We can go ahead and get started here. Thanks everybody for joining us at the Baird Healthcare conference this week. For those of you who don't know me, my name is Vikram Kesavabhotla. I'm one of our senior research analysts here at Baird. I lead our coverage of the healthcare technology and services space. Very excited today to be hosting Certara at our conference. Joining us from the company is Andy Schemick, Chief Financial Officer. We're gonna start off with a quick presentation from Andy. He's giving an overview of the business, and we're gonna dive into some Q&A from there. Just to level set, we have about 30 minutes scheduled for this conversation, and we'll try to cover as much as we can. With that, Andy, if you wanna get started and we'll go from there. Yep. Thank you. Appreciate that. I'm Andy Schemick, Chief Financial Officer of Certara. I've been in that role for eight years, and I'll do a quick company overview, and we'll go to Q&A. I don't need to read the disclaimer, right? Okay. First slide here is just the business at a glance. At the highest level, Certara is a leader in a field called biosimulation. Our solutions address critical drug discovery and development risks and provide decision support using biosimulation technology and services. Quick overview of the company at a glance. From a business perspective, we've been in business approximately 20 years, and that kinda corresponds to the earliest evidence of, you know, regulatory guidance and support around some of our products. We've been innovating the company since that time. We currently have around 1,100 employees. It's a sophisticated workforce. 350+ have PhDs, PharmDs, and MDs, and we've got a large team of software developers. Over this period of time, we've done 16 acquisitions. The most significant acquisition was in 2012 when Simcyp and Pharsight merged to put together a complete biosimulation software solution. Since that time, there's been approximately 15 acquisitions that I been a part of. The one point I like to make there is this is a little bit different than what you would expect from a private equity-owned company. It was more of a merging of an industry and a coming together of like-minded people. Out of the 16 acquisitions, 15 of them were either our partner working with us side by side in client engagements or we had used the product as a part of our solution. It was organic from that perspective. The end-to-end platform consists of. I'm losing my screen here, folks. Hey, the screen up here is dark. There we go. Perfect. Thank you. We've got an end-to-end platform. It goes from drug discovery to post-approval. The software is. There's really three core pieces of software. When you're looking at the company, it's gonna be Simcyp, Phoenix, and now Pinnacle 21 that comprises over 80% of the software revenues. We also have products in regulatory, and compliance and market access. We use these software as both, standalone licenses and subscriptions. We also leverage the software for our technology-driven services. The technology-driven services are around three core areas. The most significant piece is our drug discovery and development with biosimulation. Then we have some complementary, add-ons that we've put in place over time based on, you know, customer feedback. Large TAM, $13 billion. I'll drill down that a little bit later. In terms of the customer mix, we've got 2,000 customers across 62 countries. If you look at our top 30 clients, the average tenure is greater than 10 years, staying with Certara. We have a little less than 300 customers with an ACV greater than $100,000. Little bit more than 50 customers with an ACV greater than $1 million. Those are two cohorts that we track to measure our land and expand strategies, you know, the success of those if you're following the company. Revenues for the second quarter financials, $82.8 million, was 21% growth on a constant currency basis. We did have a benefit from acquisition comps, so it was 11% growth excluding the Pinnacle 21. We have strong cash flow generation, $28 million of EBITDA, and we maintain an EBITDA margin in the mid-30% while continuing to invest in innovation. That's been our profile for a while. The biosimulation, what is it? It is computer-aided modeling of biological processes and systems to simulate and predict how the body affects the drug and how the drug affects the body. We talk about biosimulation software. We talk about essentially what we call Simcyp and Phoenix. Simcyp is a field they call PBPK and QSP. Phoenix is what they call PKPD for those who are interested. The common applications of the software today include first in human dosing and translational questions, decision support for designing clinical trials with a goal to reduce the size and complexity of the clinical trials, evaluation and prediction of drug-drug interactions, dosing recommendations for different populations, as well as for statistical analysis, including non-compartmental analysis, PKPD analysis, and toxicokinetics. We talk about, you know, the acceptance of the technology. It can really be seen in that the software's been adopted by 17 regulatory agencies around the world. In some cases, they're the largest users of certain of our software. There has been over 300 label claims to date. Since I've been here, when I started, there were zero. We're starting to see an increasing evidence of label claims based on biosimulation. You know, this dose can be provided to pediatric population based on simulation. We can trace that back, and those 300 are attributable to Certara, and we can trace that 90% of drugs approved annually use some component of our software and our solutions. This here on the presentation is really a diagram of our Simcyp software. So just to clarify that, which is separate from the Phoenix WinNonlin software. This software is a software that started off as a model of the liver and over the years has grown into 10 organs, 25 virtual populations, and over 100 compound files. That's a quick overview on that. Okay, this is just a slide showing that our software and our services are relevant throughout drug development. I think the first thing to note here is, the software revenues are about 30% of the revenues. The tech-driven services are 70%. That does not include Pinnacle 21. Include Pinnacle 21, it's 35%, 65% today. I think one area that needs to be considered is that there's a significant percentage of the services revenues that are wholly dependent on the software that we provide. Given you know, the limitation of scientists out there, available to you know, provide this type of service, we are often engaged to run the models or prepare the simulation on behalf of a client. This has been purpose-built, and we've continually invested for a long time. On the TAM here, you know, the big TAM, $13 billion, it's large and growing. The key factors or tailwinds are probably common themes that you're hearing, digital transformation and increasing adoption of biosimulation. It's been providing, you know, significant tailwinds for us. We expect it to be growing, you know, the market to continue to grow in the teens. Our core here to focus on is the biosimulation TAM. That's $2.9 billion. That's what the company was put together to go after. This biosimulation TAM can be split about 50/50 between software and tech-enabled services. In software, 45% of that is in discovery. If you're looking at Certara, we have a small footprint in discovery today. That's not a meaningful part of the market, but we see that as an opportunity for us in the future. That's our D360 and some applications of the QSP modeling. 55% is in the development phase, and this is where overall, you know, 60%-70% of Certara's revenues come in clinical development stage, phase two, phase three. We're heavily weighted there. For the service, the TAM here is, you know, it's 50%, so it's $1.4 billion. It's driven off of essentially the number of our view, which reconciles with the external views. It's driven off the number of active drug programs. That's the key metric there, the number of drug programs ongoing by phase. In terms of value of that market, from our perspective, about 70% of the value of the market is derived in phase II and phase III, which is where our solutions sit. Basically, including this, we can get to Q&A. You know, our differentiated strengths enable us to win, you know, new customers and projects. Our software is industry standard, so there's lots of evidence of that. There's the label claims. There's just the sheer number of research publications on that you can search on Google Scholar using our software. There's the adoption by the regulatory agencies. We have a 90% renewal rate. That's a gross retention rate, so I use that mostly for calculating visibility. The net retention rate, we're around 105%-108% on the software. I mostly use that as a metric to derive, you know, what's the baseline for next year's software growth. You can see scientific publications. We're used by 400 academic institutions training the next generation of scientists. The services, you know, again, we have a high repeat rate on our services. 90% of our top 50 customers use both Biosim and Reg and Access from Certara. I'll stop there so we can get to questions, which is probably more interesting than me reading slides. Thanks, Andy, for giving that overview. That's super helpful. I mean, a couple things. I wanted to start on the biosimulation part, and then we can kinda talk about some of the other dynamics of the company. I guess first, you know, the TAM that you cited on the biosimulation part of the business was $2.8 billion. Your company does a couple hundred million of revenue, a few hundred million. I guess what is the rest of that TAM right now? Is that coming from, like, internal spending in the end market, or is it your competitors? What makes up the rest of the market right now? There's two pieces. There is in terms of the competitive landscape, there is not. You know, it's a growing field. There's not a lot of significant direct competition. When we talk about companies like Schrödinger, Simulations Plus, Certara, we're all able to operate in the market, and we focus most of our time on. You know, the white space or expanding within our clients, it's less of a, you know, the market's not mature, in a mature enough environment right now where it's kinda head-to-head competition. Those pieces comprise a small part. There's other software, so there's the discovery. Well, you know, there's a handful of discovery AI companies. There's some elements in DMPK. Essentially, each solution or strategy addresses a different need or question. There's not a lot of kind of direct replacement competition for Certara the way I see it. Then there's large groups and big pharmaceutical companies, and those are the companies that participate in our Simcyp consortium. You know, we train the employees every year, but they're hiring and they're doing a lot of work in-house as well. Yeah. The 16% CAGR that you have on there for the biosimulation market, what do you think is driving that growth? Does that have to do with awareness of the product or something about the product that's evolving? We need to understand, like, what's driving incremental growth at this point. Yeah. Ultimately, awareness is a big piece. We've been, you know, forming this market position and kind of building awareness over the last several years, and that's certainly helped us. Really what drives it is, you know, regulatory acceptance. An example of some of the strength that we've seen this year is the FDA comes out with a project called Project Optimus. That project essentially is requesting that companies who are developing a candidate in oncology would use the optimal dose in the patient as opposed to the maximum tolerable dose, I would imagine for ethics and safety reasons. The FDA comes out with a guidance in that regard. It creates a lot of interest for Certara, who has tools that can help you predict the correct first-in-human dose or have a more safe profile to your dose. Yeah. I think industry and regulatory acceptance is really what's driving it. Yeah. I guess, you know, if we think about the last, you know, handful of months, obviously a lot has evolved in the macro environment, especially within the end market that you work with. I guess, have you seen a change in terms of how your customers are approaching purchasing a solution like this? Like how they're evaluating the options that are available to them, their propensity to spend. Are you noticing anything different as you go through your sales cycles now? We have seen. There's two pieces there. Our end-to-end solution was put together based on, you know, working with clients and what they're looking for. As a component of that is our regulatory and access business. We've seen some, you know, extensions of budgets or slowdown in spending decisions in that space. It's still, generally speaking, healthy. Margins are good, and margins are comparable with the rest of the company. Conversely, with regards to the biosimulation side, we've seen kind of an acceleration in bookings. We're still processing that. The bookings that we report are an annual bookings metric, so it's the revenues we expect to incur, you know, in the next 12 months post the booking. We don't book total contract value. On a trailing twelve-month basis, the bookings of the biosim services are up 33%. We've seen revenue growth, and we adjust it for the currencies, which we do have a big footprint in the U.K., that's where Simcyp is located, 19%, so approaching 20% there. Starting to catch up with the bookings growth. Yeah. We've seen some increasing engagement on the Biosim side and some lumpiness on the regulatory and access side. Yeah. Still moving forward on the Reg and Access side. Yeah. I appreciate, you know, the decisions on the regulatory side are probably different than the processes on the biosimulation side. You know, you called out some of the lumpiness on the regulatory side of the business. Is there any reason to think that type of kind of purchasing, you know, volatility or behavior could eventually kind of find its way into the biosimulation part of your business? Or are you seeing any of that right now? So if there's, I don't know, 10,000 drug programs ongoing in, you know, early stages, getting down to 1,000 in phase III, the opportunity to add value with biosimulation is significant. So that's how we kinda build up to $2.8 billion TAM based on our average price in each one of those phases. So we still think there's a lot of room for penetration in the market, and we don't see an overall reduction in the number of drug programs. Given that, biosimulation projects essentially build upon themselves, so the more data that you acquire, the more value you can get out of, you know, modeling or simulating the data in terms of decisions, decision support for, you know, essentially decision support. The fact that it's seven-nine years to develop a drug, I think, I'm not expecting a slowdown there. Yeah. There's some argument to be made that there's a significant ROI to what we do. We'll see how that plays out over the future months, given that we could be a good alternative for companies that are trying to manage their budget. Yeah. On one of the slides, you broke down the biosimulation TAM between discovery and development. Talked about, you know, today you have a small footprint on the discovery side. I guess when you think about this business going forward, how do you expect that mix to evolve within, you know, your company, and where do you expect most of the growth going forward to come from? Yes. I'd say obviously in the near term, I would assume a similar mix to where we are right now, with the majority of the revenue coming into clinical phase II, phase III, which is where we can have the most impact. Discovery, we do have a small footprint in terms of revenues, but we have a pretty significant footprint in terms of user base. You know, over the long term, from our perspective, it would be strategic to get attached to clients even earlier, 'cause then we can continue to show the end-to-end platform. We have solutions and softwares that could be used at critical stages across development. To the extent we could start earlier with the clients, we think that would be a good opportunity for Certara. That's not something that I would anticipate having a material impact in the next two years absent some strategic change. Maybe if we can kind of move on and talk about the regulatory part of your business a little more. You referenced some of the lumpiness that you've seen this year. I guess, could you start off just talking about some of the factors that have impacted that business this year and driven some of that difference in performance? Yeah. I've had some time to reflect on that. I would like to make it clear to people that when you think about our commentary on the regulatory market, that's a massive market. You know, extrapolating our cohort of clients in that market might not be applicable. What we've seen, you know, to the broader industry, what we've seen is really two factors. The first factor was we've seen basically, since the first quarter of last year, coming out of COVID, we started to see some extensions in our revenue conversion metrics. We saw a kind of acceleration in Q3 last year, and that was some clients had some urgent regulatory milestones. They pulled us in to do that work, and then we thought we were kind of getting back to where we were before the pandemic, but it's continued. The biggest drivers for this year are we opened up a China office early last year. We started getting Chinese sponsor companies who were looking for a pathway to submit to the U.S. regulatory agencies. There's been some feedback provided by the regulators that we need to kind of come back with a more robust data set there. That's essentially a business we thought was gonna be kind of a growth driver for us and, over the short term, it's gone to zero. Long term, we do expect that to be a good business given the attractiveness of the U.S. market. On the second factor, we're essentially, given our client mix, about two projects missing. When you get to a NDA or a late-stage regulatory project, these could be in the $2 million-$4 million range. We're just not in our client mix having any of those events come up this year. Yeah. That's really what's going on. When you think about the fiscal 2022 guidance you have out there now, what does that now assume for that regulatory part of your business? Yeah, we basically took an approach whereby we looked at the business that we had sold through June thirtieth and then allocated the projects that had start and complete dates between June thirtieth and the end of the year and put that into our guidance. That represented about 60% of the total business that we had sold in Regulatory. For opportunities, we would have essentially 100% coverage as of June thirtieth. Yeah. For opportunities, we would have the pull-through of the 40% that we don't have start dates for. We would also have new business, which is incorporated there. Then for risks, it would be an adverse regulatory event for one of our clients or a client having, you know, difficulty, you know, meeting their own internal deadlines, extending the revenues. I think it's a balanced approach to the back half of the year. Yeah. I guess more of a higher level question. I think historically you've all been pretty clear in terms of how you go about building the guidance range based on your backlog and visibility. You know, given some of the experiences you've gone through this year with the market changing, has anything evolved in terms of your broader guidance philosophy or the way you go about forecasting the business given some of the changes that you've seen? Yes. It's been a pretty reliable means for us to develop forward-looking numbers. I think we'll maintain the same approach, but in light of some of the increased volatility and the delays which are new to the market, probably prudent to overlay some additional conservatism over the way we've done things in the past. Yeah. Okay. Maybe just shifting gears to a couple of other topics. I guess first on the margin side, you know, your company now is in mid-30% EBITDA margin. How should we think about the progression of margins from here going forward? It would be great to get some color on that. Yeah. Again, we don't. You know, for this year, for example, if we ran business as usual, we would have had about 100 basis points expansion in our EBITDA margin. We made the decision to take that and put that into software development and other investments for the company. I would expect that given the, you know, the significant growth opportunities that we have in front of us, we have found that maintaining that mid-30% EBITDA margin is the right mix of profitability for the company, with investment for, you know, future growth opportunities. We've got a number of growth opportunities that we've been working on, some products we've launched this year already. Yeah. Could you maybe just double-click on that, I guess, in terms of product innovation, you know, particularly on the biosimulation side, but really across your portfolio, what are some of the biggest areas of focus for you from a product standpoint? Yeah. We did launch a product called Simcyp Discovery, which is a software product that's focused on preclinical and early clinical, which is a space where we're currently underpenetrated. That was an area that was essentially modularizing the 10-organ 20- virtual- population you know into a more directed specific question as opposed to an open-ended question, where we think there could be a lot of value for clients. We'll continue to use our existing technology to develop new products or modules, if you will, to go after different market segments. We're also gonna be investing in the kind of emerging technologies in the space, which at this point in time is quantitative systems pharmacology, which looks more at the pharmacodynamics. We have several of those endeavors ongoing right now. We have an immuno-oncology product, immunogenicity product, vaccine simulator, neurodegenerative disease simulator, and a toxicology simulator ongoing. Just to talk about the cycle there, the first one started maybe four years ago. We limit that to a handful of clients, so the revenues by definition don't grow. We keep it to a base of about five clients while we develop the software and the model and, you know, and gather feedback. Then, earlier this year, we saw the FDA take the first license of that, so it's about a four-year process. We were getting revenue and profitability along the way, but now that, you know, the regulators are evaluating it, kinda creates an additional demand. As I said, the guidances for the regulators tend to be a big pull-through factor for us. Yeah. Don't forget Pinnacle 21. Pinnacle 21 is, we launched a new product called Data Exchange. Simply put, historically, Pinnacle 21 is the data validation screen between a sponsor and the FDA, which uses Pinnacle 21 to validate all data that it receives, since it was mandated two years ago. That's also an issue earlier on, as opposed to right at the end in drug development. We launched a product called Data Exchange, and we've seen pretty good uptake there, which is more about the sponsors receiving data from numerous sources, and they can ensure the compliance of the data before they accept the data from their third-party vendors. Yeah. See some interest in that as well too. Overall, data standardization and data validation is strategic for us, given that's a big component of our biosimulation efforts, is assessing the data available, getting the data in the right format so that we can then do modeling and simulation. That's a good growth area for us. Yeah. I guess if you put all that together, and just going back to also one of the earlier comments you made, you know, is there a way for you to measure the ROI that you're providing to clients and measure, I guess, even, I guess, if not customer satisfaction, but is there a way to kinda put numbers around, you know, the value that you're providing? Yeah. It's difficult to do that, so you can. There's an ROI from, you know, stopping a program, from reducing the size of a clinical trial. There's a number of use cases. The ROI is significant. I think that's why. You know, you can see the profitability that we maintain. The way that I look at the ROI is really around, to me, what's significant is the label claims. There you can see, you know, specific, okay, this is, you know, avoidance of a drug-drug interaction trial or some clinical trial. You can calculate the cost of that, and it's a versus a, you know, several hundred thousand dollar consulting engagement. Yeah. We believe the ROI is high. It's just difficult to measure, right? 'Cause the numbers are big. Yeah. If you can get a drug to market three months faster. Yeah. Well, I guess considering that, is there an opportunity for you to, I guess, be more aggressive on your pricing going forward? Is that something that you lean on typically, or is that not one of the levers you really rely on for growth? Yeah. We obviously in this environment, probably pricing is on everyone's mind. We do evaluate our pricing, you know, frequently, just in light of, you know, the cost situation around the world. We are, you know, a leader in the industry. We have long-term client relationships, so that's not, you know, primary lever for us. Yeah. going forward. Okay. We're down to about a minute. I wanted to give you a chance, anything that I didn't get a chance to touch on here or any other kind of closing remarks you wanted to leave our audience with? No, just for, you know, hopefully it's a lot to process, you know, when we start bringing people into the world of Certara. I'm happy to, you know, interact with you going forward. You know, appreciate you coming and love to have some questions if there are any. All right. I think it's probably a good place for us to wrap up then. Thank you, Andy, for joining us today. Thanks everybody in the room for joining as well. Please let us know if you have any more questions, and we'll leave it there. Thanks, everyone. Thanks.