 % Depreciation and amortization expense decreased by $0.2 million or (10)%, to $1.6 million for the year ended December 31, 2023, as compared to the same period in 2022.
Depreciation and Amortization Expense YEAR ENDED DECEMBER 31, CHANGE 2024 2023 $ % (in thousands) Depreciation and amortization $ 1,994 $ 1,552 $ 442 28 % % of total revenues 1 % — % Depreciation and amortization expense increased by $0.4 million, or 28%, to $2.0 million for the year ended December 31, 2024, as compared to the same period in 2023.
The increase in intangible asset amortization was primarily due to a $1.8 million increase in amortization expense from capitalized software and an $0.8 million increase in amortization expense from acquired intangible assets.
The increase in intangible asset amortization was primarily due to a $4.7 million increase in amortization expense from acquired intangible assets and a $2.9 million increase in amortization expense from capitalized software.
The following table provides a summary of the major sources of liquidity for periods ended December 31, 2023, 2022, and 2021. and as of December 31, 2023, 2022, and 2021. 71 T able of Contents 2023 2022 2021 (in thousands) Net cash provided by operating activities $ 82,755 $ 92,543 $ 60,388 Cash and cash equivalents (1) $ 234,951 $ 236,586 $ 185,797 Proceeds from sales of common stock $ — $ — $ 133,351 Term loan credit facilities $ 294,450 $ 297,470 $ 300,490 Available revolving line of credit $ 100,000 $ 100,000 $ 100,000 __________________________________ (1) Cash balance as of December 31, 2023, 2022, and 2021 included $47.3 million, $56.4 million, and $39.8 million, respectively, of cash and cash equivalents held outside of the United States.
The following table provides a summary of the major sources of liquidity for periods ended December 31, 2024, 2023, and 2022. and as of December 31, 2024, 2023, and 2022. 68 Table of Contents 2024 2023 2022 (in thousands) Net cash provided by operating activities $ 80,466 $ 82,755 $ 92,543 Cash and cash equivalents (1) $ 179,183 $ 234,951 $ 236,586 Term loan credit facilities $ 298,500 $ 294,450 $ 297,470 Available revolving line of credit $ 100,000 $ 100,000 $ 100,000 __________________________________ (1) Cash balance as of December 31, 2024, 2023, and 2022 included $45.8 million, $47.3 million, and $56.4 million, respectively, of cash and cash equivalents held outside of the United States.
The increase was primarily due to a $4.4 million increase in employee-related costs resulting primarily from billable head count growth, a $4.1 million increase in equity-based compensation cost, a $1.2 million increase in intangible assets amortization, a $0.5 million increase in travel expenses, partially offset by a $0.7 million decrease in consulting and professional services cost, a $0.4 million increase in capitalized software cost, a $0.4 million decrease in miscellaneous expense, and a $0.2 million decrease in cost of licenses.
The increase was primarily due to a $6.7 million increase in employee-related costs resulting primarily from billable headcount growth, a $3.9 million increase in intangible assets amortization, a $2.3 million increase in equipment and software expense, a $1.8 million increase in equity-based compensation cost, a $0.5 million decrease in capitalized software cost, and a $0.5 million increase in license expense, partially offset by a $2.3 million decrease in consulting and professional services cost resulting from the implementation of a cost reduction plan.
To do this, we have developed solutions for the collection, standardization, validation, storage, and analysis of the preclinical and clinical data needed for MIDD. These data solutions are used internally and by global life sciences companies.
To do this, we have developed solutions for the collection, standardization, validation, storage, and analysis of the preclinical and clinical data needed for MIDD.
Our guideline public company method incorporates revenues and EBITDA multiples from publicly traded companies with operations and other characteristics similar to our entity.
When performing our market approach, we rely specifically on the guideline public company method. Our guideline public company method incorporates revenues and EBITDA multiples from publicly traded companies with operations and other characteristics similar to our entity.
Provision for Income Taxes YEAR ENDED DECEMBER 31, CHANGE 2023 2022 $ % (in thousands) Provision for income taxes $ 214 $ 4,024 $ (3,810) (95) % Effective tax rate (0.4) % 21.5 % Our income tax expense was $0.2 million, resulting in an effective income tax rate of (0.4)%, for the year ended December 31, 2023, as compared to an income tax expense of $4.0 million, or an effective income tax rate of 21.5%, in 2022.
Provision for Income Taxes YEAR ENDED DECEMBER 31, CHANGE 2024 2023 $ % (in thousands) Provision for income taxes $ (5,133) $ 214 $ (5,347) (2,499) % Effective tax rate 29.9 % (0.4) % Our income tax benefit was $5.1 million, resulting in an effective income tax rate of 29.9%, for the year ended December 31, 2024, as compared to an income tax expense of $0.2 million, or an effective income tax rate of (0.4)% for the year ended December 31, 2023.
Based on our purchase price allocation, approximately $11.7 million, $3.1 million, and $25.1 million of the purchase price were assigned to developed technology, customer relationships and goodwill, respectively.
Based on our purchase price allocation, approximately $11.7 million, $3.1 million, and $25.1 million of the purchase price were assigned to developed technology, customer relationships and goodwill, respectively. For the year ended December 31, 2024, the Company paid contingent consideration of $1.8 million.
On a quarterly basis, we also assess the likelihood that we will be able to recover our deferred tax assets against future sources of taxable income and reduce the carrying amounts of deferred tax assets by recording a valuation allowance if, based on the available evidence, it is more likely than not (a likelihood of more than 50%) that all or a portion of such assets will not be realized. 78 T able of Contents Business Acquisitions When we acquire businesses, we allocate the purchase price to tangible assets and liabilities and identifiable intangible assets acquired at their acquisition date fair values.
On a quarterly basis, we also assess the likelihood that we will be able to recover our deferred tax assets against future sources of taxable income and reduce the carrying amounts of deferred tax assets by recording a valuation allowance if, based on the available evidence, it is more likely than not (a likelihood of more than 50%) that all or a portion of such assets will not be realized.
Applied BioMath, LLC ("ABM") On December 12, 2023, we completed the acquisition of ABM, an industry-leader in providing model-informed drug discovery and development support to help accelerate and de-risk therapeutic research and development, for total estimated consideration of $36.6 million. The business combination was not material to our consolidated financial statements.
In addition, as of December 31, 2024, the contingent consideration related to tax contingencies was $0.5 million. Applied BioMath, LLC ("ABM") On December 12, 2023, we completed the acquisition of ABM, an industry leader in providing model-informed drug discovery and development support to help accelerate and de-risk therapeutic research and development, for total estimated consideration of $36.6 million.
Any changes in the fair value of these contingent liabilities are included in the earnings in the consolidated statements of operations and comprehensive income (loss). The current purchase price allocations for acquisitions of Formedix and ABM are preliminary.
Any changes in the fair value of these contingent liabilities are included in the earnings in the consolidated statements of operations and comprehensive income (loss).
The scientific principles underlying our work with customers in biosimulation and MIDD must be transparent and fully explainable during the regulatory process, so we have become experts at incorporating data and results into regulatory documents.
These data solutions are used internally and by global life sciences companies. 53 Table of Contents The scientific principles underlying our work with customers in biosimulation and MIDD must be transparent and fully explainable during the regulatory process, so we have become experts at incorporating data and results into regulatory documents.
Interest Expense YEAR ENDED DECEMBER 31, CHANGE 2023 2022 $ % (in thousands) Interest expense $ 22,916 $ 17,773 $ 5,143 29 % % of total revenues 6 % 5 % Interest expense increased by $5.1 million, or 29%, to $22.9 million for the year ended December 31, 2023, as compared to the same period in 2022.
Interest Expense YEAR ENDED DECEMBER 31, CHANGE 2024 2023 $ % (in thousands) Interest expense $ 21,520 $ 22,916 $ (1,396) (6) % % of total revenues 6 % 6 % Interest expense decreased by $1.4 million, or (6)%, to $21.5 million for the year ended December 31, 2024, as compared to the same period in 2023.
Due to the quick nature of the performance obligation from start to finish and the insignificant amounts, we recognize any software training or implementation revenue at the completion of the service.
Due to the quick nature of the performance obligation from start to finish and the insignificant amounts, we recognize any software training or implementation revenue at the completion of the service. Any unrecognized portion of amounts paid in advance for licenses and services is recorded as deferred revenue.
We believe that presentation of the GAAP and the non-GAAP metrics in this filing will aid investors in understanding our business. 55 T able of Contents Management measures operating performance based on adjusted EBITDA defined for a particular period as net income (loss) excluding interest expense, provision (benefit) for income taxes, depreciation and amortization expense, intangible asset amortization, equity-based compensation expense, goodwill impairment expense, acquisition and integration expense, and other items not indicative of our ongoing operating performance.
Management measures operating performance based on adjusted EBITDA defined for a particular period as net income (loss) excluding interest expense, provision (benefit) for income taxes, depreciation and amortization expense, intangible asset amortization, equity-based compensation expense, goodwill impairment expense, acquisition and integration expense, and other items not indicative of our ongoing operating performance.
The total estimated consideration includes a portion of contingent consideration that is payable over the next three years in a combination of 70% cash and 30% in shares of our common stock. Future payments of contingent consideration are based on achieving certain eligible revenue thresholds for each of the twelve-month periods ended December 31, 2023, 2024, and 2025, respectively.
The total estimated consideration includes a portion of contingent consideration that is payable over two years in cash, not to exceed $17.6 million. Future payments of contingent consideration are based on achieving certain eligible revenue targets for each of the twelve-month periods ended December 31, 2023 and 2024, respectively.
We consider various factors when making these judgments. Our revenue is primarily derived from the sale of software products and delivery of consulting services. We recognize revenue when control of the promised good or service is transferred to the customer in an amount that reflects the consideration for which we are expected to be entitled in exchange for those services.
We recognize revenue when control of the promised good or service is transferred to the customer in an amount that reflects the consideration for which we are expected to be entitled in exchange for those services.
The increase was primarily due to a $49.5 million increase in revenues, a $5.9 million decrease in tax expense, and a $4.1 million increase in net other income mainly related to increase in remeasurement gain and interest income, partially offset by a $21.0 million increase in cost of revenue, a $9.6 million increase in operating expense, and a $0.9 million increase in interest expense.
The increase in net income was primarily due to a $30.8 million increase in revenue, a $21.7 million decrease in operating expense, a $5.3 million decrease in tax expense, and a $1.4 million decrease in interest expense, partially offset by a $13.5 million increase in cost of revenue and a $2.5 million decrease in net other income.
(n) Represents the income tax effect of the non-GAAP adjustments calculated using the applicable statutory rate by jurisdiction. 59 T able of Contents (o) Represents dilutive shares or potentially dilutive shares that were excluded from the Company's GAAP diluted weighted average common shares outstanding because the Company had a reported net loss and therefore including these shares would have been anti-dilutive.
(o) Represents dilutive shares or potentially dilutive shares that were excluded from the Company's GAAP diluted weighted average common shares outstanding because the Company had a reported net loss and therefore including these shares would have been anti-dilutive.
At December 31, 2023, the contingent consideration was remeasured to $0.1 million, resulting in a negative fair value adjustment of $0.7 million and recorded in G&A on the accompanying consolidated statement of operations and comprehensive income (loss). Formedix Limited ("Formedix") On October 10, 2023, we completed the acquisition of Formedix for a total estimated consideration of $41.4 million.
At December 31, 2024 and 2023, the contingent consideration was remeasured to zero and $0.1 million, respectively, resulting in negative fair value adjustments of $0.1 million and $0.7 million, respectively, and recorded in G&A expenses on the accompanying consolidated statement of operations and comprehensive income (loss).
In total, the fair value of the contingent consideration was estimated to be $5.2 million as of the acquisition date. At December 31 2023, the contingent consideration related to revenues was remeasured to $3.7 million, resulting in a negative fair value adjustment of $0.7 million and recorded in G&A on the accompanying consolidated statement of operations and comprehensive income (loss).
At December 31, 2024 and 2023, the contingent consideration related to eligible revenue was remeasured to zero and $3.7 million, respectively, resulting in negative fair value adjustments of $1.9 million and $0.7 million, respectively, and recorded in G&A expenses on the accompanying consolidated statement of operations and comprehensive income (loss).
As of December 31, 2023, we had federal and state NOLs of approximately $1.6 million and $0.04 million, respectively, which are available to reduce future taxable income and expire between 2035 and 2036 and 2029 and 2040, respectively.
As of December 31, 2024, we had federal and state NOLs of approximately $6.2 million and $4.9 million, respectively, which are available to reduce future taxable income and expire between 2035 and 2036 and 2029 and 2040, respectively. We had federal R&D tax credit carryforwards of approximately $0.3 million to offset future income taxes, which expire between 2027 and 2048.
Research and Development Expense YEAR ENDED DECEMBER 31, CHANGE 2023 2022 $ % (in thousands) Research and development $ 34,173 $ 28,205 $ 5,968 21 % % of total revenues 10 % 8 % R&D expenses increased by $6.0 million, or 21%, to $34.2 million for the year ended December 31, 2023, as compared to the same period in 2022.
Research and Development Expense YEAR ENDED DECEMBER 31, CHANGE 2024 2023 $ % (in thousands) Research and development $ 37,105 $ 34,173 $ 2,932 9 % % of total revenues 10 % 10 % Research and development expense increased by $2.9 million, or 9%, to $37.1 million for the year ended December 31, 2024, as compared to the same period in 2023.
At December 31, 2023, the contingent consideration was remeasured to $45.2 million, resulting in a fair value adjustment of $25.4 million for the year ended at December 31, 2023 and recorded in general and administrative (“G&A”) on the accompanying consolidated statement of operations and comprehensive income (loss).
At December 31, 2024 and 2023, the contingent consideration was remeasured to $43.9 million and $45.2 million, respectively, resulting in fair value adjustments of $11.0 million and $25.4 million, respectively. These adjustments were recorded in G&A expenses on the accompanying consolidated statement of operations and comprehensive income (loss).
We determined that we have three reporting units as of October 1, 2023 and December 31, 2023: the software reporting unit (“Software”), the SimCyp reporting unit (“SimCyp”), and the Drug Development Solutions reporting unit (“CDDS”), which are within a single operating segment of the Company.
We determined that we have three reporting units as of October 1, 2024: the Certara Data Science Software (“CDS”), the Certara Predictive Technologies reporting unit (“CPT”), and the Certara Drug Development Services reporting unit (“CDDS”), which are within a single operating segment of the Company.
Specifically, complex arrangements with nonstandard terms and conditions may require significant contract interpretation to determine the appropriate accounting, including whether promised goods and services specified in an arrangement are distinct performance obligations. Revenue recognition is also impacted by our ability to determine when a contract is probable of collection and to estimate variable consideration.
Revenue Recognition Applying GAAP to the measurement and recognition of revenue requires us to make judgments and estimates. Specifically, complex arrangements with nonstandard terms and conditions may require significant contract interpretation to determine the appropriate accounting, including whether promised goods and services specified in an arrangement are distinct performance obligations.
All obligations under the Credit Agreement are unconditionally guaranteed by our wholly owned direct and indirect subsidiaries, subject to certain exceptions.
All obligations under the Credit Agreement are unconditionally guaranteed by our wholly owned direct and indirect subsidiaries, subject to certain exceptions. All obligations under the Credit Agreement, and the guarantees of those obligations, are secured on a first lien basis, subject to certain exceptions, by substantially all of our assets and the assets of the other guarantors.
Cost of Revenues YEAR ENDED DECEMBER 31, CHANGE 2023 2022 $ % (in thousands) Cost of revenues $ 141,022 $ 132,577 $ 8,445 6 % Cost of revenues increased by $8.4 million, or 6%, to $141.0 million for the year ended December 31, 2023, as compared to the same period in 2022.
Cost of Revenues YEAR ENDED DECEMBER 31, CHANGE 2024 2023 $ % (in thousands) Cost of revenues $ 154,516 $ 141,022 $ 13,494 10 % Cost of revenues increased by $13.5 million, or 10%, to $154.5 million for the year ended December 31, 2024, as compared to the same period in 2023.
Sales and Marketing Expense YEAR ENDED DECEMBER 31, CHANGE 2023 2022 $ % (in thousands) Sales and marketing $ 32,022 $ 27,408 $ 4,614 17 % % of total revenues 9 % 8 % Sales and marketing expenses increased by $4.6 million, or 17%, to $32.0 million for the year ended December 31, 2023, as compared to the same period in 2022.
Sales and Marketing Expense YEAR ENDED DECEMBER 31, CHANGE 2024 2023 $ % (in thousands) Sales and marketing $ 47,444 $ 32,022 $ 15,422 48 % % of total revenues 12 % 9 % 65 Table of Contents Sales and marketing expense increased by $15.4 million, or 48%, to $47.4 million for the year ended December 31, 2024, as compared to the same period in 2023.
Net Income (Loss) YEAR ENDED DECEMBER 31, CHANGE 2023 2022 $ % (in thousands) Net income (loss) $ (55,357) $ 14,731 $ (70,088) (476) % Net loss was $55.4 million, representing a $70.1 million decrease in net income for the year ended December 31, 2023, as compared to the same period in 2022.
Net Income (Loss) YEAR ENDED DECEMBER 31, CHANGE 2024 2023 $ % (in thousands) Net income (loss) $ (12,051) $ (55,357) $ 43,306 (78) % Net loss was $12.1 million, representing a $43.3 million increase in net income for the year ended December 31, 2024, as compared to the same period in 2023.
“Business Combinations” in the notes to the consolidated financial statements. 63 T able of Contents Results of Operations YEAR ENDED DECEMBER 31, 2023 2022 2021 (dollars in thousands) Statement of operations data: Revenues $ 354,337 $ 335,644 $ 286,104 Cost of revenues 141,022 132,577 111,616 Operating expenses: Sales and marketing 32,022 27,408 20,141 Research and development 34,173 28,205 20,379 General and administrative 95,385 71,773 79,539 Intangible asset amortization 43,973 41,429 38,715 Depreciation and amortization expense 1,552 1,731 2,135 Goodwill impairment expense 46,984 — — Total operating expenses 254,089 170,546 160,909 Income (loss) from operations (40,774) 32,521 13,579 Other expenses: Interest expense (22,916) (17,773) (16,837) Net other income (expense) 8,547 4,007 (117) Total other expenses (14,369) (13,766) (16,954) Income (loss) before income taxes (55,143) 18,755 (3,375) Provision for income taxes 214 4,024 9,891 Net income (loss) $ (55,357) $ 14,731 $ (13,266) Comparison of the Years Ended December 31, 2023 and 2022 Revenues YEAR ENDED DECEMBER 31, CHANGE 2023 2022 $ % (in thousands) Software $ 131,677 $ 115,466 $ 16,211 14 % Services 222,660 220,178 2,482 1 % Total revenues $ 354,337 $ 335,644 $ 18,693 6 % Revenue increased by $18.7 million, or 6%, to $354.3 million for the year ended December 31, 2023, as compared to the same period in 2022.
Results of Operations YEAR ENDED DECEMBER 31, 2024 2023 2022 (dollars in thousands) Statement of operations data: Revenues $ 385,148 $ 354,337 $ 335,644 Cost of revenues 154,516 141,022 132,577 Operating expenses: Sales and marketing 47,444 32,022 27,408 Research and development 37,105 34,173 28,205 General and administrative 94,221 95,385 71,773 Intangible asset amortization 51,599 43,973 41,429 Depreciation and amortization expense 1,994 1,552 1,731 Goodwill impairment expense — 46,984 — Total operating expenses 232,363 254,089 170,546 Income (loss) from operations (1,731) (40,774) 32,521 Other expenses: Interest expense (21,520) (22,916) (17,773) Net other income (expenses) 6,067 8,547 4,007 Total other expenses (15,453) (14,369) (13,766) Income (loss) before income taxes (17,184) (55,143) 18,755 Provision for income taxes (5,133) 214 4,024 Net income (loss) $ (12,051) $ (55,357) $ 14,731 64 Table of Contents Comparison of the Years Ended December 31, 2024 and 2023 Revenues YEAR ENDED DECEMBER 31, CHANGE 2024 2023 $ % (in thousands) Software $ 155,696 $ 131,677 $ 24,019 18 % Services 229,452 222,660 6,792 3 % Total revenues $ 385,148 $ 354,337 $ 30,811 9 % Revenues increased by $30.8 million, or 9%, to $385.1 million for the year ended December 31, 2024, as compared to the same period in 2023.
We believe our existing sources of liquidity will be sufficient to meet our working capital, capital expenditures, and contractual obligations for the foreseeable future. We believe we will meet longer-term expected future cash requirements and obligations through a combination of cash flows from operating activities, available cash balances, and potential future equity or debt transactions.
We believe we will meet short-term and long-term expected future cash requirements and obligations through a combination of cash flows from operating activities, available cash balances, and potential future equity or debt transactions .
The increase in goodwill impairment expense was primarily due to recognizing a goodwill impairment for legacy regulatory and writing reporting unit as the carrying value exceeded its fair value.
Goodwill impairment expense was $47.0 million for the year ended December 31, 2023, primarily due to an impairment related to the legacy Regulatory and Writing reporting unit, as its carrying value exceeded its fair value.
These carryforwards that may be utilized in a future period may be subject to limitations based upon changes in the ownership of our stock in a future period.
We also had foreign tax credits of approximately $11 million, which will start to expire in 2027. These carryforwards that may be utilized in a future period may be subject to limitations based upon changes in the ownership of our stock in a future period.
(h) Represents costs associated with our public offerings that are not capitalized. (i) Represents charges for severance provided to former executives. (j) Represents expense related to reorganization, including legal entity reorganization and lease abandonment cost associated with the evaluation of our office space footprint. (k) Represents the gain/loss related to disposal of fixed assets.
(j) Represents expense related to reorganization, including legal entity reorganization and lease abandonment cost associated with the evaluation of our office space footprint. (k) Represents the gain/loss related to disposal of fixed assets. (l) Represents recruiting and relocation expenses related to hiring senior executives.
Based on our preliminary purchase price allocation, approximately $4.6 million, $0.8 million, $13.7 million and $15.9 million of the purchase price was assigned to developed technology, non-compete agreements, customer relationships and goodwill, respectively. The total estimated consideration includes a portion of contingent consideration that is payable over two years in cash, not to exceed $17.6 million.
The business combination was not material to our consolidated financial statements. Based on our preliminary purchase price allocation, approximately $4.6 million, $0.8 million, $13.7 million and $15.9 million of the purchase price was assigned to developed technology, non-compete agreements, customer relationships and goodwill, respectively.
The maturity date of the term loans under the Credit Agreement is August 2026; the termination date of the revolving credit commitments is August 2025, As of December 31, 2023, we had $294.5 million of outstanding borrowings on the term loan, and $100.0 million of availability under the revolving credit facility under the Credit Agreement.
The term loan under this Amendment has substantially the same terms as the existing term loans and revolving credit commitments. As of December 31, 2024, we had $298.5 million of outstanding borrowings on the term loan, and $100.0 million of availability under the revolving credit facility under the Credit Agreement.
Borrowings under the Credit Agreement bear interest at a rate per annum equal to either (i) the Eurocurrency rate, with a floor of 0.00%, as adjusted for the reserve percentage required under regulations issued by the Federal Reserve Board for determining maximum reserve requirements with respect to Eurocurrency funding, plus an applicable margin rate of 3.50% for the term loan and between 4.00% and 3.50% for revolving credit loans, depending on the applicable first lien leverage ratio, or (ii) an alternative base rate (“ABR”), with a floor of 1.00%, plus an applicable margin rate of 2.50% for the term loan or between 3.00% and 2.50% for revolving credit loans, depending on the applicable first lien leverage ratio (with the ABR determined as the greatest of (a) the prime rate, (b) the federal funds effective rate, plus 0.50%), and (c) the Eurocurrency rate plus 1.00%.
Borrowings under the Credit Agreement bear interest at a rate per annum equal to, at the election of the Borrowers, either (i) the Term SOFR rate, with a floor of 0.00% plus an applicable margin rate of 3.00% for the Term Loans and between 3.50% and 2.75% for loans under the Revolving Facility, depending on the applicable first lien leverage ratio or (ii) an Alternate Base Rate (“ABR”), with a floor of 1.00%, plus an applicable margin rate of 2.00% for the Term Loans or between 2.50% and 1.75% for loans under the Revolving Facility, depending on the applicable first lien leverage ratio.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

9 edited+2 added−1 removed13 unchanged
Biggest changeInterest Rate Risk We have borrowings under our Credit Agreement that originally bear interest at a rate per annum equal to either (a) the Eurocurrency rate, with a floor of 0.00%, as adjusted for the reserve percentage required under regulations issued by the Federal Reserve Board for determining maximum reserve requirements with respect to Eurocurrency funding, plus an applicable margin rate of 3.50% for the term loan and between 3.50% and 4.00% for revolving credit loans, depending on the applicable first lien leverage ratio, or (b) an alternative base rate (“ABR”), with a floor of 1.00%, plus an applicable margin rate of 2.50% for the term loan or between 3.00% and 2.50% for revolving credit loans, depending on the applicable first lien leverage ratio.
Biggest changeInterest Rate Risk We have borrowings under our Credit Agreement that bear interest at a rate per annum equal to, at the election of the Borrowers, either (i) the Term SOFR rate, with a floor of 0.00% plus an applicable margin rate of 3.00% for the Term Loans and between 3.50% and 2.75% for loans under the Revolving Facility, depending on the applicable first lien leverage ratio or (ii) an Alternate Base Rate (“ABR”), with a floor of 1.00%, plus an applicable margin rate of 2.00% for the Term Loans or between 2.50% and 1.75% for loans under the Revolving Facility, depending on the applicable first lien leverage ratio.
Our strategy for managing foreign currency risk relies on efforts to negotiate customer contracts to receive payment in the same currency used to pay expenses. As of December 31, 2023, we had no outstanding foreign currency forward contracts. Foreign currency exchange rate risk is evidenced in our consolidated financial statements through translation risk and transaction and re-measurement risk.
Our strategy for managing foreign currency risk relies on efforts to negotiate customer contracts to receive payment in the same currency used to pay expenses. As of December 31, 2024, we had no outstanding foreign currency forward contracts. Foreign currency exchange rate risk is evidenced in our consolidated financial statements through translation risk and transaction and re-measurement risk.
Foreign Currency Exchange Rate Risk We are exposed to foreign currency exchange rate risk by virtue of our international operations. This risk arises because we use different currencies to recognize revenue and pay operating expenses. We derived 27% of our revenue for the year ended December 31, 2023 from operations outside of the United States.
Foreign Currency Exchange Rate Risk We are exposed to foreign currency exchange rate risk by virtue of our international operations. This risk arises because we use different currencies to recognize revenue and pay operating expenses. We derived 28% of our revenue for the year ended December 31, 2024 from operations outside of the United States.
Changes in exchange rates between the applicable foreign currency and the U.S. dollar will affect the translation of foreign subsidiaries’ financial results into U.S. dollars for purposes of reporting our consolidated financial 79 T able of Contents results.
Changes in exchange rates between the applicable foreign currency and the U.S. dollar will affect the translation of foreign subsidiaries’ financial results into U.S. dollars for purposes of reporting our consolidated financial results.
However, new or modified exchange control restrictions could have an adverse effect on our ability to repatriate cash to fund our operations and make principal and interest payments, when necessary. 81 T able of Contents
However, new or modified exchange control restrictions could have an adverse effect on our ability to repatriate cash to fund our operations and make principal and interest payments, when necessary. 77 Table of Contents
If the U.S. dollar had weakened 10% or strengthened 10% relative to the pound sterling, the euro, and the Japanese yen in the year ended December 31, 2023, income from operations would have been lower or higher by approximately $2.4 million, based on revenues and costs related to our foreign operations.
If the U.S. dollar had weakened 10% or strengthened 10% relative to the pound sterling, the euro, and the Japanese yen in the year 75 Table of Contents ended December 31, 2024, income from operations would have been lower or higher by approximately $3.5 million, based on revenues and costs related to our foreign operations.
Our exposure to interest rate risk is minimized by our interest rate swaps. As of December 31, 2023, we recorded the fair value of our interest rate swaps in the amount of $5.6 million as a derivative asset included in prepaid expenses and other assets in our consolidated balance sheets.
As of December 31, 2024, we recorded the fair value of our interest rate swaps in the amount of $2.2 million as a derivative asset included in prepaid expenses and other assets in our consolidated balance sheets.
As of December 31, 2023, we had $294.5 million of outstanding borrowings on the term loan, no outstanding borrowings under the revolving credit facility. Each quarter basis point increase in the SOFR rate would increase interest expense on our current variable rate debt by approximately $0.2 million for the year ended December 31, 2023.
Each quarter basis point increase in the SOFR rate would increase interest expense on our current variable rate debt by approximately $0.2 million for the year ended December 31, 2024. Our exposure to interest rate risk is minimized by our interest rate swaps.
As part of this modification, a Credit Spread Adjustment (“CSA”) was introduced to aligning SOFR with LIBOR in terms of 80 T able of Contents the overall interest rate earned by lenders under the Credit Agreement. The CSA varied depending on the selected interest period.
In response to the discontinuation of LIBOR, we executed a LIBOR transition amendment in June 2023, formalizing the replacement of LIBOR with the Secured Overnight Funding Rate (“SOFR”). As part of this modification, a Credit Spread Adjustment (“CSA”) was introduced to aligning SOFR with LIBOR in terms of the overall interest rate earned by lenders under the Credit Agreement.
Removed
The ABR is determined as the greatest of (a) the prime rate, (b) the federal funds effective rate, plus 0.5% or (c) the Eurocurrency rate plus 1.0%. In response to the discontinuation of LIBOR, we executed a LIBOR transition amendment in June 2023, formalizing the replacement of LIBOR with the Secured Overnight Funding Rate (“SOFR”).
Added
The ABR is determined as the greatest 76 Table of Contents of (a) the prime rate, (b) the federal funds effective rate, plus 0.50% and (c) the Term SOFR rate plus 1.00%. Additionally, we are obligated to pay a commitment fee on the unused amount and other customary fees.
Added
The CSA varied depending on the selected interest period. As of December 31, 2024, we had $298.5 million of outstanding borrowings on the term loan and no outstanding borrowings under the revolving credit facility.

Other CERT 10-K year-over-year comparisons