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What changed in Certara, Inc.'s 10-K — 2024 vs 2025

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Paragraph-level year-over-year comparison of Certara, Inc.'s 2024 and 2025 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 2025 report.

+402 added−372 removedSource: 10-K (2026-02-26) vs 10-K (2025-02-26)

Top changes in Certara, Inc.'s 2025 10-K

402 paragraphs added · 372 removed · 328 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

84 edited+13 added−6 removed51 unchanged
Biggest changeAs 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.
Biggest changeWe believe we are still in the early stages of a long-term trend that will continue to advance traditional research and development into a technology-driven era of advanced modeling, simulations, analytics that are dramatically enhanced using AI enabled capabilities. 12 Table of Contents Our Growth Strategy Our growth strategy is to build upon our science, technology and consulting services creating more value through increased certainty and speed in decisions making.
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 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 attractive solutions to customers, our regulatory agency partnerships, and price, among other factors.
We strive to provide all staff opportunities for career advancement by posting and announcing openly all promotion opportunities, regularly reviewing pay to ensure fair practices and providing training to all new hires.
We strive to provide all staff opportunities for career advancement by posting and announcing openly all promotion opportunities, regularly reviewing pay to ensure fair practices and providing training for all new hires.
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.
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 model selection and analysis.
Regulatory Science Our comprehensive regulatory science solutions help provide our customers the coordinated technology-enabled regulatory submission and regulatory writing expertise they need to accelerate the regulatory writing and filing process. • CoAuthor™ Software – 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.
Regulatory Science Our comprehensive regulatory science solutions provide our customers the coordinated technology-enabled regulatory submission and regulatory writing expertise they need to accelerate the regulatory writing and filing process. • CoAuthor Software – 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.
In our view, the principal competitive factors in our market are the functionality and quality of models, the breadth of molecular types, therapeutic areas, and modalities supported, regulator acceptance of our solutions, ease of use and functionality of applications, depth of experience in drug development, brand awareness and reputation, total cost, and the ability to securely integrate with other enterprise applications and the overall drug development process in the customer.
In our view, the principal competitive factors in our market are the functionality and quality of models, the breadth of molecular types, therapeutic areas, and modalities supported, regulator acceptance of our solutions, ease of use and functionality of applications, depth of experience in drug development, brand awareness and reputation, total cost, and the ability to securely integrate with other enterprise applications and the overall drug research and development process in the customer.
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.
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, which brings state-of-the-art AI capabilities to our end-to-end platform.
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.
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 Global Submit platform. Submission management services include submission leadership, program management and planning, due diligence and readiness preparation, submission compilation, and eCTD publishing using Global Submit.
In addition, MIDD strategies are increasingly utilized to help predict commercial success, a critical part of the drug development process as new products must be both approved by regulators and adopted by the market. The diagram below shows the different areas of expertise that come together to enable MIDD.
In addition, MIDD strategies are increasingly utilized to help predict commercial success, a critical part of the drug research and development process as new products must be both approved by regulators and adopted by the market. The diagram below shows the different areas of expertise that come together to enable MIDD.
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.
Drug Development and Regulatory Strategy : Our scientific 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.
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.
The scientific principles underlying our work must be transparent and fully explainable during the regulatory process, so we have developed expertise in incorporating data, references and results into regulatory documents. Our software and regulatory scientific services streamline the creation of regulatory filings and speed regulatory data flow to maximize the chances of successful commercialization.
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.
There are many examples of currently approved drugs where models were successfully used in discovery, preclinical, first-in-human dose predictions, clinical trial simulations and protocol 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.
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.
As new scientific research and technologies areas and opportunities arise, we seek to attract and hire specialized talent and acquire complementary businesses to expand our offerings accordingly.
Scientific Informatics for Improving Drug Discovery and In-Silico Development In 2024, Certara acquired Chemaxon, a software company that develops leading software products for chemical property prediction, search, and analysis. Used by research scientists globally, Chemaxon software helps to digitize the design, make, test and analyze lifecycle to discover the best new chemical leads.
Scientific Informatics for Improving Drug Discovery and In-Silico Development In 2024, Certara acquired Chemaxon, a software company that develops leading software products for chemical property prediction, search, and analysis. Used by research scientists globally, Chemaxon software helps to digitize the design, make, test and analyze discovery lifecycle to select the best new chemical leads.
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.
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 research, development, and commercialization are rapidly increasing.
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.
The insights delivered by our QSP scientist 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 (Certara IQ) for reproducible model development that are further enabled by Certara.AI.
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.
Our organization has been purposefully designed to include all these capabilities to collectively enable a new model of drug research and development for our clients. 6 Table of Contents Our goal is to enable the life sciences industry to use data, modeling, and analytics to make better decisions during drug research, development and commercialization to increase productivity rates and vastly reduce development costs.
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.
The pharmaceutical industry spends more than $290 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.
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.
Combining data integration, structured content authoring and generative 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 – The Electronic Common Technical Document (“eCTD”) is a standard format required for submitting applications to regulatory authorities.
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.
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 life science industry.
Mechanistic biosimulation models are built by experts using known scientific principles and facts, while empirical biosimulation solutions are typically statistical models built using preclinical and clinical data. Our customers use biosimulation results to improve the design of clinical trials, reduce trial size and complexity, and in some cases obtain clinical trial waivers to replace clinical testing.
Mechanistic biosimulation models are built by experts using known scientific principles and facts, while empirical biosimulation solutions are typically statistical models built using preclinical and clinical data. Our customers use biosimulation results to simulate clinical trials, to improve the design of clinical trials, reduce trial size and complexity, and in some cases obtain clinical trial waivers to replace clinical studies.
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.
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.
Biosimulation is a critical component of MIDD that uses computer-aided mathematical simulation of biological processes and systems to understand the action of a drug in a human body or a population of humans. Biosimulation and MIDD can increase the probability of success in bringing a new drug to market and decrease the costs of drug development.
Biosimulation is a critical component of MIDD that uses computer-aided mathematical simulation of biological processes and systems to understand the action of a drug in a human body or a population of humans. Biosimulation and hereby MIDD can increase the probability of success in bringing a new drug to market, accelerate its development and decrease the costs of drug development.
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 8 Table of Contents biosimulation models and is designed to produce “regulatory quality” results that customers can use in their drug approval applications.
A small percentage increase in success rates has a large impact on the costs of the overall system; research shows that a modest increase of just three percent in the success rates at each development phase could save almost three hundred million dollars in total costs per approved drug.
A small percentage increase in success rates has a large impact on the costs of the overall system; research shows that a modest increase of just three percent in the success rates at each life cycle phase could save almost three hundred million dollars in total costs per approved drug.
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 U.S., EU and other jurisdictions, including but not limited to: the U.S.
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 U.S., EU and other jurisdictions, including but not 16 Table of Contents limited to: the U.S.
Concurrently, we observe a trend toward expanding privacy data protection law both in number and scope that will expand our obligations. We may need to modify our practices and incur expenses to accommodate this evolving privacy compliance landscape. Bribery, Anti-Corruption and Other Laws We are subject to compliance with the U.S.
Concurrently, we observe a trend toward expanding privacy data protection law both in number and scope that will expand our obligations. We 17 Table of Contents may need to modify our practices and incur expenses to accommodate this evolving privacy compliance landscape. Bribery, Anti-Corruption and Other Laws We are subject to compliance with the U.S.
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.
Data protection authorities are authorized 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.
Certara and Chemaxon have had a long-term partnership spanning ten years, providing integrated solutions to the life sciences industry. The acquisition strategically positions Certara in the drug discovery biosimulation market and is intended to complement Certara’s existing biosimulation portfolio which is widely used in later phases of drug development.
Certara and Chemaxon have had a long-term partnership spanning ten years, providing integrated solutions to the life sciences industry. The acquisition strategically positions Certara in the drug discovery biosimulation market and 9 Table of Contents complement Certara’s existing biosimulation portfolio which is widely used in later phases of drug development.
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.
Our principal clinical data suite is the Pinnacle 21 family of products. • Pinnacle 21 – A cloud-based application for clinical data collection, 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 biopharmaceutical industry was estimated to have spent a total of approximately $270 billion in 2024 on R&D. Currently, over 90% of drug candidates fail during the drug development process, many after significant expenditures of resources and time. We believe that biosimulation solutions can improve these success rates.
The biopharmaceutical industry was estimated to have spent a total of approximately $290 billion in 2025 on R&D. Currently, over 90% of drug candidates fail during the research and development process, many after significant expenditures on resources and time. We believe that biosimulation solutions can improve these success rates.
In support of our presence and authority within our fields, our scientists and experts have authored thousands of scientific 14 Table of Contents publications, posters, and articles to share biosimulation knowledge and methods to advance adoption.
In support of our presence and authority within our fields, our scientists and experts have authored thousands of scientific publications, posters, and articles to share biosimulation knowledge and methods to advance adoption.
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.
Continued innovation in technology such as biosimulation, virtual trials, and real-world evidence applications are helping biopharmaceutical and biotech 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.
Certara offers biometrics and data sciences services to help clients analyze and standardize data for faster time to insight and for submission readiness, in addition to preparing and transforming data for use in biosimulation and pharmacometrics models. Clinical Pharmacology: Certara has numerous industry leaders and experts that guide drug developers in clinical pharmacology decisions.
Certara offers biometrics and data sciences services to 11 Table of Contents help clients analyze and standardize data for faster time to insight and for submission readiness, in addition to preparing and transforming data for use in biosimulation and pharmacometrics models. Clinical Pharmacology: Certara has numerous industry leaders and scientific experts that guide drug developers in clinical pharmacology decisions.
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.
Native AI and machine learning technologies are being incorporated across our technology and consulting services portfolios, providing opportunities to expand the number of data sources utilized, better predict outcomes, and streamline reporting.
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.
Item 1. Business. Our Company We are a global leader in biosimulation science, technology, and consulting services for using Model-Informed Drug Development (“MIDD”) in the global biopharmaceutical and biotech industry. MIDD is an approach that utilizes biological and statistical models derived from preclinical, clinical, and evidence data to inform decision-making in drug research and development, and commercialization.
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.
Phoenix has four modules that support pharmacometrics and workflow. • Phoenix WinNonlin – A platform for non-compartmental analysis, PK/PD, and TK modeling with a regulatory proven 30-year history and extensive use across the biopharmaceutics industry. • Phoenix Cloud – Our next generation cloud 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.
In 2024, we acquired Chemaxon, a leading provider of cheminformatics software to expand and complement our existing prediction and analytical capabilities in drug discovery. Our Customers Our customers include life sciences companies of all sizes along with contract research organizations, academic institutions, and global regulators.
In 2024, we acquired Chemaxon, a leading provider of scientific informatics software to expand and complement our existing prediction and analytical capabilities in drug discovery. 13 Table of Contents Our Customers Our customers include life sciences companies of all sizes along with contract research organizations, academic and government institutions, and global regulators.
CoAuthor powers efficient and expedited creation of regulatory documents and medical communications.
CoAuthor powers efficiently and expedited creation of regulatory documents and medical communications.
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.
Our GlobalSubmit eCTD submissions management software provides regulatory teams with the tools they need to efficiently review, validate, and publish eCTD submissions.
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.
With increasing adoption of technology across all stages of research and development, we believe our end-to-end platform and growth strategies position us to further penetrate the rapidly growing technology-driven life science R&D market of the future that leverages advanced modeling, simulation and analytics.
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 scientifically based solutions for the collection, standardization, validation, storage, and analysis of the preclinical, clinical and evidence data needed for MIDD. These data solutions are used internally and industry wide by life sciences companies.
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.
Additionally, 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. The solutions offered by our competitors vary in size, capabilities and breadth.
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.
As of December 31, 2025, we employed 1,576 professionals in 28 countries, including 1,515 full-time employees and 61 part-time employees, of which 414 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.
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 have worked with more than 2,600 life sciences companies and academic institutions and have collaborated on more than 10,000 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.
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.
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. Our Markets Our markets within the life science industry are large and growing. Traditional research and development is costly and prone to failure.
We 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.
We support two versions of Pinnacle 21 – a fully featured enterprise version, which contains workflow and reporting tools needed by commercially targeted drug development projects, and a more basic free community version designed for 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 collected clinical data adheres to these specifications to make the process of acquiring external data from laboratory and clinical sources more efficient and predictable. 10 Table of Contents • Metadata Repository – A cloud-based Clinical Metadata Repository & Study Data Tabulation Model automation suite to enable faster transformation from protocol study design using controlled and standardized metadata and setting up the clinical study to produce faster time to analysis resulting in more successful clinical trials.
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.
Advance Our Technology The science, technology, and consulting services behind biosimulation continue to advance rapidly, and our top investment priority is to develop additional capabilities and uses for biosimulation to improve certainty in decision making and eventually patient outcomes.
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.
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.
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.
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. Food and Drug Administration (the “FDA”) from 2014 through 2025.
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.
Our technology and scientists incorporate modern advances in scientific understanding, drug research and 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. Our approach to AI is grounded in our long-standing expertise in mechanistic and empirical modeling.
We believe that we compete favorably based on these factors and that the time, effort, and investment necessary to develop validated models, modeling solutions, enterprise software and extensive MIDD experience presents a significant barrier to new entrants. Our ability to remain competitive depends on our ability to continue to invest in innovation as MIDD and drug development science advances.
We believe that we compete favorably based on these factors and that the time, effort, and investment necessary to develop validated models, modeling solutions, enterprise software and extensive MIDD experience presents a significant barrier to new entrants.
Marvin includes chemical intelligence to catch errors and perform live calculations and predictions and has a wide range of built-in tools to create publication-worthy chemical schemes.
Chemaxon Marvin – Marvin is a universal chemical drawing tool for chemists involved in research and drug discovery. Marvin includes chemical intelligence to catch errors and perform live calculations and predictions and has a wide range of built-in tools to create publication-worthy chemical schemes.
Challenging the status quo, our talented team of scientists, software developers, and subject matter experts strive to understand our customers’ most difficult business challenges and apply cutting edge technology and rigorous scientific thinking to inform solutions.
Human Capital We are a global team united in our purpose to accelerate medicine to patients. Challenging the status quo, our talented team of scientists, software developers, and subject matter experts strive to understand our customers’ most difficult business challenges and apply cutting edge technology and rigorous scientific thinking to inform 15 Table of Contents solutions.
Intellectual Property We safeguard and enhance our innovative technology platforms, systems, processes, and databases with a full array of intellectual property rights, including copyrights, trade secrets, know-how, patents, and tradenames/trademarks.
Intellectual Property We protect our technology platforms, systems, processes, and databases through a comprehensive set of intellectual property rights, including copyrights, trade secrets, know-how, patents, and trademarks.
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.
We pursue trademark registrations to the extent we believe doing so would be beneficial to our competitive position. 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.
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.
These patents and applications may be renewed by us as deemed necessary. 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, Chemaxon, and BaseCase.
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.
Certara.AI is a secure, scalable, reliable and flexible platform for deploying life science-specific Generative Pre-Trained Transformers (“GPTs”) across an organization’s data, enabling faster search, connectivity, and content generation.
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.
Certara D360 Software – D360 is a scientific informatics application for small molecule and biologics discovery. It provides researchers with industry leading self-service data access, comprehensive 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.
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.
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.
There are also many clinical research organizations that provide various data, decision tools, and advice on drug candidates and drug trial decisions. Our technology-enabled services generally compete with in-house teams at biopharmaceutical companies. Additionally, we compete with other specialized service providers including Metrum Research, qPharmetra, and Pharmetheus.
Other competitors include open-sourced solutions such as R and PK-Sim and internally developed software from biopharmaceutical companies. There are also many clinical research organizations that provide various data, decision tools, and advice on drug candidates and drug trial decisions. Our technology-enabled services generally compete with in-house teams at biopharmaceutical companies.
We aim to release new software, additional features, and upgrades on a frequent and regular basis, with a focus on cloud-based solutions, as a means to integrate and connect access to our products within an end-to-end platform.
We aim to release new software, additional features, and upgrades on a frequent and regular basis, with a focus on cloud-based solutions, to integrate and connect access to our products within an end-to-end platform. In 2025, we introduced 103 new software applications and upgrades, including Phoenix Cloud's AI PK reports module, Pinnacle 21 Enterprise Plus, and Certara IQ.
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.
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. In 2023, we extended the capabilities of MIDD and regulatory offerings with the launch of an AI platform designed for life sciences, Certara.AI.
We strive to encourage intellectual curiosity and offer a variety of professional development opportunities to enable our colleagues to grow their skills.
We are dedicated to attracting, retaining, and growing leading scientists and experts, who are passionate about developing medicines that matter. We strive to encourage intellectual curiosity and offer a variety of professional development opportunities to enable our colleagues to grow their skills.
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.
Our software products are licensed by more than 160,000 users and are also used by 20 global drug regulatory agencies, including the FDA, Japan’s Pharmaceuticals and Medical 7 Table of Contents Devices Agency (the “PMDA”), and China’s Center for Drug Evaluation (the “CDE”) within the National Medical Product Administration (the “NMPA”).
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.
Certara science, technology and consulting services have been used by more than 2,600 biopharmaceutical and biotech companies and academic institutions across 70 countries, including 38 of the top 40 biopharmaceutical companies by R&D spend in 2025. We also derive limited revenue from contracts with U.S. government agencies, including the FDA and the U.S.
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.
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.
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.
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. By offering science, technology and consulting services solutions, we provide flexible offerings for life sciences companies of all sizes and requirements.
Design Hub has been integrated with the Certara D360 solution for more than eight years to provide an optimal end user experience throughout the lead optimization stage of discovery. Certara D360™ Software – D360 is a scientific informatics system for small molecule and biologics discovery research.
Chemaxon Design Hub – A compound design and tracking platform for drug discovery teams and their external collaborators that connects workflows for scientific hypotheses, candidate compound selection and computational capabilities. Design Hub has been integrated with the Certara D360 solution for more than eight years to provide optimal end user experience throughout the lead optimization stage of discovery.
We also rely on independent contractors to address discrete parts of our business and provide expertise in certain specialized areas or focus on projects. In 2024, we again received the “Great Place to Work” award (from the Great Place to Work® Institute, Inc.). Our over 1,500 employees are the key to our success.
We also rely on independent contractors to address discrete parts of our business and provide expertise in certain specialized areas or focus on projects. We also rely on independent contractors to address discrete parts of our business and provide expertise in certain specialized areas or focus on projects.
No single customer accounted for more than 10% of our revenues in 2024. Our ten largest customers accounted for 27% and 28% of revenues for each of the years ended December 31, 2024 and 2023, respectively.
In addition to life sciences, Certara serves customers in animal health, crop science, bio science, medical devices, and public sector industries. No single customer accounted for more than 10% of our revenues in 2025. Our ten largest customers accounted for 24% and 27% of revenues for the years ended December 31, 2025 and 2024, respectively.
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.
Our Solutions We offer differentiated and comprehensive solutions for MIDD, which include science, technology and consulting services. Customers leverage 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 research and development process.
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.
Our scientists,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. Ultimately, one of our goals is to facilitate customer growth over time through higher adoption of biosimulation.
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.
For example, we are using machine learning to automate and speed the process of biosimulation, and we have created generative AI applications to aid in drafting regulatory documents from scientific analyses and clinical data. We apply AI capabilities within established modeling environments and under the supervision of experienced scientists and regulatory experts.
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.
Several of our biosimulation tools, including the Simcyp Simulator, incorporate proprietary datasets compiled over decades from both public and private sources. These datasets, combined with our proprietary source code and algorithms, form advanced modeling capabilities that cannot be readily replicated.
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 proprietary software products are protected by copyright and further safeguarded through the terms of our software license agreements, which limit authorized uses and prohibit activities such as reverse engineering, decompiling, or accessing source code or underlying algorithms except as expressly permitted.
Chemaxon Compound Registration – Compound Registration supports a streamlined lead optimization process workflow by comparing the uniqueness of new small molecules against those already stored in a database. 10 Table of Contents Chemaxon Design Hub – A compound design and tracking platform for drug discovery teams and their external collaborators that connects scientific hypotheses, candidate compound selection and computational capabilities.
Chemaxon Compound Registration – Compound Registration supports a streamlined lead optimization process workflow by comparing the uniqueness of new small molecules against those already stored in a database. The application is foundational to manage IP for the life science industry.
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.
Our ability to 14 Table of Contents remain competitive depends on our ability to continue to invest in innovation as MIDD and drug development science advances. In the biosimulation software market, we compete with other technology companies including Mathworks, Dassault Systemes, Ansys, Simulations Plus, and NONMEM, a division of ICON.
Scale Through Acquisitions Part of our strategy to date has been to pursue strategic acquisitions to accelerate our development roadmap.
As of December 31, 2025, we had employees in 28 countries, including approximately 585 in the US, 707 in Europe, and 177 in Asia. Scale Through Acquisitions Part of our strategy to date has been to pursue strategic acquisitions to accelerate our development roadmap.
For example, our software products are licensed by 23 global drug regulatory agencies, including the FDA, Health Canada, Japan’s PMDA, China’s NMPA and the UK’s Medicines and Healthcare Products Regulatory Agency (“MHRA”). In addition to life sciences, Certara serves customers in animal health, crop science, bio science, medical devices, and public sector industries.
Department of Health and Human Services (DHHS), as well as some foreign governments. For example, our software products are licensed by 20 global drug regulatory agencies, including the FDA, EU’s EMA, Japan’s PMDA, China’s CDE within the NMPA and the UK’s Medicines and Healthcare Products Regulatory Agency (“MHRA”).

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeCalifornia’s Voluntary Carbon Market Disclosures Act will require disclosure from entities that participate in the voluntary carbon offset market, or that make certain claims about their CO2 or GHG emissions, updated at least annually. 22 Table of Contents Further, we may from time to time announce, certain initiatives, including goals, targets and objectives, related to GHG emissions targets and other sustainability matters, in our SEC filings or in other public disclosures or reports.
Biggest changeCalifornia’s Climate-related Financial Risk Act will require biannual disclosure of climate-related financial risk reports by covered companies. California’s Voluntary Carbon Market Disclosures Act will require disclosure from entities that participate in the voluntary carbon offset market, or that make certain claims about their CO2 or GHG emissions, updated at least annually.
In order to attract and retain personnel in a competitive marketplace, we believe that we must provide a competitive compensation package, and compensation for our employees, which makes up our most significant fixed cost.
In order to attract and retain personnel in a competitive marketplace, we believe that we must provide a competitive compensation package for our employees, which makes up our most significant fixed cost.
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.
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; 30 Table 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.
We operate on a global basis with offices or activities in the United States, Canada, France, Germany, the Netherlands, Poland, Switzerland, the United Kingdom, Australia, India, the Philippines, Japan, China, Hungary, and South Korea. In addition, we derive a significant portion of our total revenue from our operations in international markets.
We operate on a global basis with offices or activities in the United States, Canada, France, Germany, the Netherlands, Poland, Switzerland, the United Kingdom, India, the Philippines, Japan, China, Hungary, and South Korea. In addition, we derive a significant portion of our total revenue from our operations in international markets.
Our international operations and sales subject us to a number of increased risks, including, among others: • fluctuations in foreign currency exchange rates, which may affect the costs incurred in international operations and foreign acquisitions and could harm our results of operations and financial condition; • changes in general economic and political conditions in countries where we operate, particularly as a result of ongoing economic instability within foreign jurisdictions; • the potential for political unrest, acts of terrorism, hostilities or war; • government trade restrictions, including tariffs, export controls or other trade barriers, and changes to existing trade arrangements, including the unknown impact of current and future U.S. and Chinese trade regulations; • differing protection of intellectual property, technology and data in foreign jurisdictions; 32 Table of Contents • difficulty in staffing and managing widespread operations, including as a result of different employment-related laws (such as those related to safety, discrimination, classification of employees, wages, and benefits); • being subject to complex and restrictive immigration, employment and labor laws and regulations, as well as union and works council restrictions ; • changes in tax laws or rulings in the United States or other foreign jurisdictions that may have an adverse impact on our effective tax rate; • being subject to burdensome foreign laws and regulations, including regulations that may place an increased tax burden on our operations; • being subject to longer payment cycles from customers and experiencing greater difficulties in timely accounts receivable collections; and • required compliance with a variety of foreign laws and regulations, such as data privacy requirements, real estate and property laws, anti-competition regulations, import and trade restrictions, export requirements, U.S. laws such as the FCPA and the U.S.
Our international operations and sales subject us to a number of increased risks, including, among others: • fluctuations in foreign currency exchange rates, which may affect the costs incurred in international operations and foreign acquisitions and could harm our results of operations and financial condition; • changes in general economic and political conditions in countries where we operate, particularly as a result of ongoing economic instability within foreign jurisdictions; • the potential for political unrest, acts of terrorism, hostilities or war; • government trade restrictions, including tariffs, export controls or other trade barriers, and changes to existing trade arrangements, including the unknown impact of current and future U.S. and Chinese trade regulations; • differing protection of intellectual property, technology and data in foreign jurisdictions; • difficulty in staffing and managing widespread operations, including as a result of different employment-related laws (such as those related to safety, discrimination, classification of employees, wages, and benefits); • being subject to complex and restrictive immigration, employment and labor laws and regulations, as well as union and works council restrictions ; • changes in tax laws or rulings in the United States or other foreign jurisdictions that may have an adverse impact on our effective tax rate, such as the OBBA; • being subject to burdensome foreign laws and regulations, including regulations that may place an increased tax burden on our operations; • being subject to longer payment cycles from customers and experiencing greater difficulties in timely accounts receivable collections; and • required compliance with a variety of foreign laws and regulations, such as data privacy requirements, real estate and property laws, anti-competition regulations, import and trade restrictions, export requirements, U.S. laws such as the FCPA and the U.S.
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.
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. 49 Table of Contents Item 1B.
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.
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; 45 Table of Contents • 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.
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.
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 29 Table of Contents 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.
Likewise, drug price controls are a topic subject to governmental intervention and regulation, and may vary by region, market and administration, and when applied could lead to reduced R&D spending by pharmaceutical companies, with one assumption being that they may have less financial incentive to develop new drugs, particularly for niche or complex therapeutic areas.
Likewise, drug price controls are a topic subject to governmental intervention and regulation, and may vary by region, market and administration, and when applied have led to and could continue to lead to reduced R&D spending by pharmaceutical companies, with one assumption being that they may have less financial incentive to develop new drugs, particularly for niche or complex therapeutic areas.
Any material decrease in demand for our technologies or services may have a material adverse effect on our business, financial condition and results of operations. Changes or delays in government regulation, executive action or administrative decision-making relating to the biopharmaceutical industry could decrease the need for some of the services we provide.
Any material decrease in demand for our technologies or services may have a material adverse effect on our business, financial condition and results of operations. Changes or delays in government regulation, executive action or administrative decision-making relating to the biopharmaceutical industry have decreased and could continue to decrease the need for some of the services we provide.
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.
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 42 Table of Contents 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.
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.
We have performed an analysis for the period January 1, 2025 through December 31, 2025 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.
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.
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 43 Table of Contents 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.
See “Risks Related to Intellectual Property, Information Technology and Data Privacy.” Although we have disaster recovery and business continuity plans, carry business interruption insurance policies and typically have provisions in our contracts that protect us in certain force majeure type events, we cannot be 37 Table of Contents certain that our plans will be successful in the event of a disaster, that our insurance coverage will be adequate to compensate us for all losses that may occur or that provisions in our contracts will afford us adequate protection.
See “Risks Related to Intellectual Property, Information Technology and Data Privacy.” Although we have disaster recovery and business continuity plans, carry business interruption insurance policies and typically have provisions in our contracts that protect us in certain force majeure type events, we cannot be certain that our plans will be successful in the event of a disaster, that our insurance coverage will be adequate to compensate us for all losses that may occur or that provisions in our contracts will afford us adequate protection.
A significant trade disruption, export restriction, or the establishment or increase of any trade barrier in any area where we do business could reduce customer demand and cause customers to search for substitute products and services, make our products and services more expensive or unavailable for customers, increase the cost of our products and services, have a negative impact on customer confidence and spending, make our products or services less competitive, or otherwise have an adverse impact on our business, operating results and financial condition.
A significant trade disruption, export restriction, or the establishment or increase of any trade barrier in any area where we do business could reduce customer demand and cause customers to search for substitute products and services, make our products and services more expensive or unavailable for customers, increase the cost of our products and services, have a negative impact 33 Table of Contents on customer confidence and spending, make our products or services less competitive, or otherwise have an adverse impact on our business, operating results and financial condition.
Any issuance of additional securities in connection with investments or acquisitions may result in additional dilution. 46 Table of Contents Arsenal holds a substantial amount of our outstanding common stock, and its interests may be different than the interests of other holders of our common stock.
Any issuance of additional securities in connection with investments or acquisitions may result in additional dilution. 48 Table of Contents Arsenal holds a substantial amount of our outstanding common stock, and its interests may be different than the interests of other holders of our common stock.
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.
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.
For example, in the United States, specific drug price control provisions, allowing for negotiation of certain categories of drug prices through government executive agencies, were included in the Inflation Reduction Act of 2022, and the extent of their application may have an economic impact on the incentive structure related to drug development R&D spending by our customers.
For example, in the United States, specific drug price control provisions, allowing for negotiation of certain categories of drug prices through government executive agencies, were included in the Inflation Reduction Act of 2022, and the extent of their application has had and may continue to have an economic impact on the incentive structure related to drug development R&D spending by our customers.
Furthermore, according to the FTC, violating consumers’ privacy rights or failing to take appropriate steps to keep information about consumers 41 Table of Contents secure may constitute unfair acts or practices in or affecting commerce in violation of Section 5(a) of the FTC Act. The GDPR and the UK GDPR regulate our processing of personal data, and imposes stringent requirements.
Furthermore, according to the FTC, violating consumers’ privacy rights or failing to take appropriate steps to keep information about consumers secure may constitute unfair acts or practices in or affecting commerce in violation of Section 5(a) of the FTC Act. The GDPR and the UK GDPR regulate our processing of personal data and imposes stringent requirements.
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.
The FCPA and the U.K. 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.
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.
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.
We assess the potential impairment of goodwill and other intangible assets on at least an annual basis. To the extent goodwill or other indefinite-lived intangibles are 45 Table of Contents impaired, their carrying value will be written down to its implied fair value and a charge will be made to our income from continuing operations.
We assess the potential impairment of goodwill and other intangible assets on at least an annual basis. To the extent goodwill or other indefinite-lived intangibles are impaired, their carrying value will be written down to its implied fair value and a charge will be made to our income from continuing operations.
We may also have difficulty staffing 24 Table of Contents certain projects if we were not able to convert independent contractors to full or part-time employees. As a result, any determination that our independent contractors are our employees could have a material adverse effect on our business, financial condition and results of operations.
We may also have difficulty staffing certain projects if we were not able to convert independent contractors to full or part-time employees. As a result, any determination that our independent contractors are our employees could have a material adverse effect on our business, financial condition and results of operations.
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.
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 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.
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 management requirements increases, our business, financial condition and results of operations could be harmed.
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.
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.
A prolonged service disruption affecting our cloud-based solutions for any of the foregoing reasons would negatively impact our ability to serve our customers and could damage our reputation with current and potential customers, expose us to liability, cause us to lose customers or otherwise harm our business.
A prolonged service disruption affecting our 39 Table of Contents cloud-based solutions for any of the foregoing reasons would negatively impact our ability to serve our customers and could damage our reputation with current and potential customers, expose us to liability, cause us to lose customers or otherwise harm our business.
If their products are not successful or they have difficulty raising sufficient investment capital, they may not be able to timely or fully pay for our services, or they may terminate or decrease the scope of projects for which they use our products and services, which could adversely impact our revenues.
If their products are not successful or they have difficulty raising sufficient investment capital, they may not be able to timely or 23 Table of Contents fully pay for our services, or they may terminate or decrease the scope of projects for which they use our products and services, which could adversely impact our revenues.
In such an event, our revenues may be reduced through increased downward pricing pressure, reduction in the scope of projects, delays or cancellations of ongoing projects, or our customers shifting away from using third parties for their modeling and simulation work.
In such an event, our revenues may be reduced through increased downward pricing pressure, reduction in the scope of projects, delays or cancellations of ongoing projects, or our customers 20 Table of Contents shifting away from using third parties for their modeling and simulation work.
For example, our software products are licensed by 23 global drug regulatory agencies, including the FDA, Health Canada, Japan’s PMDA, China’s NMPA and the UK’s MHRA. We have also accepted limited grant funds from governmental entities, whereby we are reimbursed for certain expenses incurred, subject to our compliance with the specific requirements of the applicable grant, including rigorous documentation requirements.
For example, our software products are licensed by 20 global drug regulatory agencies, including the FDA, Japan’s PMDA, China’s NMPA and the UK’s MHRA. We have also accepted limited grant funds from governmental entities, whereby we are reimbursed for certain expenses incurred, subject to our compliance with the specific requirements of the applicable grant, including rigorous documentation requirements.
Failure to comply with such laws and/or related contractual obligations could result in regulatory enforcement or claims against us for breach of contract or may lead third parties to terminate their contracts with us and/or choose not to work with us in the future.
Failure to comply with such laws and/or related contractual obligations could result in regulatory enforcement or claims against us for 41 Table of Contents breach of contract or may lead third parties to terminate their contracts with us and/or choose not to work with us in the future.
Some competing products are developed and made available at lower cost by government organizations and academic institutions, and these entities may be able to devote substantial resources to product development. Some clinical research organizations or technology companies may decide to enter into or expand their offerings in the biosimulation area, whether through acquisition or internal development.
Some competing products are developed and made available at lower cost by government organizations and academic institutions, and these entities may be able to devote substantial resources to product development. 19 Table of Contents Some clinical research organizations or technology companies may decide to enter into or expand their offerings in the biosimulation area, whether through acquisition or internal development.
A breach of any of these and certain other covenants could result in a default under our Credit Agreement whereby the lenders could elect to declare all amounts outstanding under our Credit Agreement to be immediately due and payable and terminate any commitments to extend further credit.
A breach of any of these and certain other covenants could result in a default under our Credit Agreement whereby the lenders could elect to declare all amounts outstanding under our Credit Agreement to be 46 Table of Contents immediately due and payable and terminate any commitments to extend further credit.
New and emerging costly and resource-consuming regulatory initiatives related to climate and sustainability matters could adversely affect our business, including, for example, the EU Corporate Sustainability Reporting Directive (“CSRD”) and climate disclosure laws adopted in California. These and other legal and regulatory requirements continue to evolve in scope and complexity, making compliance more difficult and uncertain.
New and emerging costly and resource-consuming regulatory initiatives related to climate and sustainability matters could adversely affect our business, including, for example, the EU Corporate Sustainability Reporting 38 Table of Contents Directive (“CSRD”) and climate disclosure laws adopted in California. These and other legal and regulatory requirements continue to evolve in scope and complexity, making compliance more difficult and uncertain.
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.
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.
Increasingly, government support and funding may change with new administrations, personnel or polices in effect from time to time, in the United States and globally. Under these more prevalent circumstances, with respect to these contract and 28 Table of Contents revenue sources, we may operate with less certainty and shorter known time horizons on public sector commitments and contracts.
Increasingly, government support and funding may change with new administrations, personnel or polices in effect from time to time, in the United States and globally. Under these more prevalent circumstances, with respect to these contract and revenue sources, we may operate with less certainty and shorter known time horizons on public sector commitments and contracts.
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.
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.
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 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.
We have based the TAM for our business on our current core markets, biosimulation, regulatory science, and market access, which may change from time to 31 Table of Contents time as our strategy evolves. While we believe the information on which we base our TAM is generally informative, such expectations, assumptions and estimates are inherently imprecise.
We have based the TAM for our business on our current core markets, biosimulation, regulatory science, and market access, which may change from time to time as our strategy evolves. While we believe the information on which we base our TAM is generally informative, such expectations, assumptions and estimates are inherently imprecise.
As of December 31, 2024, we had $298.5 million in total borrowings under our credit agreement, dated July 15, 2017 (as amended, the “Credit Agreement”), and $100.0 million of capacity outstanding under our revolving credit facility. In addition, subject to restrictions governing our Credit Agreement, we may incur additional debt.
As of December 31, 2025, we had $295.5 million in total borrowings under our credit agreement, dated July 15, 2017 (as amended, the “Credit Agreement”), and $100.0 million of capacity outstanding under our revolving credit facility. In addition, subject to restrictions governing our Credit Agreement, we may incur additional debt.
Furthermore, because AI technology itself is highly 26 Table of Contents complex and rapidly developing, it is not possible to predict all of the legal, operational, or technological risks that may arise relating to the use of AI.
Furthermore, because AI technology itself is highly complex and rapidly developing, it is not possible to predict all of the legal, operational, or technological risks that may arise relating to the use of AI.
Our customers’ revenue and/or profitability could decline as a result of efforts by government and third-party payors to reduce the cost of healthcare. Governments worldwide have increased efforts to expand healthcare coverage while at the same time curtailing and better controlling the increasing costs of healthcare.
Our customers’ revenue and/or profitability have declined and could continue to decline as a result of efforts by government and third-party payors to reduce the cost of healthcare and limit government spending. Governments worldwide have increased efforts to expand healthcare coverage while at the same time curtailing and better controlling the increasing costs of healthcare.
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.
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.
We derive a significant percentage of our revenues from a key group of customers, and the loss of one or more of our major customers could materially and adversely affect our business, results of operations and/or financial condition. Our ten largest customers accounted for 27% of revenues for the year ended December 31, 2024.
We derive a significant percentage of our revenues from a key group of customers, and the loss of one or more of our major customers could materially and adversely affect our business, results of operations and/or financial condition. Our ten largest customers accounted for 24% of revenues for the year ended December 31, 2025.
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.
Nonetheless, significant changes in government or regulatory policy, levels of government or academic funding or program support, 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 a 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.
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 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, including through potential divestitures.
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.
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.
In addition to serving in a technical capacity, many of our scientists also play a significant role in marketing and selling our products and services to new and existing customers. As of December 31, 2024, 408 of our employees held PhDs or doctor of medicine degrees.
In addition to serving in a technical capacity, many of our scientists also play a significant role in marketing and selling our products and services to new and existing customers. As of December 31, 2025, 414 of our employees held PhDs or doctor of medicine degrees.
It could also disrupt existing business relationships, make it harder to develop new business relationships, or otherwise negatively impact the way that we operate our business. Our estimated addressable market is subject to inherent challenges and uncertainties.
It could also disrupt existing business relationships, make it harder to develop new business relationships, or otherwise negatively impact the way that we operate our business. 31 Table of Contents Our estimated addressable market is subject to inherent challenges and uncertainties.
Additionally, in 2024, we acquired Chemaxon, a leading provider of cheminformatics software to expand and complement our existing prediction and analytical capabilities in drug discovery. The planned integrations of these businesses into our existing product offerings may be delayed or may not achieve the expected results.
For example, in 2024, we acquired Chemaxon, a leading provider of cheminformatics software to expand and complement our existing prediction and analytical capabilities in drug discovery. The planned integrations of our newly acquired businesses into our existing product offerings may be delayed or may not achieve the expected results.
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.
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.
The emergence of AI and relevance to our sector may result in more competition over time, which could adversely affect the performance of our business. The development, deployment and use of AI, particularly generative AI, however, is still in its early stages and presents risks that could negatively impact our business.
The emergence of AI and relevance to our sector may result in more competition over time, which could adversely affect the performance of our business. The development, deployment and use of AI, particularly generative AI and agentic AI systems that can take action autonomously, however, is still in its early stages and presents risks that could negatively impact our business.
As of December 31, 2024, shares controlled by Arsenal Capital Partners (“Arsenal”) and our officers and directors in aggregate represented approximately 24.7% of our outstanding common stock. The market price of our shares of common stock could drop significantly if Arsenal or our officers and directors sell their shares or are perceived by the market as intending to sell them.
As of December 31, 2025, shares controlled by Arsenal Capital Partners (“Arsenal”) and our officers and directors in aggregate represented approximately 25.2% of our outstanding common stock. The market price of our shares of common stock could drop significantly if Arsenal or our officers and directors sell their shares or are perceived by the market as intending to sell them.
The use of AI technologies with personally identifiable information or protected health information may also result in legal liability.
The use of AI technologies with personally identifiable information or protected health information 26 Table of Contents may also result in legal liability.
Such events may also (i) cause our customers to reduce, delay or forgo R&D spending, (ii) result in customers sourcing products or services in-house or from other suppliers not subject to such restrictions or tariffs, (iii) lead to the insolvency or consolidation of key customers and/or (iv) intensify pricing pressures.
Such events may also (i) cause our customers to reduce, delay or forgo R&D spending, (ii) result in customers sourcing products or services in-house or from other suppliers not subject to such restrictions or tariffs, (iii) lead to the insolvency or consolidation of key customers, particularly smaller biotech companies, (iv) result in customers preferring software to services, and/or (v) intensify pricing pressures.
Mistakes in providing services to our customers, such as dosing models, could affect medical decisions for patients in clinical trials and create liability for personal injury.
Mistakes in providing services to our customers, such as dosing models, could 35 Table of Contents affect medical decisions for patients in clinical trials and create liability for personal injury.
Because of the breadth of these laws and the narrowness of available statutory and regulatory exceptions, it is possible that some of our business activities could be subject to challenge under one or more of such laws.
Because of the breadth of these laws, ongoing legal and regulatory developments pertaining thereto, and the narrowness of available statutory and regulatory exceptions, it is possible that some of our business activities could be subject to challenge under one or more of such laws.
A general slowdown in the global economy or in a particular region or industry, other unfavorable changes in economic conditions, such as inflation, higher interest rates, tightening of the credit markets, recession or slowing growth, or an increase in trade tensions with U.S. trading partners could negatively impact our business, financial condition and liquidity.
A general slowdown in the global economy or in a particular region or industry, other unfavorable changes in economic conditions, such as inflation, higher interest rates, tightening of the credit markets, recession or slowing growth, uncertainty regarding tariffs, actual or potential changes in the research funding environment or an increase in trade tensions with U.S. trading partners could negatively impact our business, financial condition and liquidity.
Upon graduating, these students frequently become employed by biopharmaceutical companies, where 19 Table of Contents they may continue to use our products and advocate for their continued use.
Upon graduating, these students frequently become employed by biopharmaceutical companies, where they may continue to use our products and advocate for their continued use.
In addition, there is uncertainty regarding how proposed, contemplated or future changes to these complex laws and regulations 33 Table of Contents could affect our business.
In addition, there is uncertainty regarding how proposed, contemplated or future changes to these complex laws and regulations could affect our business.
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.
If academic institutions decide to use competitive products, develop their own biosimulation products, or reduce their exposure to biosimulation tools in general, whether as a result of change in approach or lack of funding or institutional support, 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.
We expect to devote substantial financial resources to our ongoing and planned activities, including the continued investment in our biosimulation software platform and strategic partnerships and acquisitions. As of December 31, 2024, we had cash and cash equivalents of $179.2 million.
We expect to devote substantial financial resources to our ongoing and planned activities, including the continued investment in our biosimulation software platform and strategic partnerships and acquisitions. As of December 31, 2025, we had cash and cash equivalents of $189.4 million.
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.
We are subject to the FCPA and the U.K. Bribery Act and similar anti-corruption laws and regulations in other countries and jurisdictions. 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.
During the years ended December 31, 2024 and 2023, 28% and 27%, respectively, of our revenues were transacted in foreign currencies, the majority of which included the British Pound Sterling, the Euro and Japanese Yen.
During the years ended December 31, 2025 and 2024, 31% and 28%, respectively, of our revenues were transacted in foreign currencies, the majority of which included the British Pound Sterling, the 32 Table of Contents Euro and Japanese Yen.
We may experience further ownership changes in the future and/or subsequent changes in our stock ownership (which may be outside our control).
We may experience further ownership changes in the future and/or subsequent changes in our stock 47 Table of Contents ownership (which may be outside our control).
We may not be able to anticipate how to respond to these rapidly evolving frameworks, and we may need to expend resources to adjust our operations or offerings in certain jurisdictions if the legal frameworks are inconsistent across jurisdictions.
We may not be able to anticipate how to respond to these rapidly evolving frameworks, and the uncertainty surrounding evolving regulations may complicate new product development. We may need to expend resources to adjust our operations or offerings in certain jurisdictions if the legal frameworks are inconsistent across jurisdictions.
Reduction in R&D spending by our customers for a variety of reasons, as well as delays in the drug discovery and development process, may reduce demand for our products and services and negatively impact our results of operations and financial condition.
Reduction in R&D spending by our customers for a variety of reasons, including due to lack of funding, as well as delays in the drug discovery and development process, have reduced and may continue to reduce demand for our products and services and negatively impact our results of operations and financial condition.
Depending on their nature and scope, this could potentially result in the misappropriation, destruction, corruption or unavailability of critical data and confidential or proprietary information (our own or that of third parties, including information about our customers and employees) and the disruption of business operations.
Depending on the nature and scope, any such incident could potentially result in the misappropriation, destruction, corruption or 40 Table of Contents unavailability of critical data and confidential or proprietary information (our own or that of third parties, including information about our customers and employees) and the disruption of business operations.
As of December 31, 2024, Arsenal owns or controls approximately 22.6% of our outstanding common stock, and subject to the terms of the Stockholders Agreement, dated as of November 3, 2022, by and among the Company and Arsenal Saturn Holdings LP and certain affiliated entities (collectively, “Arsenal”), Arsenal maintains the right to nominate up to two board members.
As of December 31, 2025, Arsenal owns or controls approximately 22.8% of our outstanding common stock, and subject to the terms of the Stockholders Agreement, dated as of November 3, 2022, by and among the Company and certain entities affiliated with Arsenal, Arsenal maintains the right to nominate up to two board members.
If we fail to perform our services in accordance with regulatory requirements, regulatory authorities may take action against us or our customers for failure to comply with applicable regulations governing the development and testing of therapeutic products.
We may be subject to inspection by regulatory authorities in connection with our customers’ marketing applications and other regulatory submissions. If we fail to perform our services in accordance with regulatory requirements, regulatory authorities may take action against us or our customers for failure to comply with applicable regulations governing the development and testing of therapeutic products.
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.
Additionally, we carried forward foreign NOLs of approximately $87.3 million which will start to expire in 2026, foreign research and development credits of $0.2 million which expire in 2029, and Canadian investment tax credits of approximately $5.2 million which expire between 2034 and 2044. Our carryforwards are subject to review and possible adjustment by the appropriate taxing authorities.
A significant portion of our customer base consists of biopharmaceutical companies, and our revenue is dependent upon expenditures by these customers. Consolidation through mergers or contraction through business failures within the biopharmaceutical industry may reduce the number of potential customers, particularly larger customers, for our products and services.
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. A significant portion of our customer base consists of biopharmaceutical companies, and our revenue is dependent upon expenditures by these customers.
We outsource substantially all of the infrastructure relating to our hosted software solutions to third-party hosting services. Customers of our hosted software solutions need to be able to access our software platform at any time, without interruption or degradation of performance, and we provide them with service-level commitments with respect to uptime.
Customers of our hosted software solutions need to be able to access our software platform at any time, without interruption or degradation of performance, and we provide them with service-level commitments with respect to uptime.
However, some changes in regulations, such as a relaxation in regulatory requirements or the introduction of streamlined or expedited approval procedures, or an increase in regulatory requirements that we have difficulty satisfying or that make our regulatory strategy services less competitive, could eliminate or substantially reduce the demand for our regulatory services.
However, some changes in regulations, such as a relaxation in regulatory requirements, the introduction of streamlined or expedited approval procedures, an increase in regulatory requirements that we have difficulty satisfying or that make our regulatory strategy services less competitive, or governmental agency decisions not to review certain types of new drug applications, such as vaccines have reduced and could eliminate or substantially reduce the demand for our regulatory services.
Our efforts to improve our defenses may not always prove successful, and we may detect, or receive notices from customers and both public and private agencies that they have detected, actual or perceived vulnerabilities or fraudulent activity.
Our efforts to defend against breaches or unauthorized access to customer or other proprietary data may not always prove successful, and we may detect, or receive notices from customers and both public and private agencies that they have detected, actual or perceived vulnerabilities or fraudulent activity.
Some of our products, such as our QSP models, require significant time and investment to develop to a point where they can achieve market 23 Table of Contents acceptance, and we may not be able to develop them at a rate that matches market demand.
Some of our products, such as our QSP models, require significant time and investment to develop to a point where they can achieve market acceptance, and we may not be able to develop them at a rate that matches market demand. We may also face more significant pricing pressure as we expand geographically and our customer profile evolves.
We structure the relationships with our independent contractors in a manner that we believe results in an independent contractor relationship, not an employee relationship. Although we believe that our independent contractors are properly characterized as independent contractors, individuals, tax or other regulatory authorities may in the future challenge our characterization of these relationships.
Although we believe that our independent contractors are properly characterized as independent contractors, individuals, tax or other regulatory authorities may in the future challenge our characterization of these relationships.
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.
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. 28 Table of Contents Many of our contracts with customers also provide for services on a fixed-price or fee-for-service with a cap basis.
The successful assertion of one or more large claims against us that exceed available insurance coverage, denial of coverage as to any specific claim, or any change or cessation in our insurance policies and coverages, including premium increases or the imposition of large deductible requirements, could have a material adverse effect on our business, financial condition and results of operations.
The successful assertion of one or more large claims against us that exceed available insurance coverage, denial of coverage as to any specific claim, or any change or cessation in our insurance policies and coverages, including premium increases or the imposition of large deductible requirements, could have a material adverse effect on our business, financial condition and results of operations We are subject to numerous privacy and cybersecurity laws and related contractual requirements, and our failure to comply with those obligations could cause us significant harm, including financial losses and reputational harm.
Our success depends to a significant extent on the continued services of our senior management and other important contributors throughout our business. There is significant competition for qualified personnel in the biopharmaceutical services industry, particularly for those with higher educational degrees, and our industry generally tends to experience relatively high levels of employee turnover.
There is significant competition for qualified personnel in the biopharmaceutical services industry, particularly for those with higher educational degrees, and our industry generally tends to experience relatively high levels of employee turnover.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeOur 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.
Biggest changeOur Board of Directors (the “Board”) oversees our cybersecurity and data privacy program, including risks associated with cybersecurity threats. Our Board’s Audit Committee supports the Board in this oversight role and is specifically focused on monitoring cybersecurity and data privacy risks, including incident response readiness, timely identification and assessment of cybersecurity threats, cybersecurity incident recovery processes, and business continuity considerations.
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.
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, processes and governance, reflect our dedication to meeting industry cybersecurity standards.
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.
Our cybersecurity risk management processes are grounded in industry best practices, including NIST 800-53, ISO 27001:2022, 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.
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.
Our cybersecurity processes have been integrated into our risk and change 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.
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.
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, 50 Table of Contents Item 1A.
As 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.
As of December 31, 2025, 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.
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.
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 framework that provides oversight and strategic guidance for our cybersecurity and data privacy program.
We understand that cybersecurity is not a static concept but a dynamic discipline, and our security and privacy program reflects this by incorporating internal and third-party audits, penetration testing, active vulnerability scanning and a continuous improvement mindset.
We understand that cybersecurity is not a static concept but a dynamic discipline, and our security and privacy program reflects this by incorporating internal and third-party audits, penetration testing, active vulnerability scanning, simulated phishing programs and a continuous improvement mindset.
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.
We have established processes to ensure that management is informed about and actively monitors cybersecurity threat prevention, detection, mitigation, and, when necessary, incident remediation. These processes include established reporting, escalation, and communication protocols, as well as periodic reviews and audits of our cybersecurity and data privacy program.
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.
Our Head of Information Technology and our Director, Compliance Standards & Data Privacy (“DCSDP”) oversee the development, implementation, and monitoring of the cybersecurity and data privacy policies, standards, procedures, and controls that govern our information systems and data-processing activities.
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.
The IT Security team and DCSDP jointly coordinate the response to and remediation of cybersecurity incidents and data breaches. They also provide updates on the status and effectiveness of our security and privacy program to the SPPO, the Board and the Audit Committee on a quarterly basis, or more frequently when circumstances require.
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.
The SPPO reports to our Head of Information Technology, who serves as the accountable executive for our cybersecurity program. Executive leadership, across our functional and business units, working in coordination with the SPPO, is responsible for ensuring organizational compliance with data protection regulations and the implementation of related risk-mitigation controls.
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”).
We have established defined roles and responsibilities for assessing and managing risks associated with cybersecurity threats, including designated executive-level and management-level positions or committees. Oversight of our cybersecurity and privacy program is carried out by our Security and Privacy Program Office (“SPPO”), which comprises leaders from our legal and information technology (“IT”) functions.
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.
The DCSDP also has over 30 years of experience in IT with the last 13 years focused on compliance and data privacy matters at Certara. Our DCSDP reports directly to our SVP of Information Technology. Our SVP, Information Technology, in turn, reports to the Audit Committee.
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.
Our Head of Information Technology brings more than 30 years of experience in IT infrastructure, cybersecurity operations, and site reliability engineering within software and services organizations, including 16 years of experience supporting SaaS environments that handle sensitive customer data.
Removed
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 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
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. 51 Table of Contents As of December 31, 2025, 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 19,370 12/31/2034 Budapest, Hungary 24,810 12/31/2027
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.
Item 2. Properties. As of December 31, 2025, we had 28 offices in 16 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.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeItem 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
Biggest changeItem 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. 52 Table of Contents PART II

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. 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.
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. 53 Table of Contents Issuer Purchases of Equity Securities The following table summarizes our purchases of common stock in the three months ended December 31, 2025: Total Number of Shares Purchased(a)(b) Weighted Average Price Paid per Share(c) Total Number of Shares Purchased Under Announced Programs Approximate Dollar Value of Shares That May Yet be Purchased Under Announced Programs 10/1/2025 to 10/31/2025 189,902 $ 11.47 178,419 $59.3 Million 11/1/2025 to 11/30/2025 166,278 $ 11.35 166,278 $57.4 Million 12/1/2025 to 12/31/2025 32,644 $ 8.86 — $57.4 Million Total 388,824 $ 11.20 344,697 $57.4 Million __________________________________ (a) On April 11, 2025, our Board of Directors approved a stock repurchase program authorizing the Company to repurchase up to $100 million of its common stock.
As of February 17, 2025, there were 30 holders of record of our common stock as reported by our transfer agent.
As of February 17, 2026, there were 23 holders of record of our common stock as reported by our transfer agent.
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.
See “Risk Factors—Risks Related to Ownership of Our Common Stock.” Stock Performance Graph The following graph shows the cumulative total shareholder return on our common stock during the five-year period ended December 31, 2025, as compared with 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 31, 2020 and the reinvestment of dividends.
The graph uses the closing market price on December 11, 2020 of $38.08 per share as the initial value of our common stock.
The graph uses the closing market price on December 31, 2020 of $33.72 per share as the starting value of our common stock .
Unregistered Sales of Equity Securities (b) There were no unregistered sales of equity securities during the fourth quarter of fiscal 2024.
This excise tax is included in the cost of shares repurchased, as reflected in the consolidated statement of stockholders’ equity. The repurchases above do not include the excise tax. 54 Table of Contents Unregistered Sales of Equity Securities (b) There were no unregistered sales of equity securities during the fourth quarter of fiscal 2025.
Added
Under this program, the Company may repurchase shares from time to time, depending on market conditions and alternate uses of capital. The timing and actual number of shares repurchased will depend on a variety of factors, including price, general business and market conditions and alternate uses of capital.
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The share repurchase program may be effected through Rule 10b5-1 plans, open market purchases, each in compliance with Rule 10b-18 under the Exchange Act, or privately negotiated transactions. The program may be suspended or discontinued at any time and does not have an expiration date.
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During the three months ended December 31, 2025, the Company repurchased 344,697 shares of its common stock at an average price of $11.40 per share, as part of the stock repurchase program.
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(b) Also includes shares purchased by the Company from employees for the payment of taxes resulting from issuance of common stock upon the vesting of RSUs relating to stock-based compensation plans. Employees tendered 44,127 shares in the fourth quarter of 2025. (c) The Company’s net share repurchases are subject to a 1% excise tax under the Inflation Reduction Act.

Item 7. Management's Discussion & Analysis

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

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Biggest changeThe decrease in general and administrative expenses was primarily due to a $16.0 million decrease related to a change in the fair value of contingent considerations, a $1.2 million decrease in equipment and software related expenses, a $1.0 million decrease in business acquisition-related costs, and a $0.4 million decrease in lease abandonment expense, partially offset by a $7.1 million increase in employee-related costs, mainly resulting from headcount growth and organizational restructuring, a $4.1 million increase in equity-based compensation cost, a $2.4 million increase in transaction expense primarily related to refinancing of our term loan and revolving line of credit, a $1.1 million increase in professional and consulting costs, a $1.0 million increase in franchise and other miscellaneous business taxes, a $0.8 million increase in provision for credit allowance, a $0.5 million increase in public company expense, and a $0.5 million increase in facility lease-related expenses. 66 Table of Contents Intangible Asset Amortization Expense YEAR ENDED DECEMBER 31, CHANGE 2024 2023 $ % (in thousands) Intangible asset amortization $ 51,599 $ 43,973 $ 7,626 17 % % of total revenues 13 % 12 % Intangible asset amortization expense increased by $7.6 million, or 17%, to $51.6 million for the year ended December 31, 2024, as compared to the same period in 2023.
Biggest changeThe decrease in general and administrative expenses was primarily due to a $11.7 million decrease related to a remeasurement change in the fair value of contingent considerations, a $2.0 million decrease in lease abandonment expense, a $1.7 million decrease in transaction cost, a $0.7 million decrease in state and city business tax, a $0.6 million decrease in merger and acquisition cost, and a $0.5 million decrease in executive recruiting expense, partially offset by a $3.0 million increase in professional and consulting expense, a $2.8 million increase in employee-related costs, and a $2.3 million increase in equipment and software expense.
General and administrative expense also includes professional fees for external legal, accounting and other consulting services, allocated overhead costs, and other general operating expenses. • Intangible Asset Amortization. Intangible asset amortization consists primarily of amortization expense related to intangible assets recorded in connection with acquisitions and amortization of capitalized software development costs. • Depreciation and Amortization Expense.
General and administrative expense also includes professional fees for external legal, accounting and other consulting services, allocated overhead costs, and other general operating expenses. • Intangible Asset Amortization. Intangible asset amortization consists primarily of amortization expense related to intangible assets recorded in connection with acquisitions and amortization of capitalized software development costs. • Depreciation and Amortization.
Chemaxon, Kft.("Chemaxon") On October 1, 2024, we completed the acquisition of 100% of the equity of Chemaxon, a software company that develops leading software products for chemical structure drawing, property prediction, search, and analysis, for a total cash consideration of $96.4 million.
Chemaxon, Kft.("Chemaxon") On October 1, 2024, we completed the acquisition of 100% of the equity of Chemaxon, a software company that develops leading software products for chemical structure drawing, property prediction, search, and analysis, for total cash consideration of $96.4 million.
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 total estimated consideration included a portion of contingent consideration that was 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.
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 goal is to enable the life science industry to use data, modeling, and analytics to make better decisions during drug research, development and commercialization to increase productivity rates and vastly reduce development costs.
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.
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. 63 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.
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).
At December 31, 2024 and 2023, the contingent consideration related to eligible revenue was remeasured to zero and $3.7 million, respectively, resulting in a negative fair value adjustment 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).
For a discussion of our financial condition and results of operations for the year ended December 31, 2023 compared to the year ended December 31, 2022, see “Results of Operations” and “Liquidity and Capital Resources” under Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations in our 2023 Annual Report on Form 10-K.
For a discussion of our financial condition and results of operations for the year ended December 31, 2024 compared to the year ended December 31, 2023, see “Results of Operations” and “Liquidity and Capital Resources” under Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations in our 2024 Annual Report on Form 10-K.
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).
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 expense on the accompanying consolidated statement of operations and comprehensive income (loss).
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.
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.
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 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, 58 Table of Contents which has directly led to an increase in the demand for our services.
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.
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.
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.
We monitor two key performance indicators to evaluate retention and expansion: new bookings and net retention rates. 57 Table of Contents • 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.
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, 59 Table of Contents acquisition and integration expense, and other items not indicative of our ongoing operating performance.
Accordingly, the number of resources being paid for and varying lengths of time they are being paid for, determine the measure of progress. Software Services Maintenance services agreements on perpetual licenses consist of fees for providing software updates and for providing technical support for software products for a specified term.
Accordingly, the number of resources being paid for and varying lengths of time they are being paid for, determine the measure of progress. 74 Table of Contents Software Services Maintenance services agreements on perpetual licenses consist of fees for providing software updates and for providing technical support for software products for a specified term.
Our expected primary uses on a short-term and long-term basis are for repayment of debt, interest payments, working capital, capital expenditures, geographic or service offering expansion, acquisitions, investments, and other general corporate purposes.
Our expected primary uses on a short-term and long-term basis are for repayment of debt, interest payments, working capital, capital expenditures, geographic or service offering expansion, acquisitions, investments, repurchases of our common stock, and other general corporate purposes.
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.
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 76 Table of Contents realized upon ultimate settlement with tax authority.
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 have worked with more than 2,600 life sciences companies and academic institutions and have collaborated on more than 10,000 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.
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).
At December 31, 2024 and 2023, the contingent consideration was remeasured to zero and $5.4 million, respectively, resulting in a fair value adjustment of $(0.7) million and $23 thousand, respectively. The adjustment was recorded in G&A expenses on the accompanying consolidated statement of operations and comprehensive income (loss).
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.
Our software and regulatory scientific services streamline the creation of regulatory filings and speed regulatory data flow to maximize the chances of successful commercialization. Native AI and machine learning technologies are being incorporated across our technology and consulting services portfolios, providing opportunities to expand the number of data sources utilized, better predict outcomes, and streamline reporting.
The ABR is determined as the greatest 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.
The ABR is determined as the greatest of (a) the prime rate, (b) the federal funds effective rate, plus 0.50%, and (c) the Term SOFR rate plus 1.00%. Additionally, the Company is obligated to pay a commitment fee of the unused amount and other customary fees.
Generally, companies spend an average of $6.2 billion per FDA-approved drug to develop one new medicine, including the cost of failures, according to "Analysis of pharma R&D productivity - a new perspective needed" on Drug Discovery Today.
Generally, companies spend an average of $6.2 billion per FDA-approved drug to develop one new medicine, including the cost of failures, according to “Analysis of pharma R&D productivity - a new perspective needed” on Drug Discovery Today.
Management has determined that it is more likely than not that we will not realize the benefits of foreign tax credit carryforwards. At the foreign subsidiaries, management has determined that it is more likely than not that we will not realize the benefits of certain NOL carryforwards.
Management has determined that it is more likely than not that we will not realize the benefits of foreign tax credit carryforwards. At the foreign subsidiaries, management has determined 73 Table of Contents that it is more likely than not that we will not realize the benefits of certain NOL carryforwards.
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.
Our income tax expense for the year ended December 31, 2025 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.
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.
Borrowings under the Credit Agreement bear interest at a rate per annum equal to, at the election of the Borrowers, either (i) the Term Secured Overnight Financing Rate (“ SOFR”) rate, with a floor of 0.00% plus an applicable margin rate of 2.75% for the Term Loans and between 3.50% and 2.75% for loan 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 1.75% for the Term Loan or between 2.50% and 1.75% for loan under the Revolving Facility, depending on the applicable first lien leverage ratio.
Other companies, including other companies in our industry, may not use 56 Table of Contents these measures and may calculate both differently than as presented, limiting the usefulness as a comparative measure.
Other 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.
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").
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 that add to total cost. On average, the pharmaceutical industry spends more than $290 billion annually on research and development(“R&D”).
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.
Liquidity and Capital Resources We have consistently generated positive cash flow from operations, providing $96.3 million, $80.5 million, and $82.8 million as a source of funds for the years ended December 31, 2025, 2024, and 2023, respectively.
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.
Financing Activities During the year ended December 31, 2025, net cash used in financing activities was approximately $64.0 million, compared to $21.0 million in the same period of 2024.
We expect income tax expense to increase over time as the Company continues to grow more profitable. Acquisitions Since 2013, we have successfully acquired 21 companies. Below is an overview of the businesses we acquired in 2024, 2023, and 2022. 61 Table of Contents Integrated Nonclinical Development Solutions, Inc.
We expect income tax expense to increase over time as the Company continues to grow more profitable. 64 Table of Contents Acquisitions Since 2013, we have successfully acquired 21 companies. Below is an overview of the businesses we acquired in 2024 and 2023.
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.
As a result, a valuation allowance of $29.4 million is recorded at December 31, 2025. 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. 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.
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. 71 Table of Contents Cash Flows The following table presents a summary of our cash flows for the periods shown: YEAR ENDED DECEMBER 31, 2025 2024 2023 (in thousands) Net cash provided by operating activities $ 96,325 $ 80,466 $ 82,755 Net cash used in investing activities (26,556) (112,368) (79,550) Net cash used in financing activities (63,986) (21,010) (9,447) Effect of foreign exchange rate changes on cash and cash equivalents 4,426 (2,856) 1,505 Net increase (decrease) in cash and cash equivalents $ 10,209 $ (55,768) $ (4,737) Cash paid for interest 19,133 22,737 19,089 Cash paid for income taxes 12,219 14,658 19,320 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.
As of December 31, 2024, we were in compliance with the covenants of the Credit Agreement. Income Taxes We recorded an income tax benefit of $(5.1) million for the year ended December 31, 2024 and income tax expense of $0.2 million for the year ended December 31, 2023.
As of December 31, 2025, we were in compliance with the covenants set forth in the Credit Agreement. Income Taxes We recorded income tax expense of $9.2 million for the year ended December 31, 2025 and income tax benefit of $5.1 million for the year ended December 31, 2024.
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.
Payments of contingent consideration were 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. For the year ended December 31, 2024, the Company paid contingent consideration of $4.7 million.
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.
The increase in net other income was primarily due to a $4.3 million increase in remeasurement gains related to the fluctuation of foreign currency exchange rates, and a $0.4 million increase in income related to disposal fixed assets, partially offset by a $3.3 million decrease in interest income, and a $1.1 million increase in other miscellaneous expense.
Software revenue increased by $24.0 million, or 18%, to $155.7 million for the year ended December 31, 2024, as compared to the same period in 2023, primarily driven by strong demand within existing customers, and expansion of relationships with existing customers, and business acquisitions. Revenue from acquisitions increased by $11.3 million.
Software revenue increased by $27.6 million, or 18%, to $183.3 million for the year ended December 31, 2025, as compared to the same period in 2024, primarily driven by strong demand within existing customers, and expansion of relationships with existing customers, and business acquisitions.
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.
Net cash provided by operating activities for the year ended December 31, 2025 was $96.3 million, compared to $80.5 million for the year ended December 31, 2024.
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.
Additionally, we carried forward foreign NOLs of approximately $87.3 million which will start to expire in 2026, foreign research and development credits of $0.2 million which expire in 2029, and Canadian investment tax credits of approximately $5.2 million which expire between 2034 and 2044. Our carryforwards are subject to review and possible adjustment by the appropriate taxing authorities.
Sales and marketing expense increased primarily due to a $6.7 million increase in employee-related costs mainly resulting from headcount growth driven by acquisitions along with investment to build the commercial organization, a $4.2 million increase in commission expenses, a $1.7 million increase in equity-based compensation cost, a $1.0 million increase in marketing expense, a $0.6 million increase in consulting and professional services expense, a $0.6 million increase in travel related expense, and a $0.6 million increase in equipment and software expense.
Sales and marketing expense increased primarily due to a $5.4 million increase in employee-related costs mainly resulting from headcount growth driven by acquisitions along with investment to build the commercial organization, a $0.9 million increase in equity-based compensation cost, and a $0.3 million increase in equipment and software expense, partially offset by a $0.3 million decrease in consulting and professional services expense.
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.
We determined that we have three reporting units for goodwill allocation and impairment testing purposes - 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.
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.
Provision (Benefit) for Income Taxes YEAR ENDED DECEMBER 31, CHANGE 2025 2024 $ % (in thousands) Provision for income taxes $ 9,211 $ (5,133) $ 14,344 279 % Effective tax rate 120.9 % 29.9 % Our income tax expense was $9.2 million, resulting in an effective income tax rate of 120.9%, for the year ended December 31, 2025, as compared to an income tax benefit of $5.1 million, or an effective income tax rate of 29.9% for the year ended December 31, 2024.
The overall revenue growth was primarily due to an increase in our technology-enabled services and software product offerings, driven by growth from business acquisitions, which increased by $24.1 million, as well as strong demand from existing customers, expansion of relationships with existing customers and new customers.
The overall revenue growth was primarily due to an increase in our technology-enabled services and software product offerings, driven by strong demand from existing customers, expansion of relationships with existing customers and new customers, and growth from the Chemaxon acquisition.
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 following table 70 Table of Contents provides a summary of the major sources of liquidity for the years ended December 31, 2025, 2024, and 2023. and as of December 31, 2025, 2024, and 2023. 2025 2024 2023 (in thousands) Net cash provided by operating activities $ 96,325 $ 80,466 $ 82,755 Cash and cash equivalents (1) $ 189,392 $ 179,183 $ 234,951 Term loan credit facilities $ 295,509 $ 298,500 $ 294,450 Available revolving line of credit $ 100,000 $ 100,000 $ 100,000 __________________________________ (1) Cash balance as of December 31, 2025, 2024, and 2023 included $76.2 million, $45.8 million, and $47.3 million, respectively, of cash and cash equivalents held outside of the United States.
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.
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.
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.
Interest Expense YEAR ENDED DECEMBER 31, CHANGE 2025 2024 $ % (in thousands) Interest expense $ 19,738 $ 21,520 $ (1,782) (8) % % of total revenues 5 % 6 % Interest expense decreased by $1.8 million, or 8%, to $19.7 million for the year ended December 31, 2025, as compared to the same period in 2024.
If we determine that it is more-likely-than-not that the fair values of our reporting units are less than carrying value or if we elect to bypass the qualitative assessment, we proceed to a quantitative assessment or test of goodwill.
If we determine that it is more-likely-than-not that the fair values of our reporting units are less than carrying value or if we elect to bypass the qualitative assessment, we proceed to a quantitative assessment or test of goodwill. 75 Table of Contents If a quantitative assessment of goodwill is required, the determination of the fair value of a reporting unit will involve the use of significant estimates and assumptions.
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.
The increase in net income was primarily due to a $33.7 million increase in revenue and a $2.1 million increase in net other income, partially offset by a $14.3 million increase in tax expense, a $6.6 million increase in cost of revenue, and a $4.3 million increase in operating expenses.
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.
Our technology and scientists incorporate modern advances in scientific understanding, drug research and 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. Our approach to AI is grounded in our long-standing expertise in mechanistic and empirical modeling.
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.
Research and Development Expense YEAR ENDED DECEMBER 31, CHANGE 2025 2024 $ % (in thousands) Research and development $ 41,040 $ 37,105 $ 3,935 11 % % of total revenues 10 % 10 % Research and development expense increased by $3.9 million, or 11%, to $41.0 million for the year ended December 31, 2025, as compared to the same period in 2024.
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.
Investing Activities Net cash used in investing activities for the year ended December 31, 2025 was approximately $26.6 million, a decrease of $85.8 million, compared to $112.4 million in 2024.
We assess our liquidity in terms of our ability to generate adequate amounts of cash to meet current and future needs. 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 our existing sources of liquidity will be sufficient to meet our working capital, capital expenditures, and contractual obligations for the foreseeable future.
The $11.6 million increase in cash used from financing activities was primarily due to a $15.2 million increase in cash payments for contingent consideration related to business acquisitions, and a $2.3 million increase in cash payments in connection with share awards vested and withheld for payroll tax, partially offset by a $5.1 million increase in cash proceeds net of debt issuance cost from refinancing of term loan debt, and a $0.8 million decrease in quarterly prepayments of term loan debt . 70 Table of Contents Indebtedness Credit Facilities We have been a party to a Credit Agreement since August 2017 that provides for a senior secured term loan and commitments under a revolving credit facility (as amended, the “Credit Agreement”).
The $43.0 million increase in cash used in financing activities was primarily due to a $42.6 million increase in cash used in connection with repurchasing the Company's common stock, a $6.3 million decrease in cash inflow from debt refinancing activities, and a $0.7 million increase in prepayments on term loan debt, partially offset by a $3.5 million decrease in cash payments associated with share awards vested and withheld for payroll tax, a $1.9 million decrease in cash payments for contingent consideration related to business acquisitions, and a $1.2 million decrease in payment for debt refinancing fees. 72 Table of Contents Indebtedness Credit Facilities We have been a party to the Credit Agreement since August 2017 that provides for a senior secured term loan (the “Term Loan”) and commitments under a revolving credit facility (the “Revolving Facility”).
The 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.
The following table reconciles net loss to adjusted EBITDA: YEAR ENDED DECEMBER 31, 2025 2024 2023 (in thousands) Net income (loss)(a) $ (1,595) $ (12,051) $ (55,357) Interest expense(a) 19,738 21,520 22,916 Interest income(a) (5,720) (9,034) (9,317) (Benefit from) Provision for income taxes(a) 9,211 (5,133) 214 Depreciation and amortization expense(a) 75,162 68,033 56,071 Currency (gain) loss(a) (891) 2,344 638 Equity-based compensation expense(b) 33,079 34,774 28,300 Change in fair value of contingent consideration(d) (3,597) 8,089 24,118 Goodwill impairment expense(e) — — 46,984 Acquisition-related expenses(f) 3,843 5,426 6,064 Integration expense(g) 150 — 121 Transaction-related expenses(h) 928 2,625 — Severance expenses(i) 2,190 183 — Reorganization expense(j) 1,239 4,223 1,660 Loss on disposal of fixed assets(k) (24) 401 65 Executive recruiting expense(l) 661 646 631 Litigation and settlement expense(m) 119 — — Adjusted EBITDA $ 134,493 $ 122,046 $ 123,108 60 Table of Contents The following table reconciles net loss to adjusted net income: YEAR ENDED DECEMBER 31, 2025 2024 2023 (in thousands) Net income (loss) (a) $ (1,595) $ (12,051) $ (55,357) Currency (gain) loss(a) (891) 2,344 638 Equity-based compensation expense(b) 33,079 34,774 28,300 Amortization of acquisition-related intangible assets(c) 56,224 54,431 45,838 Change in fair value of contingent consideration(d) (3,597) 8,089 24,118 Goodwill impairment expense(e) — — 46,984 Acquisition-related expenses(f) 3,843 5,426 6,064 Integration expense(g) 150 — 121 Transaction-related expenses(h) 928 2,625 — Severance expenses(i) 2,190 183 — Reorganization expense(j) 1,239 4,223 1,660 Loss on disposal of fixed assets(k) (24) 401 65 Executive recruiting expense(l) 661 646 631 Litigation and settlement expense(m) 119 — — Income tax expense impact of adjustments(n) (21,408) (28,220) (30,041) Adjusted net income $ 70,918 $ 72,871 $ 69,021 61 Table of Contents The following table reconciles diluted earnings per share to adjusted diluted earnings per share: YEAR ENDED DECEMBER 31, 2025 2024 2023 Diluted earnings per share(a) $ (0.01) $ (0.08) $ (0.35) Currency (gain) loss(a) (0.01) 0.02 — Equity-based compensation expense(b) 0.21 0.22 0.18 Amortization of acquisition-related intangible assets(c) 0.35 0.34 0.29 Change in fair value of contingent consideration(d) (0.02) 0.05 0.15 Goodwill impairment expense(e) — — 0.30 Acquisition-related expenses(f) 0.02 0.03 0.04 Integration expense(g) — — — Transaction-related expenses(h) 0.01 0.02 — Severance expenses(i) 0.01 — — Reorganization expense(j) 0.01 0.03 0.01 Loss on disposal of fixed assets(k) — — — Executive recruiting expense(l) — — — Litigation and settlement expense(m) — — — Income tax expense impact of adjustments(n) (0.13) (0.18) (0.19) Adjusted diluted earnings per share $ 0.44 $ 0.45 $ 0.43 Basic weighted average common shares outstanding 160,394,418 160,392,805 158,936,251 Effect of potentially dilutive shares outstanding (o) 500,271 635,547 943,886 Adjusted diluted weighted average common shares outstanding 160,894,689 $ 161,028,352 159,880,137 __________________________________ (a) Represents a measure determined under GAAP.
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 software products are licensed by more than 160,000 users and are also used by 20 global drug regulatory agencies, including the FDA, the UK’s MHRA, Japan's PMDA, and China’s NMPA.
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.
The increase was primarily due to a $4.2 million increase in intangible assets amortization, a $2.6 million increase in license and service expense, a $1.9 million increase in consulting and professional services cost, a $0.5 million increase related to executive recruiting expenses, and a $0.5 million increase in equipment and software expense, partially offset by a $2.0 million decrease in employee-related costs, and a $1.1 million decrease in equity-based compensation cost.
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.
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.
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.
These data solutions are used internally and industry wide by life sciences companies. The scientific principles underlying our work must be transparent and fully explainable during the regulatory process, so we have developed expertise in incorporating data, references and results into regulatory documents.
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.
The change in investing activities was primarily due to a $91.3 million decrease in cash payments in connection with business acquisitions, partially offset by a $5.4 million increase in cash utilized in capitalized software development costs.
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.
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, 65 Table of Contents for total estimated consideration of $36.6 million. The business combination was not material to our consolidated financial statements.
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.
Net Loss YEAR ENDED DECEMBER 31, CHANGE 2025 2024 $ % (in thousands) Net loss $ (1,595) $ (12,051) $ 10,456 87 % Net loss was $1.6 million, representing a $10.5 million increase in net income for the year ended December 31, 2025, as compared to the same period in 2024.
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.
Depreciation and Amortization YEAR ENDED DECEMBER 31, CHANGE 2025 2024 $ % (in thousands) Depreciation and Amortization $ 56,556 $ 53,593 $ 2,963 6 % % of total revenues 14 % 14 % Depreciation and amortization expense increased by $3.0 million, or 6%, to $56.6 million for the year ended December 31, 2025, as compared to the same period in 2024.
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.
Sales and Marketing Expense YEAR ENDED DECEMBER 31, CHANGE 2025 2024 $ % (in thousands) Sales and marketing $ 53,720 $ 47,444 $ 6,276 13 % % of total revenues 13 % 12 % Sales and marketing expense increased by $6.3 million, or 13%, to $53.7 million for the year ended December 31, 2025, as compared to the same period in 2024.
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.
"Business Combinations" in the notes to the consolidated financial statements. 66 Table of Contents Results of Operations YEAR ENDED DECEMBER 31, 2025 2024 2023 (dollars in thousands) Statement of operations data: Revenues $ 418,838 $ 385,148 $ 354,337 Cost of revenues 161,126 154,516 141,022 Operating expenses: Sales and marketing 53,720 47,444 32,022 Research and development 41,040 37,105 34,173 General and administrative 85,380 94,221 95,385 Depreciation and amortization expense 56,556 53,593 45,525 Goodwill impairment expense — — 46,984 Total operating expenses 236,696 232,363 254,089 Income (loss) from operations 21,016 (1,731) (40,774) Other expenses: Interest expense (19,738) (21,520) (22,916) Net other income 6,338 6,067 8,547 Total other expenses (13,400) (15,453) (14,369) Income (loss) before income taxes 7,616 (17,184) (55,143) Provision (benefit) for income taxes 9,211 (5,133) 214 Net income (loss) $ (1,595) $ (12,051) $ (55,357) Comparison of the Years Ended December 31, 2025 and 2024 Revenues YEAR ENDED DECEMBER 31, CHANGE 2025 2024 $ % (in thousands) Software $ 183,275 $ 155,696 $ 27,579 18 % Services 235,563 229,452 6,111 3 % Total revenues $ 418,838 $ 385,148 $ 33,690 9 % Revenues increased by $33.7 million, or 9%, to $418.8 million for the year ended December 31, 2025, as compared to the same period in 2024.
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.
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.
The increase in research and development expense was primarily due to a $9.6 million increase in employee-related costs, mainly resulting from headcount growth associated with investments in software development, including AI integration across our product portfolio, a $0.8 million increase in equipment and software expense, and a $0.4 million increase in the cost of licenses, partially offset by a $6.3 million increase in capitalized cost in R&D, a $1.1 million decrease in equity-based compensation cost, and a $0.4 million decrease in consulting and professional services expense.
The increase in research and development expense was primarily due to a $11.4 million increase in employee-related costs, mainly resulting from headcount growth associated with investments in software development, including AI integration across our product portfolio, and a $0.2 million increase in equipment and software expense, partially offset by a $5.6 million increase in capitalized cost in R&D, a $1.5 million decrease in equity-based compensation cost, and a $0.6 million decrease in the cost of licenses. 68 Table of Contents General and Administrative Expense YEAR ENDED DECEMBER 31, CHANGE 2025 2024 $ % (in thousands) General and administrative $ 85,380 $ 94,221 $ (8,841) (9) % % of total revenues 20 % 24 % General and administrative expense decreased by $8.8 million, or 9%, to $85.4 million for the year ended December 31, 2025, as compared to the same period in 2024.
Based on our purchase price allocation, approximately $2.9 million, $0.3 million, $11.0 million, $36.0 million, and $46.5 million of the purchase price was assigned to 63 Table of Contents trademark, non-compete agreement, customer relationships, developed technology, and goodwill, respectively.
Based on our purchase price allocation, approximately $2.9 million, $0.3 million, $11.0 million, $36.0 million, and $49.4 million of the purchase price was assigned to trademark, non-compete agreement, customer relationships, developed technology, and goodwill, respectively. The results of Chemaxon have been included in our consolidated results of operations and comprehensive income (loss) since the date of acquisition.
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.
As of December 31, 2025, we had federal and state NOLs of approximately $4.2 million and $3.5 million, respectively, which are available to reduce future taxable income, and some of which expire between 2035 and 2036 and 2030 and 2041, respectively.
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.
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. The fair value of the contingent consideration related to revenue threshold was estimated to be $4.4 million as of the acquisition date.
The $2.3 million decrease in cash provided from operating activities was primarily driven by an increase in accounts receivable, and an increase in cash used for prepaid and other assets, partially offset by higher cash inflows from deferred revenues, a decrease in cash used for liability payments, and an increase in cash-adjusted net income.
The $15.9 million increase in cash provided from operating activities was primarily driven by cash-adjusted net income, the year-over-year impact of a significant prior-year increase in accounts receivable, decreased cash outflows to settle liabilities, and a decrease in cash used for prepaid and other assets, partially offset by reduced cash inflows from deferred revenue.
These changes are expected to potentially have a significant impact on the biopharmaceutical industries, creating a mix of opportunities and challenges for us. In addition to the external regulatory environment, internally, we initiated a review process in 2024 to evaluate the long-term strategic options for our regulatory services business.
In addition to the external regulatory environment, internally, we initiated a review process in 2024 to evaluate the long-term strategic options for our regulatory services business. This review could result in several potential directions for the business, which could potentially have a significant impact on our operations.
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.
Based on our 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.
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.
In total, the fair value of the contingent consideration was estimated to be $5.2 million as of the acquisition date. 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.
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 increase in depreciation and amortization expense was primarily due to a net $2.8 million increase in intangible assets amortization, which included a $5.2 million increase in amortization of capitalized software, partially offset by a $2.4 million decrease in amortization of acquired intangible assets.
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 contingent consideration related to eligible revenues that are remeasured on a recurring basis at fair value for each reporting period. 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).
To do this, we have developed solutions for the collection, standardization, validation, storage, and analysis of the preclinical and clinical data needed for MIDD.
For over two decades, our scientists have developed and validated our biosimulation technology using data from scientific literature, laboratory research, preclinical and clinical studies. To do this, we have developed scientifically based solutions for the collection, standardization, validation, storage, and analysis of the preclinical, clinical and evidence data needed for MIDD.
See “Risk Factors — Risks Related to Our Business — Our bookings might not accurately predict our future revenue, and we might not realize all or any part of the anticipated revenue reflected in our backlog.” • Net Retention Rates: Our net retention rates measure the percentage of recurring revenue that is retained from existing software customers over a specific period of time, inclusive of price increases and expansion, excluding revenue from acquisitions occurred within the past 12 months. 54 Table of Contents The tables below summarizes our quarterly bookings and net software retention rate trends: Bookings Q1 Q2 Q3 Q4 FULL YEAR (in millions) 2024 $ 105.8 $ 98.9 $ 96.1 $ 144.5 $ 445.3 2023 $ 112.7 $ 85.9 $ 84.8 $ 118.9 $ 402.3 2022 $ 108.5 $ 100.3 $ 79.8 $ 120.4 $ 409.0 Net Retention Rates Q1 Q2 Q3 Q4 FULL YEAR (in percentage) 2024 114.1 % 108.0 % 107.6 % 105.5 % 108.8 % 2023 108.3 % 110.5 % 106.4 % 103.4 % 108.4 % 2022 101.5 % 104.5 % 104.3 % 109.2 % 105.1 % Investments in Growth We have invested and intend to continue to invest in expanding the breadth and depth of our solutions, including through acquisitions and international expansion.
The tables below summarize our quarterly bookings and net software retention rate trends: Bookings Q1 Q2 Q3 Q4 FULL YEAR (in millions) 2025 $ 118.2 $ 112.0 $ 96.6 $ 155.3 $ 482.1 2024 $ 105.8 $ 98.9 $ 96.1 $ 144.5 $ 445.3 2023 $ 112.7 $ 85.9 $ 84.8 $ 118.9 $ 402.3 Net Retention Rates Q1 Q2 Q3 Q4 FULL YEAR (in percentage) 2025 102.4 % 107.6 % 103.9 % 107.2 % 105.3 % 2024 114.1 % 108.0 % 107.6 % 105.5 % 108.8 % 2023 108.3 % 110.5 % 106.4 % 103.4 % 108.4 % Investments in Growth We have invested and intend to continue to invest in expanding the breadth and depth of our solutions, including through acquisitions and international expansion.
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.
We also maintain a $100.0 million revolving credit facility under the Credit Agreement, which matures on June 26, 2029. As of December 31, 2025, we had $295.5 million of outstanding borrowings on the Term Loan and $100.0 million of availability under the Revolving Facility.
Services revenue increased by $6.8 million, or 3%, to $229.5 million for the year ended December 31, 2024, as compared to the same period in 2023. The growth in overall services revenue was primarily attributed to growth from business acquisitions, which increased by $12.8 million, as well as continued growth in technology-enabled services with both existing and new customers.
Services revenue increased by $6.1 million, or 3%, to $235.6 million for the year ended December 31, 2025, as compared to the same period in 2024, primarily attributed to continued growth in technology-enabled services with existing and new customers. 67 Table of Contents Cost of Revenues YEAR ENDED DECEMBER 31, CHANGE 2025 2024 $ % (in thousands) Cost of revenues $ 161,126 $ 154,516 $ 6,610 4 % Cost of revenues increased by $6.6 million, or 4%, to $161.1 million for the year ended December 31, 2025, as compared to the same period in 2024.
If a quantitative assessment of goodwill is required, the determination of the fair value of a reporting unit will involve the use of significant estimates and assumptions. Our quantitative goodwill impairment test uses both the income approach and the market approach to estimate fair value.
Our quantitative goodwill impairment test uses both the income approach and the market approach to estimate fair value.
Since 2014, customers who leverage our solutions have received 90% or more of all new drug approvals by FDA.
Our services are delivered by scientists with extensive drug development experience who aid our customers in applying biosimulation and MIDD to their specific projects. Since 2014, customers who leverage our solutions have received 90% or more of all new drug approvals by FDA.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

10 edited+0 added−2 removed12 unchanged
Biggest changeEach 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.
Biggest changeAs of December 31, 2025, we had $295.5 million of outstanding borrowings on the Term Loan and no outstanding borrowings under the Revolving 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, 2025.
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.
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, 2025, 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.
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
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. 79 Table of Contents
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.
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 31% of our revenue for the year ended December 31, 2025 from operations outside of the United States.
Interest 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.
Interest 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 2.75% for the Term Loan and between 3.50% and 2.75% for loans under the Revolving Facility, depending on the applicable first lien leverage ratio, or (ii) the ABR, with a floor of 1.00%, plus an applicable margin rate of 1.75% for the Term Loan or between 2.50% and 1.75% for loans under the Revolving Facility, depending on the applicable first lien leverage ratio.
Translation Risk We are exposed to movements in foreign currencies, predominately in U.S. dollars, British Pounds Sterling, Euros, or Japanese yen, with the majority in U.S. dollars. The vast majority of our contracts are entered into by our U.S. and U.K., E.U., and Japanese subsidiaries. Contracts entered into by our U.S. subsidiaries are almost always denominated in U.S. dollars.
Translation Risk We are exposed to movements in foreign currencies, predominately in U.S. dollars, British Pounds Sterling, Euros, Hungarian forint, or Japanese yen, with the majority in U.S. dollars. The vast majority of our contracts are entered into by our U.S. and U.K., E.U., and Japanese subsidiaries.
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.
The ABR is determined as the greatest of (a) the prime rate, (b) the 78 Table of Contents federal funds effective rate, plus 0.50%, and (c) the Term SOFR rate plus 1.00%. Additionally, the Company is obligated to pay a commitment fee of the unused amount and other customary fees.
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.
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, 2025, income from operations would have been lower or higher by approximately $3.6 million, based on revenues and costs related to our foreign operations.
Contracts entered into by our other subsidiaries are generally denominated in U.S. dollars, pounds sterling, euros, or Japanese yen, with the majority in U.S. dollars.
Contracts entered into by our U.S. subsidiaries are almost always denominated in U.S. dollars. Contracts entered into by our other subsidiaries are 77 Table of Contents generally denominated in U.S. dollars, pounds sterling, euros, or Japanese yen, with the majority in U.S. dollars.
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.
Our exposure to interest rate risk is minimized by our interest rate swaps. As of December 31, 2025, we recorded the fair value of our interest rate swaps in the amount of $2.3 million as derivative liabilities included in other current and long-term liabilities in our consolidated balance sheets.
Removed
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 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.

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