Certara, Inc. Common Stock 2026 Q2 Earnings Call

Thank you all for participating in today's conference call. On the call from Certara, we have Jon Resnick, Chief Executive Officer, and Faiz Mohammed, Interim Chief Financial Officer. Earlier today, Certara released financial results for the quarter ended June 30th, 2026. A copy of the press release is available on the company's website. Before we begin, I would like to remind you that management will make statements during this call that include forward-looking statements. Actual results may differ materially from those expressed or implied in the forward-looking statement. Please refer to Slide 2 in the accompanying presentation titled Second Quarter 2026 Financial Results for additional information, which you can find on the company's investor relations website. In their remarks or responses to questions, management may mention some non-GAAP financial measures.

Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP measures are available in the recent earnings press release available on the company's website. Please refer to the reconciliation tables in the accompanying materials for additional information. This conference call contains time-sensitive information and is accurate only as of today, August 4th, 2026. Certara disclaims any obligation, except as required by law, to update or revise any financial projections or forward-looking statements, whether because of new information, future events, or otherwise. With that, I will turn the call over to Jon.

Thank you for joining today's call. Before I get into our results, I want to highlight the appointment of our new Chief Commercial Officer, which we announced earlier this morning. This reflects our commitment to a new, more impactful go-to-market approach, which I'll cover in more detail shortly. The second quarter was about executing on our commitments. Overall, we are pleased with our progress. We are transforming Certara into a company we believe is capable of delivering sustainable double-digit growth. We still have work to do. We are on the right path. We are executing against our plan. Our foundation is strengthening. The macro market conditions, biopharma spending, clinical trial starts, and new regulatory guidance continue to be in our favor. I'll start with our top-line financials. Move to our strategic and operational priorities, our client impact, and finally, how we are leveraging AI.

Top-line results in the quarter were in line with expectations and guidance. Overall, revenue growth was modest at 1%, with software revenue growing 4% and service revenue declining 3%. On software, a renewed focus on driving new growth is building momentum. Normalizing for the Chemaxon acquisition, trailing 12-month bookings grew 7% exiting the first half, up sharply from 0.8% exiting 2025. Overall, software revenue now represents 53% of our business versus 40% just two years ago. Service bookings lagged in the quarter with a book-to-bill of 1.07. Services bookings were impacted in part by the carve-out of our regulatory and Medical Writing business. In the quarter, we also began implementing several changes to the broader services go-to-market model, which we will continue to refine. Leading indicators are positive. Our pipeline grew 27% year-over-year exiting the quarter, which we anticipate translating into revenue growth in the back half of 2026.

Today, we are reaffirming our guidance range of 0%-4% for full-year revenue growth. Shifting to the key actions we have taken to improve our ability to drive growth. In February, we outlined bold initiatives to more sharply focus the organization on its ability to deliver, in Q2, we continued implementing them. Medical Writing divestiture was our first step in sharpening our strategy, rebalancing Certara, improving our overall financial predictability, and strengthening our software services flywheel. We have reprioritized our product portfolio to focus on key growth areas and adjusted our roadmaps to accelerate AI. Our reorganization around two business units, Model Informed Discovery and Drug Development, or MID3, and Accelerated Clinical Evidence, or ACE, is expected to better align our business to how customers consume our products and our services. We have taken steps to streamline our cost base.

In May, we executed a reduction in force focused predominantly on overhead, impacting approximately 5% of our global employee base. This action, combined with other steps towards operational excellence, is expected to result in a run rate saving of approximately $13 million. These reductions allow us to address some of the stranded costs from the divestiture and accelerate our investments in innovation. We're also redesigning our commercial go-to-market engine to tightly integrate sales and marketing in support of the business units. This is expected to activate growth across all segments, extend our partnership model, and drive adoption of new customer use cases. As part of that, I'm excited to announce Julien Perrier as our new Chief Commercial Officer effective August 1st. Julien brings nearly two decades of international commercial leadership across global biopharma, technology-enabled scientific services, and AI-driven biotechnology. Most recently, he was CEO of an AI-powered diagnostic company.

I'm also pleased to announce that Eric Jahn has been promoted to CIO. Eric will be critical in enabling our global scalability and optimizing internal AI systems to drive growth. Turning to our unique value proposition and how it translates to customer impact. Certara sits at a rare intersection, regulatory and scientific leadership, proprietary software, and AI. We serve more than 2,600 customers in over 70 countries with nearly 160,000 daily users of our software. The ecosystem we sit in amplifies our positioning. Regulators are accelerating model-informed approaches into policy. This quarter, HHS launched Operation Trial Blazer to speed up early-stage clinical trials, the FDA issued new guidance backing quantitative systems pharmacology or QSP modeling for first-in-human dosing. In July, ICH M15 took effect at EMA, giving U.S. and Europe a shared standard for model-informed drug development for the first time.

Certara is at the forefront of helping shape these policies. Our scientists are in direct dialogue with agencies on how modeling can optimize trial design and strengthen evidence. Their leadership is evident in the numbers. 62 peer-reviewed publications this quarter alone, spanning AI and machine learning, rare populations, and the cutting edge of science. That science shows up directly in the products and services our customers buy. In the quarter, every one of the 13 novel therapies the FDA approved came from a Certara client. One was for Eli Lilly's orforglipron, the first once-daily non-peptide oral GLP-1 therapy for obesity. Certara's Simcyp Simulator supported the drug-to-drug interaction labeling and helped characterize how slower gastric emptying affects dosing. For patients, this means a therapy that can be taken any time of day and no longer requires the inconvenience of self-injection.

This product was approved in just 50 days, the fastest new molecular entity approval since 2002. We saw the same pattern in rare disease, where our clinical pharmacology and pharmacometrics teams partnered with a biopharma company on the evidence package behind the FDA's approval of a new therapy for rare autoimmune conditions with historically few treatments. In oncology, Certara scientists partnered with Memorial Sloan Kettering to build a virtual patient model on our QSP platform for CAR T therapy in multiple myeloma, individualizing treatment and optimizing trials of novel combination therapies. Our software business is seeing strong momentum from AI and the movement to the cloud. Phoenix, our pharmacometrics modeling platform, has won 30 cloud implementations this year across client segments. Phoenix is one of our core launch points for integrated AI capabilities. Additionally, we grew our footprint globally this quarter.

Our first major Simcyp win in China, expanding engagement across the Middle East, and in Japan, a full modeling collaboration delivering a first-in-human dose estimate through Certara IQ, our AI-powered QSP platform. Speaking about AI, we believe AI accelerates how we deliver customer value. With 25 years of accumulated scientific and operational data, deep scientific judgment, proven algorithms, and software embedded in the workflows of both clients and regulators, Certara has exactly what it takes to optimize how AI benefits the regulated environments we serve. Generic AI tools don't have the same level of specialization and cannot provide the accountability layer that Certara can. Let me highlight three examples from the quarter to illustrate how AI is helping us drive revenue growth and margin efficiencies. First, we are embedding AI across our product development and operations teams to drive speed and efficiency.

Up to 85% of our new code is now AI assisted, and we are seeing a 65% year-on-year increase in the rate of development per software engineer. We are connecting our internal systems and automating workflows across our functions. Agents are cutting cycle times by as much as 90% in areas like legal and IT. Our sales teams now get daily automated signals from our AI platform to drive prospecting and pipeline. Second, AI is enabling new customer use cases, powering new workflows, and enhancing our existing software products. The integration of D360 and Chemaxon Design Hub will enable scientists to connect experimental data, scientific hypotheses, and candidate compound design into a single workflow.

Our next-generation platform will allow customers to leverage our software products alongside frontier AI models, including NVIDIA's BioNeMo agent toolkit. We are enhancing functionality across several products, including Phoenix Cloud, Pinnacle, Certara IQ, D360, and CoAuthor. As an example, CoAuthor, which has been used in more than 400 regulatory submissions, now provides nearly 600 AI agents, driving 40% productivity increase in drafting quality control documents and over 90% accuracy summarizing complex data tables. Third, AI agents are now making our scientific services more productive. Proprietary scientific agentic workflow is accelerating delivery steps by up to 80% for certain tasks. This allows our scientists to spend more time on activities that require human judgment. Importantly, our scientists remain at the center of every decision, creating an accountability layer that AI alone cannot provide. This protects the trust, reproducibility, and auditability our customers and regulators depend on.

In closing, today we are focused on growth and instilling operational discipline into our business. We are aligning the organization behind our strategy, resetting our operational model, and right-sizing our cost base. Our sights are also set on the future. Certara is well-positioned to drive transformative growth, defining the science needed to accelerate drug development. With a broad customer base, deeply embedded software, we believe we are uniquely situated to lead MIDD adoption and growth that will meaningfully impact our customers and the patients they serve. With that, I'll turn the call over to Faiz, who will go over the financials.