0001827090-26-000019
SEC filingRevenue up 1% to $106.9M, net loss of $8.8M vs income of $4.7M due to higher G&A and contingent consideration.
For the three months ended March 31, 2026, Certara reported total revenues of $106.9 million, up 1% from $106.0 million in the same period last year. The modest top-line growth was driven by a 7% increase in software revenue to $49.7 million, partially offset by a 4% decline in services revenue to $57.2 million. Despite revenue growth, the company swung to a net loss of $8.8 million from net income of $4.7 million in Q1 2025, primarily due to a 49% surge in general and administrative expenses to $29.4 million. This increase was largely attributable to a $7.4 million charge from contingent consideration fair value adjustments, along with higher equipment and software costs, executive recruiting expenses, and lease abandonment costs. Cost of revenues remained flat at 39% of revenue, while sales and marketing and R&D expenses increased moderately. As a result, adjusted EBITDA decreased to $31.7 million from $34.8 million, and adjusted net income fell to $14.5 million from $22.2 million. Diluted EPS was -$0.06 compared to $0.03 in the prior year.
Software revenue grew 7% to $49.7 million, driven by strong demand from existing customers, relationship expansion, and new customer additions. Software revenue now accounts for 46.5% of total revenue, up from 43.7% a year ago. Services revenue declined 4% to $57.2 million, primarily due to lower revenue from a previously acquired business. The segment mix shift toward software supports higher-margin recurring revenue, as reflected in the stable gross margin of 61%. Operational leverage in software was offset by higher G&A expenses, leading to overall operating loss of $4.3 million. Bookings in Q1 2026 were $115.3 million, down from $118.2 million in Q1 2025, but the net software retention rate improved to 106.1% from 102.4%, indicating strong customer expansion.
Management continues to invest in growth, particularly in AI integration across its product portfolio, as evidenced by increased R&D spending (up 17% to $12.3 million). The company also completed the sale of its global medical writing business on May 8, 2026, for $85 million in cash plus a potential earnout of up to $35 million. This divestiture is expected to sharpen focus on core biosimulation and AI-driven modeling and simulation. Looking ahead, Certara aims to leverage its strong net retention, expanding customer base, and regulatory acceptance of MIDD to sustain software momentum. The $100 million share repurchase program (with $17.4 million remaining) signals confidence in the business. However, near-term profitability may remain pressured by ongoing investments and non-recurring charges. No formal revenue or earnings guidance was provided.
Operating cash flow (CFO) of $11.7M was generated despite a net loss of $8.8M, primarily due to $19.1M in depreciation and amortization, $7.3M in equity compensation, and $7.2M in contingent consideration changes. However, a $14.2M decrease in accounts payable and other liabilities partially offset these add-backs. Capex intensity was high at $6.8M, representing 58% of CFO, leaving limited free cash flow after capital spending. The company returned $40M to shareholders via share repurchases, relying on cash balances and debt capacity. Investing cash flow was entirely used for capex and software development, while financing was dominated by repurchases and $3M in contingent consideration payments. Compared to the prior year, CFO dropped $5.7M due to lower net income and larger working capital outflows. The negative net income and elevated capital returns suggest reliance on balance sheet strength rather than organic cash generation to fund shareholder distributions.