Certara, Inc. [CERT] Filings

10-Q 1 cert-20220930x10q.htm 10-Q

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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 September 30, 2022

☐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 November 01, 2022, the registrant had 159,672,997 shares of common stock, par value $0.01 per share, outstanding.

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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;

•

our ability to retain key personnel or recruit additional qualified personnel

•

our ability to successfully enter new markets, increase our customer base and expand our relationships with existing customers;

•

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 and the use of third parties by biopharmaceutical companies;

•

the impact of macroeconomic trends including inflation and foreign currency exchange volatility;

•

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;

•

the loss of more than one of our major customers;

•

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;

•

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;

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•

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 future capital needs;

•

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, in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021 (“2021 Annual Report”), and 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 2021 Annual Report, 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.

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.

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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 these 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.

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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 September 30, 2022 and December 31, 2021	6

	Condensed Consolidated Statements of Operations and Comprehensive Loss for the three and nine months ended September 30, 2022 and 2021	7

	Condensed Consolidated Statements of Stockholders’ Equity for the three and nine months ended September 30, 2022 and 2021	8

	Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 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	46

4.	Controls and Procedures	46


	PART II – OTHER INFORMATION

1.	Legal Proceedings	47

1A.	Risk Factors	47

2.	Unregistered Sales of Equity Securities and Use of Proceeds	47

3.	Defaults Upon Senior Securities	47

4.	Mine Safety Disclosures	47

5.	Other Information	47

6.	Exhibits	47

SIGNATURES		48

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PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

CERTARA, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)


	SEPTEMBER 30,		DECEMBER 31,
(IN THOUSANDS, EXCEPT PER SHARE AND SHARE DATA)	2022		2021
Assets
Current assets:
Cash and cash equivalents	$	210,509	$	185,797
Accounts receivable, net of allowance for credit losses of $692 and $262, respectively		74,806		69,555
Restricted cash		3,274		827
Prepaid expenses and other current assets		16,503		18,548
Total current assets		305,092		274,727
Other assets:
Property and equipment, net		2,609		2,935
Operating lease right-of-use assets		11,481		12,634
Goodwill		696,921		703,371
Intangible assets, net of accumulated amortization of $202,901 and $169,329, respectively		481,536		511,823
Deferred income taxes		4,158		4,073
Other long-term assets		6,896		2,167
Total assets	$	1,508,693	$	1,511,730
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	3,002	$	7,458
Accrued expenses		26,552		29,830
Current portion of deferred revenue		40,434		45,496
Current portion of long-term debt		3,020		3,020
Current operating lease liabilities		3,422		5,040
Other current liabilities		100		1,381
Total current liabilities		76,530		92,225
Long-term liabilities:
Deferred revenue, net of current portion		1,884		1,531
Deferred income taxes		75,522		76,098
Operating lease liabilities, net of current portion		8,509		8,256
Long-term debt, net of current portion and debt discount		290,428		291,746
Other long-term liabilities		1,422		25
Total liabilities		454,295		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 September 30, 2022 and December 31, 2021, respectively		—		—
Common shares, $0.01 par value, 600,000,000 shares authorized, 159,921,814 and 159,660,048 shares issued as of September 30, 2022 and December 31, 2021, respectively; 159,781,270 and 159,658,948 shares outstanding as of September 30, 2022 and December 31, 2021, respectively		1,599		1,596
Additional paid-in capital		1,143,638		1,119,821
Accumulated deficit		(70,047)		(75,604)
Accumulated other comprehensive loss		(17,928)		(3,926)
Treasury stock at cost, 140,544 and 1,100 shares at September 30, 2022 and December 31, 2021, respectively		(2,864)		(38)
Total stockholders’ equity		1,054,398		1,041,849
Total liabilities and stockholders’ equity	$	1,508,693	$	1,511,730

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

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CERTARA, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(UNAUDITED)


	THREE MONTHS ENDED SEPTEMBER 30,				NINE MONTHS ENDED SEPTEMBER 30,
(IN THOUSANDS, EXCEPT PER SHARE AND SHARE DATA)	2022		2021		2022		2021
Revenues	$	84,700	$	73,944	$	249,011	$	210,758
Cost of revenues		32,812		28,769		100,795		82,327
Operating expenses:
Sales and marketing		6,376		5,082		19,608		13,423
Research and development		6,318		4,530		21,607		13,862
General and administrative		17,327		26,199		53,444		60,795
Intangible asset amortization		10,591		9,592		31,095		28,527
Depreciation and amortization expense		417		533		1,321		1,687
Total operating expenses		41,029		45,936		127,075		118,294
Income (loss) from operations		10,859		(761)		21,141		10,137
Other income (expenses):
Interest expense		(5,221)		(3,289)		(12,328)		(13,549)
Other, net		2,855		657		6,217		194
Total other expenses		(2,366)		(2,632)		(6,111)		(13,355)
Income (loss) before income taxes		8,493		(3,393)		15,030		(3,218)
Provision for (benefit from) income taxes		4,557		(1,631)		9,473		349
Net income (loss)		3,936		(1,762)		5,557		(3,567)
Other comprehensive loss:
Foreign currency translation adjustment		(9,489)		(2,798)		(20,193)		(4,041)
Change in fair value from interest rate swap, net of tax of $1,716, $(16), $2,137, $145, respectively		5,279		(47)		6,191		430
Reclassification of fair value of interest rate swap, net of tax of $0,$0,0,$(765)		—		—		—		2,268
Total other comprehensive loss		(4,210)		(2,845)		(14,002)		(1,343)
Comprehensive loss	$	(274)	$	(4,607)	$	(8,445)	$	(4,910)

Net income (loss) per share attributable to common stockholders:
Basic	$	0.03	$	(0.01)	$	0.04	$	(0.02)
Diluted	$	0.02	$	(0.01)	$	0.03	$	(0.02)
Weighted average common shares outstanding:
Basic		157,140,166		149,016,609		156,523,022		147,894,227
Diluted		159,587,645		149,016,609		159,392,534		147,894,227

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

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CERTARA, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(UNAUDITED)


								ACCUMULATED
				ADDITIONAL				OTHER					TOTAL
(IN THOUSANDS,	COMMON STOCK			PAID-IN		ACCUMULATED		COMPREHENSIVE		TREASURY STOCK			STOCKHOLDERS'
EXCEPT SHARE DATA)	SHARES	AMOUNT		CAPITAL		DEFICIT		LOSS		SHARES	AMOUNT		EQUITY
Balance as of June 30, 2021	152,864,921	$	1,529	$	897,209	$	(64,143)	$	(85)	—	$	—	$	834,510
Equity-based compensation expense	—		—		8,165		—		—	—		—		8,165
Common stock offerings	4,500,000		45		133,306		—		—	—		—		133,351
Restricted stock forfeiture	(11,730)		—		—		—		—	—		—		—
Restricted stock withheld for tax liability	—		—		(99)		—		—	—		—		(99)
Change in fair value from interest rate swap, net of tax	—		—		—		—		(47)	—		—		(47)
Net loss	—		—		—		(1,762)		—	—		—		(1,762)
Foreign currency translation adjustment	—		—		—		—		(2,798)	—		—		(2,798)
Balance as of September 30, 2021	157,353,191	$	1,574	$	1,038,581	$	(65,905)	$	(2,930)	—	$	—	$	971,320

Balance as of December 31, 2020	152,979,479	$	1,529	$	884,528	$	(62,338)	$	(1,587)	—	$	—	$	822,132
Equity-based compensation expense	—		—		20,846		—		—	—		—		20,846
Common stock offerings	4,500,000		45		133,306		—		—	—				133,351
Common shares issued for employee share-based compensation	14,769		—		—		—		—	—		—		—
Restricted stock forfeiture	(141,057)		—		—		—		—	—		—		—
Restricted stock withheld for tax liability	—		—		(99)		—		—	—				(99)
Change in fair value from interest rate swap, net of tax	—		—		—		—		430	—		—		430
Reclassification of fair value of interest rate swap, net of tax	—		—		—		—		2,268	—		—		2,268
Net loss	—		—		—		(3,567)		—	—		—		(3,567)
Foreign currency translation adjustment	—		—		—		—		(4,041)	—		—		(4,041)
Balance as of September 30, 2021	157,353,191	$	1,574	$	1,038,581	$	(65,905)	$	(2,930)	—	$	—	$	971,320

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

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CERTARA, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(UNAUDITED)


								ACCUMULATED
				ADDITIONAL				OTHER					TOTAL
(IN THOUSANDS,	COMMON STOCK			PAID-IN		ACCUMULATED		COMPREHENSIVE		TREASURY STOCK			STOCKHOLDERS'
EXCEPT SHARE DATA)	SHARES	AMOUNT		CAPITAL		DEFICIT		LOSS		SHARES	AMOUNT		EQUITY
Balance as of June 30, 2022	159,991,357	$	1,600	$	1,136,831	$	(73,983)	$	(13,718)	108,995	$	(2,349)	$	1,048,381
Equity-based compensation expense	—		—		6,804		—		—	—		—		6,804
Restricted stock units withheld for tax liability	—		—		1		—		—	29,845		(481)		(480)
Common shares issued for employee share-based compensation	94,091		—		—		—		—	—		—		—
Restricted stock withheld for tax liability	—		—		—		—		—	1,704		(34)		(34)
Restricted stock forfeiture	(163,634)		(1)		2		—		—	—		—		1
Change in fair value from interest rate swap, net of tax	—		—		—		—		5,279	—		—		5,279
Net income	—		—		—		3,936		—	—		—		3,936
Foreign currency translation adjustment, net of tax	—		—		—		—		(9,489)	—		—		(9,489)
Balance as of September 30, 2022	159,921,814	$	1,599	$	1,143,638	$	(70,047)	$	(17,928)	140,544	$	(2,864)	$	1,054,398

Balance as of December 31, 2021	159,660,048	$	1,596	$	1,119,821	$	(75,604)	$	(3,926)	1,100	$	(38)	$	1,041,849
Equity-based compensation expense	—		—		23,818		—		—	—		—		23,818
Restricted stock units withheld for tax liability	—		—		1		—		—	134,262		(2,710)		(2,709)
Common shares issued for employee share-based compensation	425,400		4		(4)		—		—	—		—		—
Restricted stock withheld for tax liability	—		—		—		—		—	5,182		(116)		(116)
Restricted stock forfeiture	(163,634)		(1)		2		—		—	—		—		1
Change in fair value from interest rate swap, net of tax	—		—		—		—		6,191	—		—		6,191
Net income	—		—		—		5,557		—	—		—		5,557
Foreign currency translation adjustment, net of tax	—		—		—		—		(20,193)	—		—		(20,193)
Balance as of September 30, 2022	159,921,814	$	1,599	$	1,143,638	$	(70,047)	$	(17,928)	140,544	$	(2,864)	$	1,054,398

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

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CERTARA, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)


	NINE MONTHS ENDED SEPTEMBER 30,
(IN THOUSANDS)	2022		2021
Cash flows from operating activities:
Net income (loss)	$	5,557	$	(3,567)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization of property and equipment		1,321		1,687
Amortization of intangible assets		38,007		30,435
Amortization of debt issuance costs		1,156		1,144
Provision for credit losses		468		39
Loss on retirement of assets		56		304
Equity-based compensation expense		23,818		20,846
Unrealized loss on interest rate swap		—		1,750
Deferred income taxes		(3,209)		1,796
Changes in assets and liabilities
Accounts receivable		(7,895)		(6,148)
Prepaid expenses and other assets		4,209		(5,504)
Accounts payable and other liabilities		(3,404)		(1,650)
Deferred revenue		(1,727)		(1,575)
Other current liabilities		(1,088)		216
Changes in operating lease assets and liabilities, net		(211)		(216)
Net cash provided by operating activities		57,058		39,557
Cash flows from investing activities:
Capital expenditures		(1,249)		(995)
Capitalized development costs		(8,106)		(5,490)
Business acquisitions, net of cash acquired		(5,883)		(14,114)
Net cash used in investing activities		(15,238)		(20,599)
Cash flows from financing activities:
Net proceeds from public offering of common stock		—		133,351
Proceeds from borrowings on long-term debt		—		89
Payments on long-term debt and finance lease obligations		(2,483)		(3,147)
Payment of debt issuance costs		—		(2,942)
Payments on financing component of interest rate swap		(1,085)		(216)
Payment of taxes on shares withheld for employee taxes		(2,827)		(100)
Net cash (used) provided by financing activities		(6,395)		127,035
Effect of foreign exchange rate changes on cash and cash equivalents, and restricted cash		(8,266)		(1,326)
Net increase in cash and cash equivalents, and restricted cash		27,159		144,667
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	$	213,783	$	417,958
Supplemental disclosures of cash flow information
Cash paid for interest	$	12,310	$	10,671
Cash paid for taxes	$	7,784	$	6,744
Supplemental schedule of non-cash investing and financing activities
Liabilities assumed in connection with business acquisition	$	—	$	1,912

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

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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. 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.

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 our 2021 Annual Report. 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 condensed 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 September 30, 2022, the condensed consolidated statements of operations and comprehensive loss for the three and nine months ended September 30, 2022 and 2021, the condensed consolidated statements of stockholders’ equity for the three and nine months ended September 30, 2022 and 2021, the condensed consolidated statements of cash flows for the nine months ended September 30, 2022 and 2021, and the related interim disclosures are unaudited.

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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. Certain amounts reported in prior periods have been reclassified to conform with the current presentation. 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 2021 Annual Report.

(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 condensed 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 provide for a Company credit card program and unexpended restricted grant funds. The restricted cash balance was $3,274 and $827 at September 30, 2022 and December 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:


	SEPTEMBER 30,		DECEMBER 31,
	2022		2021
Cash and cash equivalents	$	210,509	$	185,797
Restricted cash, current		3,274		827
Total cash and cash equivalents and restricted cash	$	213,783	$	186,624

(f)	Derivative Instruments

Effective May 31, 2022, the Company has a pay-fixed, receive-variable interest rate swap agreement to modify the interest rate characteristics of term loan debt from variable to fixed in order to reduce the impact of changes in future cash flows due to market interest rate changes. The swap agreement has a notional amount of $230,000, a fixed rate of 2.8% and a termination date of August 31, 2025. At September 30, 2022, the interest swap had a fair value of $8,385 and the fair value recognized in accumulated other comprehensive income was $8,385. During the three and nine months ended September 30, 2022, the amounts recognized as interest expense on the condensed consolidated statements of operations and comprehensive loss on the derivative were $355 and $700.

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The Company also had an interest rate swap agreement for a notional amount of $230,000 that fixed the interest rate at 2.1%, non-inclusive of the fixed credit spread through May 31, 2022. On August 31, 2021, the Company entered into 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. Due to an other-than-insignificant financing element on a portion of such hybrid instrument, the cash flows associated with this hybrid instrument were classified as financing activities in the condensed consolidated statements of cash flows. The interest rate swap matured on May 31, 2022. At September 30, 2022, the Company did not record any amounts for the financing component and fair value of the interest rate swap in the condensed consolidated balance sheets. The Company reclassified $3,033 of accumulated comprehensive loss to interest expense in the condensed consolidated statements of comprehensive loss in the second quarter of 2021 due to hedge ineffectiveness. Excluding the amount reclassified, the interest expense recognized on the derivative was $0, $29, $(179), $690 for the three and nine months ended September 30, 2022 and 2021, respectively.

The Company uses derivatives to manage certain interest exposures and designated all the derivatives as cash flow hedges. The Company records derivatives at fair value on its condensed consolidated balance sheets. Changes in the fair value of derivatives designated as cash flow hedges are recorded as a component of accumulated other comprehensive income (loss). Those amounts are reclassified into interest expenses in the same period during which the hedged transactions impact earnings.

The following table sets forth the assets that are measured at fair value on a recurring basis by the levels in the fair value hierarchy at September 30, 2022:


	LEVEL 1		LEVEL 2		LEVEL 3		TOTAL
Asset
Interest rate swap asset	$	—	$	8,385	$	—	$	8,385
Total	$	—	$	8,385	$	—	$	8,385

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	$	—	$

Certara, Inc. [CERT] Filings
10-Q	[2022-11-07]
10-Q	[2022-08-09]
10-Q	[2022-05-05]
10-K	[2022-03-01]
S-1	[2021-11-15]
10-Q	[2021-11-09]
S-1	[2021-09-03]
10-Q	[2021-08-06]
10-Q	[2021-05-07]
S-1	[2021-03-22]
10-K	[2021-03-15]
S-1	[2020-11-18]