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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2022

or

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

For the transition period from                      to                    

Commission File Number: 001-39799

Certara, Inc.

(Exact name of registrant as specified in its charter)

Delaware

82-2180925

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification Number)

100 Overlook Center

Suite 101

Princeton, New Jersey 08540

(Address of Principal Executive Offices)

(609) 716-7900

(Registrant’s telephone number)

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class

Trading symbol

Name of Exchange on which registered

Common stock, par value $0.01 per share

CERT

The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   Yes      No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).   Yes      No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   Yes      No  

As of May 01, 2022, the registrant had 159,841,502 shares of common stock, par value $0.01 per share, outstanding.

Certara, Inc.

Unless otherwise indicated, references to the “Company,” “Certara,” “we,” “us” and “our” refer to Certara, Inc. and its consolidated subsidiaries.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q (this “Quarterly Report”) contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which are subject to the “safe harbor” created by those sections. All statements (other than statements of historical facts) in this Quarterly Report regarding the prospects of the industry and our prospects, plans, financial position and business strategy may constitute forward-looking statements. In addition, forward-looking statements generally can be identified by the use of forward-looking terminology such as “may,” “should,” “expect,” “might,” “intend,” “will,” “estimate,” “anticipate,” “plan,” “believe,” “predict,” “potential,” “continue,” “suggest,” “project” or “target” or the negatives of these terms or variations of them or similar terminology. Although we believe that the expectations reflected in these forward-looking statements are reasonable, we cannot provide any assurance that these expectations will prove to be correct. Such statements reflect the current views of our management with respect to our operations, results of operations and future financial performance. The following factors are among those that may cause actual results to differ materially from the forward-looking statements:

our ability to compete within our market;
any deceleration in, or resistance to, the acceptance of model-informed biopharmaceutical discovery;
the occurrence of natural disasters and epidemic diseases, including the ongoing COVID 19 pandemic, which may result in delays or cancellations of customer contracts or decreased utilization by our employees;
changes or delays in government regulation relating to the biopharmaceutical industry;
increasing competition, regulation and other cost pressures within the pharmaceutical and biotechnology industries;
trends in research and development (“R&D”) spending, the use of third parties by biopharmaceutical companies and a shift toward more R&D occurring at smaller biotechnology companies;
our ability to successfully enter new markets, increase our customer base and expand our relationships with existing customers;

our ability to retain key personnel or recruit additional qualified personnel;

consolidation within the biopharmaceutical industry;

reduction in the use of our products by academic institutions;

pricing pressures due to increased customer utilization of our products;

any delays or defects in our release of new or enhanced software or other biosimulation tools;

failure of our existing customers to renew their software licenses or any delays or terminations of contracts or reductions in scope of work by our existing customers;

our ability to accurately estimate costs associated with our fixed-fee contracts;

risks related to our contracts with government customers, including the ability of third parties to challenge our receipt of such contracts;

our ability to sustain recent growth rates;

any future acquisitions and our ability to successfully integrate such acquisitions;

the accuracy of our addressable market estimates;

the length and unpredictability of our software and service sales cycles;

our ability to successfully operate a global business;

our ability to comply with applicable anti-corruption, trade compliance and economic sanctions laws and regulations;

risks related to litigation against us;

the adequacy of our insurance coverage and our ability to obtain adequate insurance coverage in the future;

our ability to perform our services in accordance with contractual requirements, regulatory standards and ethical considerations;

2

the loss of more than one of our major customers;

our future capital needs;

the ability or inability of our bookings to accurately predict our future revenue and our ability to realize the anticipated revenue reflected in our backlog;

any disruption in the operations of the third-party providers who host our software solutions or any limitations on their capacity or interference with our use;

our ability to reliably meet our data storage and management requirements, or the experience of any failures or interruptions in the delivery of our services over the internet;

our ability to comply with the terms of any licenses governing our use of third-party open source software utilized in our software solutions;

any breach of our security measures or unauthorized access to customer data;

our ability to comply with applicable privacy and data security laws;

our ability to adequately enforce or defend our ownership and use of our intellectual property and other proprietary rights;

any allegations that we are infringing, misappropriating or otherwise violating a third party’s intellectual property rights;

our ability to meet the obligations under our current or future indebtedness as they become due and have sufficient capital to operate our business and react to changes in the economy or industry;

any limitations on our ability to pursue our business strategies due to restrictions under our current or future indebtedness or inability to comply with any restrictions under such indebtedness;

any impairment of goodwill or other intangible assets;

our ability to use our net operating loss (“NOLs”) and R&D tax credit carryforwards to offset future taxable income;

the accuracy of our estimates and judgments relating to our critical accounting policies and any changes in financial reporting standards or interpretations;

any inability to design, implement, and maintain effective internal controls when required by law, or inability to timely remediate internal controls that are deemed ineffective; and

the other factors described elsewhere in this Quarterly Report on Form 10-Q or as described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021, or as described in the other documents and reports we file with the Securities and Exchange Commission (the “SEC”).

You should not rely upon forward-looking statements as predictions of future events. The forward-looking statements in this Quarterly Report are based on our beliefs, assumptions and expectations of future performance, taking into account the information currently available to us. These statements are only predictions based upon our current expectations and projections about future events. There are important factors, including those described in the section titled “Risk Factors” and elsewhere in this Quarterly Report and in our Annual Report on Form 10-K, that could cause our actual results, level of activity, performance or achievements to differ materially from the results, level of activity, performance or achievements expressed or implied by the forward-looking statements. Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time and it is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make in this Quarterly Report. Such risk factors may be updated from time to time in our periodic filings with the SEC. Our periodic filings are accessible on the SEC’s website at www.sec.gov.

Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee that the future results, levels of activity, performance and events and circumstances reflected in the forward-looking statements will be achieved or occur.  The forward-looking statements made in this Quarterly Report relate only to events as of the date on which the statements are made. Except as required by law, we undertake no obligation to update publicly any forward-looking statements for any reason after the date of this Quarterly Report to conform these statements to actual results or to changes in our expectations.

3

In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this Quarterly Report, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements.

Channels for Disclosure of Information

Investors and others should note that we may announce material information to the public through filings with the SEC, our Investors Relations website (https://ir.certara.com), press releases, public conference calls and public webcasts. We use these channels to communicate with the public about the Company, our products, our services and other matters. We encourage our investors, the media and others to review the information disclosed through such channels as such information could be deemed to be material information. The information on such channels, including on our website, is not incorporated by reference in this Quarterly Report and shall not be deemed to be incorporated by reference into any other filing under the Securities Act or the Exchange Act, except as expressly set forth by specific reference in such a filing. Please note that this list of disclosure channels may be updated from time to time.

4

CERTARA, INC. AND SUBSIDIARIES

FORM 10-Q

TABLE OF CONTENTS

Item

Page

PART I – FINANCIAL INFORMATION

1.

Financial Statements (Unaudited)

6

Condensed Consolidated Balance Sheets as of March 31, 2022 and December 31, 2021

6

Condensed Consolidated Statements of Operations and Comprehensive Loss for the three months ended March 31, 2022 and 2021

7

Condensed Consolidated Statements of Stockholders’ Equity for the three months ended March 31, 2022 and 2021

8

Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2022 and 2021

10

Notes to Condensed Consolidated Financial Statements

11

2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

27

3.

Quantitative and Qualitative Disclosures About Market Risk

42

4.

Controls and Procedures

42

PART II – OTHER INFORMATION

1.

Legal Proceedings

43

1A.

Risk Factors

43

2.

Unregistered Sales of Equity Securities and Use of Proceeds

43

3.

Defaults Upon Senior Securities

43

4.

Mine Safety Disclosures

43

5.

Other Information

43

6.

Exhibits

43

SIGNATURES

45

5

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

CERTARA, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

    

MARCH 31, 

DECEMBER 31, 

(IN THOUSANDS, EXCEPT PER SHARE AND SHARE DATA)

    

2022

    

2021

Assets

 

  

 

  

Current assets:

 

  

 

  

Cash and cash equivalents

$

184,315

$

185,797

Accounts receivable, net of allowance for credit losses of $296 and $262, respectively

 

72,719

 

69,555

Restricted cash

 

745

 

827

Prepaid expenses and other current assets

 

17,407

 

18,548

Total current assets

 

275,186

 

274,727

Other assets:

 

  

 

  

Property and equipment, net

 

2,927

 

2,935

Operating lease right-of-use assets

13,631

12,634

Goodwill

 

704,788

 

703,371

Intangible assets, net of accumulated amortization of $181,138 and $169,329, respectively

 

504,310

 

511,823

Deferred income taxes

4,086

4,073

Other long-term assets

 

2,098

 

2,167

Total assets

$

1,507,026

$

1,511,730

Liabilities and stockholders’ equity

 

  

 

  

Current liabilities:

 

  

 

  

Accounts payable

$

6,255

$

7,458

Accrued expenses

 

18,592

 

29,830

Current portion of deferred revenue

 

48,168

 

45,496

Current portion of long-term debt

 

3,020

 

3,020

Current operating lease liabilities

4,897

5,040

Other current liabilities

 

685

 

1,381

Total current liabilities

 

81,617

 

92,225

Long-term liabilities:

 

  

 

  

Deferred revenue, net of current portion

 

1,080

 

1,531

Deferred income taxes

 

75,268

 

76,098

Operating lease liabilities, net of current portion

9,348

8,256

Long-term debt, net of current portion and debt discount

 

291,308

 

291,746

Non-current finance lease liabilities

 

 

25

Total liabilities

 

458,621

 

469,881

Commitments and contingencies

 

  

 

  

Stockholders' equity:

 

  

 

  

Preferred shares, $0.01 par value, 50,000,000 shares authorized, no shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively

Common shares, $0.01 par value, 600,000,000 shares authorized, 159,657,174 and 159,658,948 shares outstanding as of March 31, 2022 and December 31, 2021, respectively

 

1,596

 

1,596

Additional paid-in capital

 

1,127,334

 

1,119,821

Accumulated deficit

 

(73,394)

 

(75,604)

Accumulated other comprehensive loss

 

(7,046)

 

(3,926)

Treasury stock at cost, 2,874 and 1,100 shares at March 31, 2022 and December 31, 2021, respectively

(85)

(38)

Total stockholders’ equity

 

1,048,405

 

1,041,849

Total liabilities and stockholders’ equity

$

1,507,026

$

1,511,730

The accompanying notes are an integral part of the condensed consolidated financial statements

6

CERTARA, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(UNAUDITED)

THREE MONTHS ENDED MARCH 31, 

    

(IN THOUSANDS, EXCEPT PER SHARE AND SHARE DATA)

    

2022

    

2021

    

Revenues

$

81,551

$

66,718

Cost of revenues

 

32,789

 

26,016

Operating expenses:

 

 

Sales and marketing

 

6,111

 

3,752

Research and development

 

7,548

 

4,706

General and administrative

 

18,339

 

16,562

Intangible asset amortization

 

10,149

 

9,456

Depreciation and amortization expense

 

482

 

602

Total operating expenses

 

42,629

 

35,078

Income from operations

 

6,133

 

5,624

Other income (expenses):

 

 

Interest expense

 

(3,228)

 

(3,928)

Miscellaneous, net

 

841

 

(117)

Total other expenses

 

(2,387)

 

(4,045)

Income before income taxes

 

3,746

 

1,579

Provision for income taxes

 

1,536

 

527

Net income

 

2,210

 

1,052

Other comprehensive loss:

 

 

Foreign currency translation adjustment

 

(3,184)

 

(1,545)

Change in fair value of interest rate swap, net of tax $60 and $161, respectively

64

477

Total other comprehensive loss

 

(3,120)

 

(1,068)

Comprehensive loss

$

(910)

$

(16)

Net income per share attributable to common stockholders:

Basic

$

0.01

$

0.01

Diluted

$

0.01

$

0.01

Weighted average common shares outstanding:

Basic

155,936,953

147,160,084

Diluted

 

159,160,321

 

152,084,745

The accompanying notes are an integral part of the condensed consolidated financial statements

7

CERTARA, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(UNAUDITED)

ACCUMULATED 

ADDITIONAL 

OTHER 

TOTAL 

(IN THOUSANDS,

COMMON STOCK

PAID-IN 

ACCUMULATED 

COMPREHENSIVE 

TREASURY

STOCKHOLDERS' 

EXCEPT SHARE DATA)

  

SHARES

AMOUNT

CAPITAL

DEFICIT

LOSS

STOCK

EQUITY

Balance as of December 31, 2020

152,979,479

$

1,529

$

884,528

$

(62,338)

$

(1,587)

$

$

822,132

Equity-based compensation awards

5,151

5,151

Change in fair value from interest rate swap, net of tax

477

477

Net income

1,052

1,052

Foreign currency translation adjustment, net of tax

(1,545)

(1,545)

Balance as of March 31, 2021

152,979,479

$

1,529

$

889,679

$

(61,286)

$

(2,655)

$

$

827,267

The accompanying notes are an integral part of the condensed consolidated financial statements

8

CERTARA, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(UNAUDITED)

ACCUMULATED 

OTHER 

TOTAL 

(IN THOUSANDS,

COMMON STOCK

ADDITIONAL 

ACCUMULATED 

COMPREHENSIVE 

TREASURY

STOCKHOLDERS' 

EXCEPT SHARE DATA)

  

SHARES

AMOUNT

PAID-IN CAPITAL

DEFICIT

LOSS

STOCK

EQUITY

Balance as of December 31, 2021

 

159,658,948

$

1,596

$

1,119,821

$

(75,604)

$

(3,926)

$

(38)

$

1,041,849

Equity-based compensation awards

 

7,513

7,513

Restricted stock withheld for tax liability

(1,774)

(47)

(47)

Change in fair value from interest rate swap, net of tax

64

64

Net income

 

2,210

2,210

Foreign currency translation adjustment, net of tax

 

(3,184)

(3,184)

Balance as of March 31, 2022

159,657,174

$

1,596

$

1,127,334

$

(73,394)

$

(7,046)

$

(85)

$

1,048,405

The accompanying notes are an integral part of the condensed consolidated financial statements

9

CERTARA, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

THREE MONTHS ENDED MARCH 31, 

(IN THOUSANDS)

    

2022

    

2021

    

Cash flows from operating activities:

 

  

  

Net income

$

2,210

$

1,052

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

Depreciation and amortization of property and equipment

 

482

 

602

Amortization of intangible assets

 

12,450

 

10,102

Amortization of debt issuance costs

 

386

 

378

(Recovery of) provision for credit losses

 

34

 

(1)

Loss on retirement of assets

 

5

 

Equity-based compensation expense

 

7,513

 

5,151

Deferred income taxes

 

(715)

 

12

Changes in assets and liabilities, net of acquisitions:

 

Accounts receivable

 

(3,244)

 

(2)

Prepaid expenses and other assets

 

653

 

(673)

Accounts payable and other liabilities

 

(11,830)

 

(11,109)

Deferred revenue

2,556

(507)

Other current liabilities

(792)

Changes in operating lease assets and liabilities, net

95

(71)

Net cash provided by operating activities

 

9,803

 

4,934

Cash flows from investing activities:

 

  

 

  

Capital expenditures

 

(506)

 

(222)

Capitalized development costs

(2,187)

 

(1,192)

Business acquisitions, net of cash acquired

 

(5,983)

 

(2,044)

Net cash used in investing activities

 

(8,676)

 

(3,458)

Cash flows from financing activities:

 

  

 

  

Payments on long-term debt and finance lease obligations

(826)

(855)

Payments on financing component of interest rate swap

 

(646)

Payment of taxes on shares withheld for employee taxes

 

(48)

Net cash used in financing activities

 

(1,520)

 

(855)

Effect of foreign exchange rate changes on cash and cash equivalents, and restricted cash

 

(1,171)

 

(191)

Net (decrease) increase in cash and cash equivalents, and restricted cash

 

(1,564)

 

430

Cash and cash equivalents, and restricted cash, at beginning of period

 

186,624

 

273,291

Cash and cash equivalents, and restricted cash, at end of period

$

185,060

$

273,721

Supplemental disclosures of cash flow information

 

  

 

  

Cash paid for interest

$

3,547

$

3,552

Cash paid for taxes

$

2,769

$

1,644

Supplemental schedule of non-cash investing and financing activities

 

 

Liabilities assumed in connection with business acquisition

$

$

921

The accompanying notes are an integral part of the condensed consolidated financial statements

10

CERTARA, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

(UNAUDITED)

1.

Description of Business

Certara, Inc. and its wholly-owned subsidiaries (together, the “Company”) deliver software products and technology-driven services to customers to efficiently carry out and realize the full benefits of biosimulation in drug discovery, preclinical and clinical research, regulatory submissions and market access. The Company is a global leader in biosimulation, and the Company’s biosimulation software and technology-driven services help optimize, streamline, or even waive certain clinical trials to accelerate programs, reduce costs, and increase the probability of success. The Company’s regulatory science and market access software and services are underpinned by technologies such as regulatory submissions software, natural language processing, and Bayesian analytics. When combined, these solutions allow the Company to offer customers end-to-end support across the entire product life cycle. On October 1, 2020, the Company amended the certificate of incorporation of EQT Avatar Topco, Inc. to change the name of the Company to Certara, Inc.

The Company has operations in the United States, Canada, Spain, Luxembourg, Portugal, United Kingdom, Germany, France, Netherlands, Denmark, Switzerland, Italy, Poland, Japan, Philippines, India, Australia and China.

2.

Summary of Significant Accounting Policies

There have been no changes other than what is discussed herein to the Company’s significant accounting policies as compared to the significant accounting policies described in Note 2 to the Company’s audited consolidated financial statements included in its Annual Report on Form 10-K for the year ended December 31, 2021. These unaudited consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes as of and for the year ended December 31, 2021.

(a)

Basis of Presentation and Use of Estimates

The preparation of condenesd consolidated financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, disclosure of contingent assets and liabilities at the date of the  condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates include, among other estimates, assumptions used in the allocation of the transaction price to separate performance obligations, estimates towards the measure of  progress of completion on fixed-price service contracts, the determination of fair values and useful lives of long-lived assets as well as intangible assets, goodwill, allowance for credit losses for accounts receivable, recoverability of deferred tax assets, recognition of deferred revenue, value of interest rate swaps, determination of fair value of equity-based awards and assumptions used in testing for impairment of long-lived assets. Actual results could differ from those estimates, and such differences may be material to the condensed consolidated financial statements.

(b)   Unaudited Interim Financial Statements

The accompanying condensed consolidated balance sheet as of March 31, 2022, the condensed consolidated statements of operations and comprehensive loss for the three months ended March 31, 2022 and 2021, the condensed consolidated statements of stockholders’ equity for the three months ended March 31, 2022 and 2021, the condensed consolidated statements of cash flows for the three months ended March 31, 2022 and 2021, and the related interim disclosures are unaudited.

11

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. GAAP. These unaudited condensed consolidated financial statements include all adjustments necessary to fairly state the financial position and the results of the Company’s operations and cash flows for interim periods in accordance with U.S. GAAP. Interim period results are not necessarily indicative of results of operations or cash flows for a full year or any subsequent interim period. The accompanying condensed consolidated financial statements should be read in conjunction with the Company’s 2021 audited consolidated financial statements and notes thereto. The information as of December 31, 2021 in the Company’s condensed consolidated balance sheet included herein is derived from the Company’s audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021.

(c)

Accounting Pronouncements Not Yet Adopted

In November 2021, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”)  2021-10, “Government Assistance (Topic 832): Disclosures by Business Entities about Government Assistance”. The ASU requires that entities increase disclosures about government assistance received relating to accounting policy, nature of the assistance, and the effect of the assistance on the financial statements. The ASU is effective for annual periods beginning after December 15, 2021. Early application of the ASU is permitted. The Company is currently evaluating the impact of these amendments on its consolidated financial statements.

(d)   Principles of Consolidation

The accompanying condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

(e)

Cash and Cash Equivalents, and Restricted Cash

Cash equivalents include highly liquid investments with maturities of three months or less from the date purchased.

Restricted cash represents cash that is reserved to support a financing program and unexpended restricted grant funds. The restricted cash balance was $745, $827 and $733 at March 31, 2022, December 31, 2021, and March 31, 2021, respectively.

The following table provides a reconciliation of cash and cash equivalents and restricted cash to the amounts presented in the condensed consolidated statements of cash flows:

    

MARCH 31, 

DECEMBER 31, 

MARCH 31, 

    

           2022           

    

           2021           

    

           2021           

Cash and cash equivalents

$

184,315

$

185,797

$

272,988

Restricted cash, current

 

745

 

827

 

733

Total cash and cash equivalents and restricted cash

$

185,060

$

186,624

$

273,721

(f)

Derivative Instruments

The Company has an interest rate swap agreement that was designated as a cash flow hedge of interest rate risk for a notional amount of $230,000 that fixed the interest rate at 2.1284%, non-inclusive of the fixed credit spread through May 31, 2022.  On August 31, 2021, the Company entered an amendment to the interest rate swap agreement. The amended interest rate swap agreement does not in its entirety meet the definition of a derivative instrument because of its off market fixed rate at inception and is deemed to be a hybrid instrument with a financing component and an embedded at-the-market derivative. Such embedded derivative is bifurcated and accounted for separately. At inception, the financing component of $1,966 was recorded at amortized cost. The embedded at-the-market derivative was designated and qualified as a cash flow hedge of interest rate risk for a notional amount of $230,000 that fixed the interest rate at 1.2757%, non-inclusive of the fixed credit spread through May 31, 2022. The fair value of the embedded at-the-market derivative is recognized in

12

the condensed consolidated balance sheets and the changes in the fair value of the embedded at-the-market derivative is recognized in other comprehensive loss. At March 31, 2022, the financing component is recorded in current portion of interest rate swap liability in the amount of $439. Due to an other-than-insignificant financing element on a portion of such hybrid instrument, the cash flows associated with this hybrid instrument are classified as financing activities in the condensed consolidated statements of cash flows. At March 31, 2022, the Company recorded the fair value of the embedded at-the-market derivative in current portion of interest rate swap assets in the amount of $181. The Company did not recognize any changes in the fair value of the interest rate swap in interest expense for the three months ended March 31, 2022.  

The following table sets forth the assets that is measured at fair value on a recurring basis by the levels in the fair value hierarchy at March 31, 2022:

    

LEVEL 1

    

LEVEL 2

    

LEVEL 3

    

TOTAL

Asset

 

  

 

  

 

  

 

  

Interest rate swap asset

$

$

181

$

$

181

Total

$

$

181

$

$

181

The following table sets forth the assets that were measured at fair value on a recurring and non-recurring basis by their levels in the fair value hierarchy at December 31, 2021:

    

LEVEL 1

    

LEVEL 2

    

LEVEL 3

    

TOTAL

Asset

 

  

 

  

 

  

 

  

Interest rate swap asset

$

$

57

$

$

57

Total

$

$

57

$

$

57

For more information regarding fair value measurement and fair value hierarchy, see NOTE 2. “Summary of Significant Accounting Policies” in the notes to the Consolidated Financial Statements in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021.

The net amount of deferred losses related to derivative instruments designated as cash flow hedges that is expected to be reclassified from accumulated other comprehensive loss into earnings over the next twelve months is insignificant.

(g)

Revenue Recognition

The Company’s revenue consists of fees for perpetual and term licenses for the Company’s software products, post-contract customer support (referred to as maintenance), software as a service (“SaaS”) and professional services including training and other revenue. Revenue is recognized upon transfer of control of promised products or services to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for promised goods or services. The Company typically recognizes license revenue at a point in time upon delivering the applicable license. The revenue related to the support and maintenance performance obligation will be recognized on an over-time basis using time elapsed methodology. The revenue related to software training and software implementation performance will be recognized at the completion of the service.

The following describes the accounting policies for multiple performance obligations and the nature of the Company’s primary types of revenues and the revenue recognition policies as they pertain to the types of transactions the Company enters into with its customers.

Arrangements with Multiple Performance Obligations

13

For contracts with multiple performance obligations, the Company determines if the products or services are distinct and allocates the consideration to each distinct performance obligation on a relative standalone selling price basis. When products and services are not distinct, the Company determines an appropriate measure of progress based on the nature of its overall promise for the single performance obligation. The delivery of a particular type of software and each of the user licenses would be one performance obligation. However, any training, implementation, or support and maintenance promises as part of the software license agreement would be considered separate performance obligations, as those promises are distinct and separately identifiable from the software licenses. The payment terms in these arrangements are sufficiently short such that there is no significant financing component to the transaction.

Software Licenses and Support

License revenue includes perpetual license fees and term license fees, which provide customers with the same functionality and differ mainly in the duration over which the customer benefits from the use of software. Both revenues from perpetual license and term license performance obligations are generally recognized upfront at the point in time when the software license has been delivered.

Software Services

For contracts that include multiple performance obligations, such as a software license plus software training, implementation, and/or maintenance/support, or in contracts where there are multiple software licenses, the transaction price is allocated to each of the performance obligations on a pro-rata basis based on the relative standalone selling price (“SSP”) of each performance obligation. Maintenance services agreements consist of fees for providing software updates and for providing technical support for software products for a specified term. 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. Expenses related to maintenance and subscription are recognized as incurred. 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. Due to the quick nature of the performance obligation from start to finish and the immaterial amounts, the Company recognizes any software training or implementation revenue at the completion of the service. Any unrecognized portion of amounts paid in advance for licenses and services is recorded as deferred revenue. Certara’s software contracts do not typically include discounts, variable consideration, or options for future purchases that would not be similar to the original goods.

Subscription Revenues

Subscription revenues consists of subscription fees for access to, and related support for, our cloud-based solutions. The Company typically invoices subscription fees in advance in annual installments and recognizes subscription revenue ratably over the term of the applicable agreement, usually one to three years which is initially deferred and recognized ratably over the life of the contract.

Services and Other Revenues

The Company’s primary services offering includes consulting services, which may be either strategic consulting services, reporting and analysis services, regulatory writing services, or any combination of the three. Strategic consulting services consists of consulting, training, and process redesign that enables customers to identify which uncertainties are greatest and matter most and then to design development programs, trial sequences, and individual trials in such a way that those trials systematically reduce the identified uncertainties in the most rapid and cost-effective manner possible.

The Company’s professional services contracts are either time-and-materials, fixed fee or prepaid. Services revenues are generally recognized over time as the services are performed. Generally, these services are delivered to customers electronically. Revenue from time-and-material contracts is recognized on an output basis as labor hours are delivered and/or direct expenses are incurred. Revenues for fixed price services and prepaid are generally recognized over time applying input methods to estimate progress to completion. Accordingly, the number of resources being paid for and

14

varying lengths of time they are being paid for, determine the measure of progress. Training revenues are recognized as the services are performed over time. However, due to short period over which the transfer of control occurs for a classroom or on-site training course, the revenue related to these performance obligations is recognized at the completion of the course for administrative feasibility purposes. The training services generally do not provide for any non-cash consideration nor is there consideration payable to a customer.

Contract Balances

The timing of revenue recognition, billings and cash collections results in billed accounts receivable, unbilled receivables (contract assets), and customer advances and deposits (deferred revenue, contract liabilities) on the Consolidated Balance Sheets. Amounts are billed as work progresses in accordance with agreed-upon contractual terms, either at periodic intervals (e.g., quarterly or monthly) or upon achievement of contractual milestones.

Contract assets relate to the Company’s rights to consideration for performance obligations satisfied but not billed at the reporting date on contracts (i.e., unbilled revenue, a component of accounts receivable in the Consolidated Balance Sheets). Contract assets are billed and transferred to customer accounts receivable when the rights become unconditional. The Company typically invoices customers for term licenses, subscriptions, maintenance and support fees in advance with payment due before the start of the subscription term, ranging from one to three years. The Company records the amounts collected in advance of the satisfaction of performance obligations, usually over time, as a contract liability or deferred revenue. Invoiced amounts for non-cancelable services starting in future periods are included in contract assets and deferred revenue. The portion of deferred revenue that will be recognized within 12 months is recorded as current deferred revenue, and the remaining portion is recorded as non-current deferred revenue in the Consolidated Balance Sheets.

The unsatisfied performance obligations as of March 31, 2022 were approximately $101,246.

Deferred Contract Acquisition Costs

Under ASC 606, sales commissions paid to the sales force and the related employer payroll taxes, collectively “deferred contract acquisition costs”, are considered incremental and recoverable costs of obtaining a contract with a customer. The Company has determined that sales commissions paid are an immaterial component of obtaining a customer’s contract and has elected to expense sales commissions when paid.

Sources and Timing of Revenue

The Company’s performance obligations are satisfied either over time or at a point in time. The following table presents the Company’s revenue by timing of revenue recognition to understand the risks of timing of transfer of control and cash flows:

    

    

THREE MONTHS ENDED MARCH 31, 

    

2022

2021

Software licenses transferred at a point in time

$

13,452

$

12,425

Software licenses transferred over time

 

15,741

 

9,479

Service revenues earned over time

 

52,358

 

44,814

Total

$

81,551

$

66,718

(h)

Earnings per Share

Basic earnings per common share is computed by dividing the net income that is attributable to common stockholders by the weighted-average number of common shares outstanding during the reporting period, without consideration for potentially dilutive securities. The dilutive effect of potentially dilutive securities is excluded from basic earnings per share

15

and is included in the calculation of diluted earnings per share. Restricted stock and restricted stock units granted by the Company are treated as potential common shares outstanding in computing diluted earnings per share.  

Diluted earnings per share is computed by dividing the earnings attributable to stockholders by the weighted-average number of shares and potentially dilutive securities outstanding during the period.

(i)

COVID-19

Since the first quarter of 2020, the COVID-19 pandemic has posed a significant threat to public health as well as the global and U.S. economies. The continued spread of variants of COVID-19 may adversely impact our business, financial condition or results of operations as a result of increased costs, negative impacts to our workforce, delay or cancellation of projects due to disruption of clinical trials, or a sustained economic downturn. Although the spread of the virus seems to have subsided, the possibility of a resurgence due to a new strain is possible.  Given its ongoing and dynamic nature, it is difficult to predict the full impact of the COVID-19 outbreak on the global and US economy and our business.

3. Public Offerings

The Company is party to a registration rights agreement with EQT AB and its affiliates (“EQT AB”), Arsenal, EQT, and certain other stockholders (“Institutional Investors”). It contains provisions that entitle EQT and the other Institutional Investors thereto to certain rights to have their securities registered by the Company under the Securities Act. EQT is entitled to an unlimited number of “demand” registrations, subject to certain limitations. Every Institutional Investor that holds registration rights is also be entitled to customary “piggyback” registration rights. In addition, the amended and restated registration rights agreement provides that the Company will pay certain expenses of the Institutional Investors relating to such registrations and indemnify them against certain liabilities which may arise under the Securities Act of 1933.

The registration rights agreement will terminate (i) with the prior written consent of the Institutional Investors in connection with a change of control; (ii) for those holders (other than the Institutional Investors) that beneficially own less than 5% of the Company’s outstanding shares, if all of the registrable securities then owned by such holder could be sold in any 90-day period pursuant to Rule 144; (iii) as to any holder, if all of the registrable securities held by such holder have been sold or otherwise transferred in a registration pursuant to the Securities Act or pursuant to an exemption therefrom; or (iv) with respect to any holder that is an officer, director, employee or consultant of the Company on the date that is 90 days after the date on which such holder ceases to be an employee, director or consultant (as applicable) of the Company.  The rights and obligations do not transfer without the written consent of the Company and the Institutional Investors.

On March 29, 2021, the Company completed an underwritten secondary public offering in which certain selling stockholders, including EQT, sold 11,500,000 shares of the Company’s common stock, including 1,500,000 shares of common stock pursuant to the full exercise of the underwriters’ option to purchase additional shares. The Company did not offer any common stock in this transaction and did not receive any proceeds from the sale of the shares of common stock by the selling stockholders. The Company incurred costs of $1,100, recorded in general and administrative expenses, in relation to the secondary public offering.

On September 13, 2021, the Company completed another public offering, at a public offering price of $31.00 per share,  pursuant to which the Company sold 4,500,000 shares of its common stock, and certain selling stockholders sold 18,500,000 shares of the Company’s common stock, including an additional 3,000,000 shares of common stock pursuant to the full exercise of the underwriters’ option to purchase additional shares. The Company received net proceeds of $134,096, after deducting underwriters' discounts and commissions. In addition, $745 of legal, accounting and other offering costs incurred in connection with the sale of the Company's common stock in the public offering, were capitalized and offset against the proceeds received.

On November 22, 2021, the Company completed another secondary public offering in which certain selling stockholders, including EQT, sold 10,000,000 shares of the Company’s common stock. The Company did not offer any common stock

16

in this transaction and did not receive any proceeds from the sale of the shares of common stock by the selling stockholders. The Company incurred costs of $644, recorded in general and administrative expenses, in relation to the secondary public offering.

4.

Concentrations of Credit Risk

Financial instruments that potentially subject the Company to concentrations of credit risk have consisted principally of cash and cash equivalent investments and trade receivables. The Company invests available cash in bank deposits, investment-grade securities, and short-term interest-producing investments, including government obligations and other money market instruments. At March 31, 2022 and December 31, 2021, the investments were bank deposits and overnight sweep accounts. The Company has adopted credit policies and standards to evaluate the risk associated with sales that require collateral, such as letters of credit or bank guarantees, whenever deemed necessary. Management  believes that any risk of loss is significantly reduced due to the nature of the customers and distributors with which the Company does business.

As of March 31, 2022 and December 31, 2021,  no single customer accounted for more than 10% of the Company’s accounts receivable. No customers accounted for more than 10% of the Company’s revenues during the three months ended March 31, 2022 and 2021.

5.

Acquisitions

Acquisitions have been accounted for using the acquisition method of accounting pursuant to FASB ASC 805, “Business Combinations.” Amounts allocated to the purchased assets and liabilities are based upon the total purchase price and the estimated fair values of such assets and liabilities on the effective date of the purchase as determined by an independent third party. The results of operations have been included in the Company’s results of operations prospectively from the date of acquisition.

Author! B.V.

On March 2, 2021, the Company completed a transaction which qualified as a business combination for a total consideration of $2,667. The business combination was not material to our consolidated financial statements. Based on the Company’s purchase price allocation, approximately $1,200, $100 and $1,200 of the purchase price was assigned to customer relationships, non-compete agreements and goodwill, respectively.

Insight Medical Writing Limited

On June 7, 2021, the Company completed a transaction which qualified as a business combination for a total consideration of $15,197. The business combination was not material to our consolidated financial statements. Based on the Company’s purchase price allocation, approximately $7,400 and $4,700 of the purchase price was assigned to customer relationships and goodwill, respectively.

Pinnacle 21, LLC

On October 1, 2021, the Company acquired 100% of the equity of Pinnacle 21, LLC (“Pinnacle”). Pinnacle  provides software and services for preparing clinical trial data for regulatory submission. The acquisition executes on the Company’s strategy to invest in innovation to increase the use cases of biosimulation and grow adoption of Certara’s end-to-end platform.

The acquisition of Pinnacle was treated as a purchase in accordance with ASC 805, “Business Combinations”, which requires allocation of the purchase price to the estimated fair values of assets and liabilities acquired in the transaction.

17

The following table summarizes the fair value of the consideration paid as well as the fair values of the assets acquired and liabilities assumed as of the date of the acquisition:

Fair value of consideration:

    

Pinnacle

Cash paid to sellers

    

$

249,115

Cash paid to others and escrow

17,200

Unregistered shares of Certara, Inc. (2,239,717 shares)

72,760

Total consideration

$

339,075

Assets acquired and liabilities assumed:

Cash and cash equivalents

$

19,409

Accounts receivable

2,925

Other current assets

619

Property and equipment

258

Deferred tax assets

2,907

Identifiable intangible assets:

Trademark

15,800

Acquired software

103,000

Customer relationships

24,600

Goodwill

180,947

Long-term deposits

34

Current liabilities

(794)

Current portion of deferred revenue

(10,630)

Net assets acquired

$

339,075

The fair value of the unregistered shares given as part of the purchase consideration was determined based on the market price of Certara stock on the closing date less a 7% discount for lack of marketability.

The acquisition was structured as an asset acquisition for income tax purposes; therefore, the Company’s tax basis in Pinnacle’s identifiable assets reflects the fair value of consideration paid. However, the company did not recognize tax basis in certain liabilities assumed at the acquisition date; resulting in deferred income taxes being recorded in purchase accounting.  

The fair value of the intangible assets is based on significant inputs that are not observable in the market and, therefore, represent Level 3 measurements within the fair value measurement hierarchy. The fair value of the customer relationships (Distributor method), trademarks (Relief from Royalty method) and developed technology (Multi-Period Excess Earnings Method) was determined under the income approach.  

Goodwill of $180,947 was recorded to reflect the excess of the purchase price over the estimated fair value of the net identifiable assets acquired, which is generally deductible for income tax purposes. The excess of the purchase prices over the fair values of the acquired business's net assets represent cost and revenue synergies specific to the Company, as well as non-capitalizable intangible assets, such as the employee workforces acquired, and has been allocated to goodwill.

18

Integrated Nonclinical Development Solutions

On January 3, 2022, the Company completed the acquisition of Integrated Nonclinical Development Solutions, Inc. (“INDS”), a company that provides the SEND Explorer software and drug development consulting for a total consideration of $8,148. The business combination was not material to the Company’s condensed consolidated financial statements. Based on the Company’s preliminary purchase price allocation, approximately $2,500, $860 and $2,855 of the purchase price was assigned to customer relationships, acquired software and goodwill, respectively.

The current purchase price allocation is preliminary. The primary areas of the preliminary purchase price allocations that are not yet finalized relate to the fair value of certain tangible and intangible assets acquired, and liabilities assumed, and residual goodwill. The Company expects to continue to obtain information to assist in determining the fair values of the net assets acquired at the acquisition date during the measurement period. Any adjustments to the preliminary purchase price allocation identified during the measurement period, which will not exceed one year from the acquisition date, will be accounted for prospectively.

The condensed consolidated financial statements include the operating results of each acquisition from the date of acquisition. Pro forma results of operations revenue and net income subsequent to the acquisition date for three months ended March 31, 2022 have not been presented because the effects of the acquisition was not material to our financial results.

6.

Prepaid Expenses and Other Current Assets and Other Supplemental Assets Information

March 31,

December 31,

    

2022

    

2021

Prepaid expenses

$

8,580

$

8,973

Income tax receivable

 

4,945

 

4,800

Research and development tax credit receivable

 

2,702

 

3,951

Current portion of interest rate swap asset

181

57

Other current assets

999

767

Prepaid expenses and other current assets

$

17,407

$

18,548

Other long-term assets consisted of the following:

March 31,

December 31,

    

2022

    

2021

Long-term deposits

$

1,161

$

1,160

Deferred financing cost

 

937

 

1,007

Total other long-term assets

$

2,098

$

2,167

7.

Long-Term Debt and Revolving Line of Credit

Effective August 14, 2017, the Company entered into a credit agreement with lenders for a $250,000 term loan (“Credit Agreement”). The Credit Agreement is a syndicated arrangement with various lenders providing the financing. The $250,000 term loan is due to mature on August 14, 2024. The Company also entered into a $20,000 revolving line of credit with lenders with a sub-commitment for issuance of letters of credit of $10,000.

The Company and lenders entered into Amendment No. 1 to the Credit  Agreement on January 25, 2018, where an additional tranche of $25,000 was added to the term loan. The amortization schedule of the new tranche was made coterminous with the rest of the term loan. There were no other changes to the terms of the Credit Agreement.

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The Company and lenders entered into Amendment No. 2 to the Credit Agreement on April 3, 2018, where an additional tranche of $40,000 was added to the term loan. The amortization schedule of the new tranche was made coterminous with the rest of the term loan. There were no other changes to the terms of the Credit Agreement.

The Company and lenders entered into a third amended and restated loan agreement on June 17, 2021 (“Third Amendment”), which provides for, among other things, (i) the extension of the termination date applicable to the revolving credit commitments under the Credit Agreement to August 2025, (ii) the extension of the maturity date applicable to the term loans under the Credit Agreement to August 2026, and (iii) an increase of approximately $80,000 in commitments available under the revolving line of credit (resulting in an aggregate amount of commitments of $100,000).  The term loan under the Third Amendment has substantially the same terms as the existing term loans and revolving credit commitments. The Credit Agreement is collateralized by substantially all U.S. assets and stock pledges for the non-U.S. subsidiaries and contain various financial and nonfinancial covenants.

As of March 31, 2022 and December 31, 2021,  available borrowings under the revolving lines of credits were $100,000. Available borrowings under the revolving lines of credits as of March 31, 2022 and December 31, 2021 were reduced by $120 and $239 standby letters of credit issued to a landlord in lieu of a security deposit in addition to any outstanding borrowings.  

The Company was in compliance with all financial covenants as of March 31 2022 and December 31, 2021. Borrowings under the Credit Agreement are subject to a variable interest rate at LIBOR plus a margin. The applicable margins are based on achieving certain levels of compliance with financial covenants.

The effective interest rate was 3.64% and 3.75% for the three months ended March 31, 2022 and 2021 for the term loan debt, respectively. As discussed previously, the Company entered into interest rate swap agreements to mitigate the interest risk.

Interest incurred on the Credit Agreement with respect to the term loan amounted to $2,737 and $2,854 for the three months ended March 31, 2022 and 2021, respectively. Accrued interest payable on the Credit Agreement with respect to the term loan amounted to $33 and $30 at March 31, 2022 and December 31, 2021, respectively, and is included in accrued expenses. Interest incurred on the Credit Agreement with respect to the revolving line of credit was $63 and $12 for the three months ended March 31, 2022 and 2021, respectively. There was $1 and $66 accrued interest payable on the revolving line of credit at March 31, 2022 and December 31, 2021, respectively.

Long-term debt consists of the following:

MARCH 31, 

DECEMBER 31, 

    

           2022           

    

           2021           

Term loans

$

299,735

$

300,490

Revolving line of credit

 

 

Less: debt issuance costs

 

(5,407)

 

(5,724)

Total

 

294,328

 

294,766

Current portion of long-term debt

 

(3,020)

 

(3,020)

Long-term debt, net of current portion and debt issuance costs

$

291,308

$

291,746

The principal amount of long-term debt outstanding as of March 31, 2022 matures in the following years:

    

Remainder of 2022

    

2023

    

2024

2025

2026

    

TOTAL

Maturities

$

2,265

$

3,020

$

3,020

$

3,020

$

288,410

$

299,735

The Credit Agreement requires the Company to make an annual mandatory prepayment as it relates to the Company’s Excess Cash Flow calculation. For the year ended December 31, 2021, the Company was not required to make a mandatory

20

prepayment on the term loan. For the credit agreement, the Company is required to make a quarterly principal payment of $755 on the term loan each quarter starting from the end of September 2021.

The fair values of the Company’s variable interest term loan and revolving line of credit are not significantly different than their carrying value because the interest rates on these instruments are subject to change with market interest rates.

8.

Leases

The Company leases certain office facilities and equipment under non-cancelable operating and finance leases with remaining terms from one to six years.

Operating lease ROU assets are included in other asset section while finance lease ROU assets are included in "Property and equipment, net" in the condensed consolidated balance sheets. With respect to operating lease liabilities, current lease liabilities and non-current operating lease liabilities are included in “Current operating lease liabilities” and "Operating lease liabilities, net of current portion”. Current finance lease liabilities and non-current finance lease liabilities are included in "Other current liabilities" and "Non-current finance lease liabilities" in the condensed consolidated balance sheets. At March 31, 2022, The weighted average remaining lease terms were 3.63 years and 0.83 year for operating and finance lease, respectively; the weighted average discount rate were 4.08% and 6.19% for operating and finance lease, respectively. For additional information on the Company's leases, see Note 14 to the Consolidated Financial Statements included in the 2021 Annual Report on Form 10-K.

The following table summarizes the lease-related assets and liabilities recorded in the consolidated balance sheets at March 31, 2022 and December 31, 2021:

Lease Position

Balance Sheet Classification

March 31, 2022

December 31, 2021

Assets

Operating lease assets

Operating lease right-of-use assets

$

13,631

$

12,634

Finance lease assets

Property and equipment, net

202

271

Total lease assets

$

13,833

$

12,905

Liabilities

Current

Operating

Current operating lease liabilities

$

4,897

$

5,040

Finance

Other current liabilities

246

293

Noncurrent

Operating

Operating lease liabilities, net of current portion

9,348

8,256

Finance

Non-current finance lease liabilities

25

Total lease liabilities

$

14,491

$

13,614

21

The following table summarizes by year the maturities of our minimum lease payments as of March 31, 2022.

    

OPERATING 

    

FINANCE

LEASES

LEASES

  

  

Remainder of 2022

$

3,936

$

228

2023

4,019

25

2024

3,341

2025

2,551

2026

1,359

Thereafter

133

Total future lease payments

15,339

253

Less: imputed interest

(1,094)

(7)

Total

$

14,245

$

246

9.

Accrued Expenses and Other Supplemental Liabilities Information

Accrued expenses consist of the following:

March 31,

December 31,

    

2022

    

2021

Accrued compensation

  

$

14,731

$

24,848

Legal and professional accruals

  

 

1,110

 

2,477

Local sales and VAT taxes

  

 

16

 

Interest payable

  

 

36

 

96

Income taxes payable

  

 

1,067

 

1,398

Accrued business acquisition liabilities

  

 

700

 

Other

  

 

932

 

1,011

Total accrued expenses

  

$

18,592

$

29,830

Other current liabilities consist of the following:

March 31,

December 31,

    

2022

    

2021

Current portion of interest rate swap liability

  

$

439

$

1,088

Current finance lease liabilities

  

 

246

 

293

Total other current liabilities

  

$

685

$

1,381

10.

Equity-Based Compensation

Restricted Stock

The majority of the company’s restricted stock awarded to its employees were originally issued in December 2020 to exchange the Class B Profits Interest Unit (the “Class B Plan”) of EQT, former parent of the Company.

Modification accounting was not required for the time-based vesting Class B Units for which the vesting conditions, classification and fair market value did not change as a result of the shares of restricted common stock that replaced them. The original grant date fair value will continue to be recognized on a straight-line basis. Modification accounting was

22

required for the performance-based vesting Class B Units that were exchanged for time-based vesting restricted common stock, given the vesting conditions were changed.

Share based compensation for the restricted stock exchanged for the time-based Class B Units is recognized on a straight-line basis over the requisite service period of the award, which is generally five years. Share-based compensation for the restricted stock exchanged for the performance-based Class B Units is recognized using the accelerated attribution approach.

In 2021, the Company granted 87,127 replacement shares of restricted stock in connection with the Pinnacle business acquisition under which equity-based awards are outstanding. The fair value of the per share of restricted stock issued in 2021 was measured using grant date fair market value adjusted lack of marketability for these shares. Total grant date fair value was $2,762. The restricted stock issued in 2021 generally have a three year vesting period except for one holder whose shares vests equally on a monthly basis for 2 years.

WEIGHTED-

AVERAGE

GRANT DATE

    

SHARES

    

FAIR VALUE

Non-vested restricted stock as of December 31, 2021

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