Certara (NASDAQ:CERT) executives used a discussion at the Leerink Partners global healthcare conference to outline recent performance, the assumptions behind the company’s outlook, and the priorities under new CEO Jon Resnick. Chief Financial Officer John E. Gallagher III said the company was pleased with its fourth-quarter results, but acknowledged softer software bookings trends exiting the year that influenced its forward guidance.
Recent results and the setup for the company’s outlook
Gallagher said Certara’s fourth-quarter revenue and EBITDA were in line with internal expectations. He added that organic software revenue for 2025 came in “right in the middle” of the company’s original plan at 7%, and that profitability finished at the high end of the firm’s original EBITDA margin guidance, reaching 32%.
Drivers of software softness: Phoenix and Pinnacle 21
Gallagher attributed the weaker software bookings trend to two main dynamics that showed up in the fourth quarter, when software bookings were down 6% year-over-year.
- Phoenix: He cited customer reprioritization among large pharma customers tied to the Phoenix product, which reduced certain seat licenses.
- Pinnacle 21: He said study count trends were “perhaps even more of a driver,” characterizing study count as a lagging indicator tied to slower clinical trial starts from roughly 18 months earlier. As those trials finish, they begin to “hit Pinnacle,” pressuring bookings.
Gallagher said that, when combined with Certara’s longer-running services growth profile, these factors—along with some conservatism—contributed to the company’s flat-to-4% revenue outlook.
Services trends and what they suggest about the market
On the services side, Gallagher said Certara has been a low-single-digit grower over the last three years at about 3% revenue growth. He described services bookings as an area with greater customer discretion, which can make it a useful market indicator. He pointed to a strong month of December for services bookings and said the company views this as a sign of stability in the market, “if not a bit of a tailwind.”
Gallagher also cautioned that quarterly services results can be “lumpy,” noting that Certara had a low quarter in Q3 and a high quarter in Q4. He said trailing-twelve-month services bookings were about 5%.
Discussing customer segments, Gallagher said Certara saw tier-three customers, including biotechs, “perform really well” throughout the prior year. He linked some of that to an easing funding environment and said recent results suggest that tailwind is continuing, “if not accelerating.” For tier-one customers, he said Certara expects stability and believes much of the volatility that drove reprioritization, headcount reductions, and study-count impacts is largely in the past, though it can still affect near-term revenue through slower bookings.
Growth areas: biosimulation, QSP, and AI-enabled offerings
Gallagher said demand for model-informed drug development (MIDD) and biosimulation remains strong and that the company’s faster-growing areas include QSP (quantitative systems pharmacology), Simcyp, and PBPK services. He noted that the cloud version of Phoenix has seen “really strong demand” and that the company is optimistic about continued conversion from on-premise to cloud.
On artificial intelligence, Gallagher discussed Certara’s acquisition of Vyasa in 2022 and said the company has been weaving that technology into its products, highlighting the launch of Certara IQ in Q4 as “AI software for QSP.” He also pointed to Phoenix Cloud’s data visualization functionality—described as automated plotting and tables that reduce manual effort—as a capability that can entice customers to move off desktop deployments. Gallagher said that shifting Phoenix customers to the cloud creates “price opportunity” because Certara is hosting the solution and delivering more value.
He also explained why QSP was a strategic focus for AI investment. Certara previously acquired Applied BioMath in 2023 and combined it with its existing QSP services practice to build what he called the world’s largest QSP practice. Because that practice historically lacked a dedicated software offering, Gallagher said the company viewed AI-enabled software as a way to improve consultant throughput and also provide a product to sell to customers.
Operational priorities under new leadership, capital allocation, and longer-term adoption themes
Gallagher said Certara sees an opportunity to more closely link its software and services offerings around a “customer-centric approach,” with changes including aligning incentive structures so sales teams and consultants are encouraged to sell across the portfolio rather than within separate silos. He described Certara as a “human-in-the-loop” organization where software, scientific expertise, and regulatory acceptance combine into a competitive advantage, noting that the FDA uses and understands Certara’s software.
On profitability and investment, Gallagher said the company’s EBITDA margin guide remains 30% to 32%. He said Certara is leaving room to invest primarily in R&D, particularly in MIDD and biosimulation, including further AI features and functionality across offerings such as Certara IQ and Phoenix Cloud. He added that the company has already identified $10 million of cost avoidance in its planning for 2026 to help fund investment while maintaining discipline across the P&L.
Gallagher also addressed capital allocation. He said Certara has a strong balance sheet, good cash position, and low leverage, and continues to scan for tuck-in M&A opportunities. He noted that the company’s regulatory business remains “under discussion” with the new CEO and that “more news” is expected, but said this does not stop the company from evaluating M&A. Gallagher also pointed to share repurchases as another lever: Certara added a share repurchase authorization last year, executed part of it, and still has remaining authorization outstanding.
Finally, Gallagher discussed the industry’s gradual shift toward alternatives to animal model studies, describing it as a “tremendous opportunity” for biosimulation and for Certara as a market leader. However, he cautioned that adoption will take time due to long cycle times and risk aversion in pharma. He said the areas of Certara’s business most exposed to this shift include Simcyp, PBPK services, and especially QSP, which he called one of the company’s fastest-growing areas.
About Certara (NASDAQ:CERT)
Certara is a biosimulation software and services company that partners with pharmaceutical, biotechnology and medical device developers to accelerate drug discovery, development and regulatory approval. The company’s platform integrates quantitative pharmacology, real-world evidence, artificial intelligence and machine learning to model and simulate drug behavior across a range of therapeutic areas and patient populations. By applying these mechanistic and data-driven approaches, Certara helps its clients predict clinical outcomes, optimize dosing strategies and streamline decision-making throughout the product lifecycle.
The company’s offerings are divided into software tools and consulting services.
