(Mark One) | |||||
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES | |||||
EXCHANGE ACT OF 1934 |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES | |||||
EXCHANGE ACT OF 1934 |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification Number) |
Title of Each Class | Trading symbol | Name of Exchange on which registered | ||||||||||||
x | Accelerated filer | o | |||||||||||||||
Non-accelerated filer | o | Smaller reporting company | Emerging growth company |
Item | Page | |||||||||||||
2. | ||||||||||||||
CERTARA, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) |
(IN THOUSANDS, EXCEPT PER SHARE AND SHARE DATA) | MARCH 31, 2024 | DECEMBER 31, 2023 | ||||||||||||
Assets | ||||||||||||||
Current assets: | ||||||||||||||
Cash and cash equivalents | $ | $ | ||||||||||||
Accounts receivable, net of allowance for credit losses of $ | ||||||||||||||
Prepaid expenses and other current assets | ||||||||||||||
Total current assets | ||||||||||||||
Other assets: | ||||||||||||||
Property and equipment, net | ||||||||||||||
Operating lease right-of-use assets | ||||||||||||||
Goodwill | ||||||||||||||
Intangible assets, net of accumulated amortization of $ | ||||||||||||||
Deferred income taxes | ||||||||||||||
Other long-term assets | ||||||||||||||
Total assets | $ | $ | ||||||||||||
Liabilities and stockholders' equity | ||||||||||||||
Current liabilities: | ||||||||||||||
Accounts payable | $ | $ | ||||||||||||
Accrued expenses | ||||||||||||||
Current portion of deferred revenue | ||||||||||||||
Current portion of long-term debt | ||||||||||||||
Other current liabilities | ||||||||||||||
Total current liabilities | ||||||||||||||
Long-term liabilities: | ||||||||||||||
Deferred revenue, net of current portion | ||||||||||||||
Deferred income taxes | ||||||||||||||
Operating lease liabilities, net of current portion | ||||||||||||||
Long-term debt, net of current portion and debt discount | ||||||||||||||
Other long-term liabilities | ||||||||||||||
Total liabilities | ||||||||||||||
Commitments and contingencies | ||||||||||||||
Stockholders' equity | ||||||||||||||
Preferred shares, $ | ||||||||||||||
Common shares, $ | ||||||||||||||
Additional paid-in capital | ||||||||||||||
Accumulated deficit | ( | ( | ||||||||||||
Accumulated other comprehensive loss | ( | ( | ||||||||||||
Treasury stock at cost, | ( | ( | ||||||||||||
Total stockholders' equity | ||||||||||||||
Total liabilities and stockholders' equity | $ | $ |
CERTARA, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) (UNAUDITED) |
THREE MONTHS ENDED MARCH 31, | ||||||||||||||
(IN THOUSANDS, EXCEPT PER SHARE AND SHARE DATA) | 2024 | 2023 | ||||||||||||
Revenues | $ | $ | ||||||||||||
Cost of revenues | ||||||||||||||
Operating expenses: | ||||||||||||||
Sales and marketing | ||||||||||||||
Research and development | ||||||||||||||
General and administrative | ||||||||||||||
Intangible asset amortization | ||||||||||||||
Depreciation and amortization expense | ||||||||||||||
Total operating expenses | ||||||||||||||
Income (loss) from operations | ( | |||||||||||||
Other income (expenses): | ||||||||||||||
Interest expense | ( | ( | ||||||||||||
Net other income | ||||||||||||||
Total other expenses | ( | ( | ||||||||||||
Income (loss) before income taxes | ( | |||||||||||||
Provision (benefit) for income taxes | ( | |||||||||||||
Net income (loss) | ( | |||||||||||||
Other comprehensive income (loss): | ||||||||||||||
Foreign currency translation adjustment, net of tax of $ | ( | |||||||||||||
Change in fair value from interest rate swap, net of tax of $ | ( | |||||||||||||
Total other comprehensive income | ||||||||||||||
Comprehensive income (loss) | $ | ( | $ | |||||||||||
Net income (loss) per share attributable to common stockholders: | ||||||||||||||
Basic | $ | ( | $ | |||||||||||
Diluted | $ | ( | $ | |||||||||||
Weighted average common shares outstanding: | ||||||||||||||
Basic | ||||||||||||||
Diluted |
CERTARA, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED) |
(IN THOUSANDS, EXCEPT SHARE DATA) | COMMON STOCK | ADDITIONAL PAID-IN CAPITAL | ACCUMULATED DEFICIT | ACCUMULATED OTHER COMPREHENSIVE LOSS | TREASURY STOCK | TOTAL STOCKHOLDERS' EQUITY | ||||||||||||||||||||||||||||||||||||||||||||
SHARES | AMOUNT | SHARES | AMOUNT | |||||||||||||||||||||||||||||||||||||||||||||||
Balance as of December 31, 2022 | $ | $ | $ | ( | $ | ( | ( | $ | ( | $ | ||||||||||||||||||||||||||||||||||||||||
Equity-based compensation expense, net of forfeiture | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
Common shares issued for share-based compensation awards and shares withheld for tax | ( | — | — | ( | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||
Restricted stock forfeiture* | ( | ( | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
Change in fair value from interest rate swap, net of tax | — | — | — | — | ( | — | — | ( | ||||||||||||||||||||||||||||||||||||||||||
Net income | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
Foreign currency translation adjustment, net of tax | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
Balance as of March 31, 2023 | $ | $ | $ | ( | $ | ( | ( | $ | ( | $ | ||||||||||||||||||||||||||||||||||||||||
Balance as of December 31, 2023 | $ | $ | $ | ( | $ | ( | ( | $ | ( | $ | ||||||||||||||||||||||||||||||||||||||||
Equity-based compensation expense, net of forfeiture | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
Common stock withheld for tax liabilities | — | — | — | — | — | ( | ( | ( | ||||||||||||||||||||||||||||||||||||||||||
Common shares issued for employee share-based compensation | ( | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||
Common shares issued for contingent consideration | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
Change in fair value from interest rate swap, net of tax | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
Net loss | — | — | — | ( | — | — | ( | |||||||||||||||||||||||||||||||||||||||||||
Foreign currency translation adjustment, net of tax | — | — | — | — | ( | — | — | ( | ||||||||||||||||||||||||||||||||||||||||||
Balance as of March 31, 2024 | $ | $ | $ | ( | $ | ( | ( | $ | ( | $ |
CERTARA, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) |
THREE MONTHS ENDED MARCH 31, | ||||||||||||||
(IN THOUSANDS) | 2024 | 2023 | ||||||||||||
Cash flows from operating activities: | ||||||||||||||
Net income (loss) | $ | ( | $ | |||||||||||
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | ||||||||||||||
Depreciation and amortization of property and equipment | ||||||||||||||
Amortization of intangible assets | ||||||||||||||
Amortization of debt issuance costs | ||||||||||||||
(Recovery of) provision for credit losses | ( | |||||||||||||
Loss on retirement of assets | ||||||||||||||
Equity-based compensation expense | ||||||||||||||
Change in fair value of contingent considerations | ||||||||||||||
Lease abandonment expense | ||||||||||||||
Deferred income taxes | ( | ( | ||||||||||||
Changes in assets and liabilities: | ||||||||||||||
Accounts receivable | ||||||||||||||
Prepaid expenses and other assets | ( | |||||||||||||
Accounts payable, accrued expenses, and other liabilities | ( | ( | ||||||||||||
Deferred revenues | ( | ( | ||||||||||||
Net cash provided by operating activities | ||||||||||||||
Cash flows from investing activities: | ||||||||||||||
Capital expenditures | ( | ( | ||||||||||||
Capitalized software development costs | ( | ( | ||||||||||||
Investment in intangible assets | ( | |||||||||||||
Net cash used in investing activities | ( | ( | ||||||||||||
Cash flows from financing activities: | ||||||||||||||
Payments on long-term debt and finance lease obligations | ( | ( | ||||||||||||
Payments for business acquisition related contingent consideration | ( | |||||||||||||
Payment of taxes on shares withheld for employee taxes | ( | ( | ||||||||||||
Net cash used in financing activities | ( | ( | ||||||||||||
Effect of foreign exchange rate changes on cash and cash equivalents, and restricted cash | ( | |||||||||||||
Net (decrease) increase in cash and cash equivalents, and restricted cash | ( | |||||||||||||
Cash and cash equivalents, and restricted cash, at beginning of period | ||||||||||||||
Cash and cash equivalents, and restricted cash, at end of period | $ | $ | ||||||||||||
Supplemental disclosures of cash flow information | ||||||||||||||
Cash paid for interest | $ | $ | ||||||||||||
Cash paid for taxes | $ | $ | ||||||||||||
Supplemental schedule of noncash investing and financing activities | ||||||||||||||
Issuance of common stock for business acquisition related contingent consideration | $ | $ |
LEVEL 1 | LEVEL2 | LEVEL 3 | TOTAL | |||||||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||||
Assets | ||||||||||||||||||||||||||
Money market funds | $ | $ | $ | $ | ||||||||||||||||||||||
Interest rate swap assets | ||||||||||||||||||||||||||
Total assets | $ | $ | $ | $ | ||||||||||||||||||||||
Liabilities | ||||||||||||||||||||||||||
Contingent liabilities | $ | $ | $ | $ | ||||||||||||||||||||||
Total liabilities | $ | $ | $ | $ |
LEVEL 1 | LEVEL2 | LEVEL 3 | TOTAL | |||||||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||||
Assets | ||||||||||||||||||||||||||
Money market funds | $ | $ | $ | $ | ||||||||||||||||||||||
Interest rate swap assets | ||||||||||||||||||||||||||
Total assets | $ | $ | $ | $ | ||||||||||||||||||||||
Liabilities | ||||||||||||||||||||||||||
Contingent liabilities | $ | $ | $ | $ | ||||||||||||||||||||||
Total liabilities | $ | $ | $ | $ |
MARCH 31, | ||||||||
2024 | ||||||||
(In thousands) | ||||||||
Beginning balance at December 31, 2023 | $ | |||||||
Additions | ||||||||
Payments | ( | |||||||
Fair value remeasurement | ||||||||
Ending balance at March 31, 2024 | $ |
MARCH 31, 2024 | DECEMBER 31, 2023 | ||||||||||
(In thousands) | |||||||||||
Trade receivables | $ | $ | |||||||||
Unbilled receivables | |||||||||||
Other receivables | |||||||||||
Allowances for credit losses | ( | ( | |||||||||
Accounts receivable, net | $ | $ |
MARCH 31, 2024 | DECEMBER 31, 2023 | ||||||||||
(In thousands) | |||||||||||
Beginning balance | $ | $ | |||||||||
Provision for credit losses | |||||||||||
Charge-offs, net of recoveries | ( | ( | |||||||||
Ending balance | $ | $ |
Interest rate swap derivative designated as cash flow hedging instrument: | MARCH 31, 2024 | DECEMBER 31, 2023 | ||||||||||||
(In thousands) | ||||||||||||||
Notional amounts | $ | $ | ||||||||||||
Prepaid expenses and other current assets | $ | $ | ||||||||||||
Other long-term assets | $ | $ |
MARCH 31, 2024 | DECEMBER 31, 2023 | |||||||||||||
(In thousands) | ||||||||||||||
Contract assets | $ | $ | ||||||||||||
Contract liabilities |
THREE MONTHS ENDED MARCH 31, | ||||||||||||||
2024 | 2023 | |||||||||||||
Software licenses transferred at a point in time | $ | $ | ||||||||||||
Software licenses transferred over time | ||||||||||||||
Service revenues earned over time | ||||||||||||||
Total | $ | $ |
MARCH 31, 2024 | DECEMBER 31, 2023 | ||||||||||
(In thousands) | |||||||||||
Prepaid expenses | $ | $ | |||||||||
Income tax receivable | |||||||||||
Research and development tax credit receivable | |||||||||||
Current portion of interest rate swap asset | |||||||||||
Other current assets | |||||||||||
Prepaid expenses and other current assets | $ | $ |
MARCH 31, 2024 | DECEMBER 31, 2023 | ||||||||||
(In thousands) | |||||||||||
Long-term deposits | $ | $ | |||||||||
Interest rate swap asset - long-term | |||||||||||
Deferred financing cost | |||||||||||
Total other long-term assets | $ | $ |
MARCH 31, 2024 | DECEMBER 31, 2023 | ||||||||||
(In thousands) | |||||||||||
Term loans | $ | $ | |||||||||
Revolving line of credit | |||||||||||
Less: debt issuance costs | ( | ( | |||||||||
Total | |||||||||||
Current portion of long-term debt | ( | ( | |||||||||
Long-term debt, net of current portion and debt issuance costs | $ | $ |
Remainder of 2024 | 2025 | 2026 | TOTAL | ||||||||||||||||||||
(In thousands) | |||||||||||||||||||||||
Maturities | $ | $ | $ | $ |
Lease Position | Balance Sheet Classification | MARCH 31, 2024 | DECEMBER 31, 2023 | |||||||||||||||||
(In thousands) | ||||||||||||||||||||
Assets | ||||||||||||||||||||
Operating lease assets | Operating lease right-of-use assets | $ | $ | |||||||||||||||||
Total lease assets | $ | $ | ||||||||||||||||||
Liabilities | ||||||||||||||||||||
Current | ||||||||||||||||||||
Operating | Other current liabilities | $ | $ | |||||||||||||||||
Noncurrent | ||||||||||||||||||||
Operating | Operating lease liabilities, net of current portion | |||||||||||||||||||
Total lease liabilities | $ | $ |
OPERATING LEASES | |||||
(In thousands) | |||||
Remainder of 2024 | $ | ||||
2025 | |||||
2026 | |||||
2027 | |||||
2028 | |||||
Thereafter | |||||
Total future lease payments | |||||
Less: imputed interest | ( | ||||
Total | $ |
MARCH 31, 2024 | DECEMBER 31, 2023 | ||||||||||
(In thousands) | |||||||||||
Accrued compensation | $ | $ | |||||||||
Legal and professional accruals | |||||||||||
Interest payable | |||||||||||
Income taxes payable | |||||||||||
Short-term contingent consideration liabilities | |||||||||||
Other | |||||||||||
Total accrued expenses | $ | $ |
MARCH 31, 2024 | DECEMBER 31, 2022 | ||||||||||
(In thousands) | |||||||||||
Uncertain tax position liability | $ | $ | |||||||||
Contingent consideration | |||||||||||
Total other long-term liabilities | $ | $ |
SHARES | WEIGHTED- AVERAGE GRANT DATE FAIR VALUE | ||||||||||
Non-vested restricted stock as of December 31, 2023 | $ | ||||||||||
Granted* | |||||||||||
Vested* | ( | ||||||||||
Forfeited | |||||||||||
Cancelled* | ( | ||||||||||
Non-vested restricted stock as of March 31, 2024 | $ |
UNITS | WEIGHTED- AVERAGE GRANT DATE FAIR VALUE | ||||||||||
Non-vested RSUs as of December 31, 2023 | $ | ||||||||||
Granted* | |||||||||||
Vested** | ( | ||||||||||
Forfeited | ( | ||||||||||
Cancelled* | ( | $ | |||||||||
Non-vested RSUs as of March 31, 2024 | $ |
UNITS | WEIGHTED- AVERAGE GRANT DATE FAIR VALUE | ||||||||||
Non-vested PSUs as of December 31, 2023 | $ | ||||||||||
Granted* | |||||||||||
Vested | |||||||||||
Forfeited | |||||||||||
Cancelled* | ( | ||||||||||
Non-vested PSUs as of March 31, 2024 | $ |
THREE MONTHS ENDED MARCH 31, | ||||||||||||||
2024 | 2023 | |||||||||||||
(In thousands) | ||||||||||||||
Cost of revenues | $ | $ | ||||||||||||
Sales and marketing | ||||||||||||||
Research and development | ||||||||||||||
General and administrative | ||||||||||||||
Total | $ | $ |
THREE MONTHS ENDED MARCH 31, | ||||||||||||||
2024 | 2023 | |||||||||||||
Revenue(1): | ||||||||||||||
Americas | $ | $ | ||||||||||||
EMEA | ||||||||||||||
Asia Pacific | ||||||||||||||
Total | $ | $ |
THREE MONTHS ENDED MARCH 31, | ||||||||||||||
2024 | 2023 | |||||||||||||
Basic earnings per share | ||||||||||||||
Net income (loss) available to common shareholders | $ | ( | $ | |||||||||||
Basic weighted-average common shares outstanding | ||||||||||||||
Basic earnings per common share | $ | ( | $ | |||||||||||
Diluted earnings per share | ||||||||||||||
Net income (loss) available to common shares | $ | ( | $ | |||||||||||
Basic weighted-average common shares outstanding | ||||||||||||||
Dilutive potential common shares | ||||||||||||||
Diluted weighted-average common shares outstanding | ||||||||||||||
Diluted earnings per common share | $ | ( | $ |
2024 | 2023 | |||||||||||||||||||
Q1 | Q1 | |||||||||||||||||||
(in millions except percentage) | ||||||||||||||||||||
Bookings | $ | 105.8 | $ | 112.7 | ||||||||||||||||
Net Retention Rates | 114.1 | % | 110.5 | % |
THREE MONTHS ENDED MARCH 31, | ||||||||||||||
2024 | 2023 | |||||||||||||
(in thousands) | ||||||||||||||
Net income (loss)(a) | $ | (4,683) | $ | 1,358 | ||||||||||
Interest expense(a) | 5,751 | 5,475 | ||||||||||||
Interest income(a) | (2,574) | (1,354) | ||||||||||||
(Benefit from) provision for income taxes(a) | (751) | 1,111 | ||||||||||||
Depreciation and amortization expense(a) | 432 | 411 | ||||||||||||
Intangible asset amortization(a) | 15,996 | 13,113 | ||||||||||||
Currency (gain) loss(a) | 876 | 894 | ||||||||||||
Equity-based compensation expense(b) | 9,073 | 8,543 | ||||||||||||
Change in fair value of contingent consideration(d) | 2,878 | 1,261 | ||||||||||||
Acquisition-related expenses(e) | 1,714 | 1,192 | ||||||||||||
Integration expense(f) | — | 102 | ||||||||||||
Reorganization expense(g) | 51 | — | ||||||||||||
Loss on disposal of fixed assets(h) | — | 4 | ||||||||||||
Executive recruiting expense(i) | 380 | 196 | ||||||||||||
Adjusted EBITDA | $ | 29,143 | $ | 32,306 |
THREE MONTHS ENDED MARCH 31, | ||||||||||||||
2024 | 2023 | |||||||||||||
(in thousands) | ||||||||||||||
Net income (loss) (a) | $ | (4,683) | $ | 1,358 | ||||||||||
Currency (gain) loss(a) | 876 | 894 | ||||||||||||
Equity-based compensation expense(b) | 9,073 | 8,543 | ||||||||||||
Amortization of acquisition-related intangible assets(c) | 13,348 | 11,256 | ||||||||||||
Change in fair value of contingent consideration(d) | 2,878 | 1,261 | ||||||||||||
Acquisition-related expenses(e) | 1,714 | 1,192 | ||||||||||||
Integration expense(f) | — | 102 | ||||||||||||
Reorganization expense(g) | 51 | — | ||||||||||||
Loss on disposal of fixed assets(h) | — | 4 | ||||||||||||
Executive recruiting expense(i) | 380 | 196 | ||||||||||||
Income tax expense impact of adjustments(j) | (7,089) | (5,495) | ||||||||||||
Adjusted net income | $ | 16,548 | $ | 19,311 |
THREE MONTHS ENDED MARCH 31, | ||||||||||||||
2024 | 2023 | |||||||||||||
Diluted earnings per share(a) | $ | (0.03) | $ | 0.01 | ||||||||||
Currency (gain) loss(a) | 0.01 | 0.01 | ||||||||||||
Equity-based compensation expense(b) | 0.05 | 0.04 | ||||||||||||
Amortization of acquisition-related intangible assets(c) | 0.08 | 0.07 | ||||||||||||
Change in fair value of contingent consideration(d) | 0.02 | 0.01 | ||||||||||||
Acquisition-related expenses(e) | 0.01 | 0.01 | ||||||||||||
Integration expense(f) | — | — | ||||||||||||
Reorganization expense(g) | — | — | ||||||||||||
Loss on disposal of fixed assets(h) | — | — | ||||||||||||
Executive recruiting expense(i) | — | — | ||||||||||||
Income tax expense impact of adjustments(j) | (0.04) | (0.03) | ||||||||||||
Adjusted Diluted Earnings Per Share | $ | 0.10 | $ | 0.12 | ||||||||||
Basic weighted average common shares outstanding | 159,524,270 | 158,177,025 | ||||||||||||
Effect of potentially dilutive shares outstanding (k) | 889,094 | 1,550,387 | ||||||||||||
Adjusted diluted weighted average common shares outstanding | 160,413,364 | 159,727,412 |
THREE MONTHS ENDED MARCH 31, | CHANGE | ||||||||||||||||||||||
2024 | 2023 | $ | % | ||||||||||||||||||||
(in thousands) | |||||||||||||||||||||||
Software | $ | 39,307 | $ | 33,005 | $ | 6,302 | 19 | % | |||||||||||||||
Services | 57,347 | 57,296 | 51 | — | % | ||||||||||||||||||
Total revenues | $ | 96,654 | $ | 90,301 | $ | 6,353 | 7 | % |
THREE MONTHS ENDED MARCH 31, | CHANGE | ||||||||||||||||||||||
2024 | 2023 | $ | % | ||||||||||||||||||||
(in thousands) | |||||||||||||||||||||||
Cost of revenues | $ | 39,255 | $ | 34,856 | $ | 4,399 | 13 | % |
THREE MONTHS ENDED MARCH 31, | CHANGE | ||||||||||||||||||||||
2024 | 2023 | $ | % | ||||||||||||||||||||
(in thousands) | |||||||||||||||||||||||
Sales and marketing | $ | 10,687 | $ | 8,002 | $ | 2,685 | 34 | % | |||||||||||||||
% of total revenues | 11 | % | 9 | % |
THREE MONTHS ENDED MARCH 31, | CHANGE | ||||||||||||||||||||||
2024 | 2023 | $ | % | ||||||||||||||||||||
(in thousands) | |||||||||||||||||||||||
Research and development | $ | 11,995 | $ | 9,287 | $ | 2,708 | 29 | % | |||||||||||||||
% of total revenues | 12 | % | 10 | % |
THREE MONTHS ENDED MARCH 31, | CHANGE | ||||||||||||||||||||||
2024 | 2023 | $ | % | ||||||||||||||||||||
(in thousands) | |||||||||||||||||||||||
General and administrative | $ | 22,979 | $ | 19,772 | $ | 3,207 | 16 | % | |||||||||||||||
% of total revenues | 24 | % | 22 | % |
THREE MONTHS ENDED MARCH 31, | CHANGE | ||||||||||||||||||||||
2024 | 2023 | $ | % | ||||||||||||||||||||
(in thousands) | |||||||||||||||||||||||
Intangible asset amortization | $ | 12,593 | $ | 10,535 | $ | 2,058 | 20 | % | |||||||||||||||
% of total revenues | 13 | % | 12 | % |
THREE MONTHS ENDED MARCH 31, | CHANGE | ||||||||||||||||||||||
2024 | 2023 | $ | % | ||||||||||||||||||||
(in thousands) | |||||||||||||||||||||||
Depreciation and amortization | $ | 432 | $ | 411 | $ | 21 | 5 | % | |||||||||||||||
% of total revenues | — | % | — | % |
THREE MONTHS ENDED MARCH 31, | CHANGE | ||||||||||||||||||||||
2024 | 2023 | $ | % | ||||||||||||||||||||
(in thousands) | |||||||||||||||||||||||
Interest expense | $ | 5,751 | $ | 5,475 | $ | 276 | 5 | % | |||||||||||||||
% of total revenues | 6 | % | 6 | % |
THREE MONTHS ENDED MARCH 31, | CHANGE | ||||||||||||||||||||||
2024 | 2023 | $ | % | ||||||||||||||||||||
(in thousands) | |||||||||||||||||||||||
Net other (income ) expense | $ | (1,604) | $ | (506) | $ | (1,098) | 217 | % | |||||||||||||||
% of total revenues | (2) | % | (1) | % |
THREE MONTHS ENDED MARCH 31, | CHANGE | ||||||||||||||||||||||
2024 | 2023 | $ | % | ||||||||||||||||||||
(in thousands) | |||||||||||||||||||||||
Provision (benefit) for income taxes | $ | (751) | $ | 1,111 | $ | (1,862) | (168) | % | |||||||||||||||
Effective income tax rate | 14 | % | 45 | % |
THREE MONTHS ENDED MARCH 31, | CHANGE | ||||||||||||||||||||||
2024 | 2023 | $ | % | ||||||||||||||||||||
(in thousands) | |||||||||||||||||||||||
Net income (loss) | $ | (4,683) | $ | 1,358 | $ | (6,041) | 445 | % |
March 31, 2024 | December 31, 2023 | ||||||||||
(in thousands) | |||||||||||
Net cash from operating activities(a) | 4,296 | 82,755 | |||||||||
Cash and cash equivalents(b) | 224,776 | 234,951 | |||||||||
Term loan credit facilities | 293,695 | 294,450 | |||||||||
Gross revolving line of credit | 100,000 | 100,000 |
Remainder of 2024 | 2025 | 2026 | TOTAL | ||||||||||||||||||||
( in thousands) | |||||||||||||||||||||||
Maturities | $ | 2,265 | $ | 3,020 | $ | 288,410 | $ | 293,695 |
THREE MONTHS ENDED MARCH 31, | |||||||||||
2024 | 2023 | ||||||||||
(in thousands) | |||||||||||
Net cash provided by operating activities | $ | 4,296 | $ | 9,957 | |||||||
Net cash used in investing activities | (3,578) | (2,731) | |||||||||
Net cash used in financing activities | (10,347) | (850) | |||||||||
Effect of foreign exchange rate changes on cash and cash equivalents, and restricted cash | (546) | 1,174 | |||||||||
Net increase ( decrease) in cash and cash equivalents, and restricted cash | $ | (10,175) | $ | 7,550 | |||||||
Cash paid for interest | $ | 5,395 | $ | 5,196 | |||||||
Cash paid for income taxes | $ | 3,640 | $ | 517 |
Total Number of Shares Purchased(a) | Weighted Average Price Paid per Share | Total Number of Shares Purchased Under Announced Programs | Approximate Dollar Value of Shares That May Yet be Purchased Under Announced Programs | |||||||||||||||||||||||
1/1/2024 to 1/31/2024 | — | $ | — | — | $ | — | ||||||||||||||||||||
2/1/2024 to 2/29/2024 | — | $ | — | — | $ | — | ||||||||||||||||||||
3/1/2024 to 3/31/2024 | 60,177 | $ | 18.87 | — | $ | — | ||||||||||||||||||||
Total | 60,177 | $ | 18.87 | — | $ | — |
Incorporated by Reference | |||||||||||||||||||||||
Exhibit Number | Exhibit Title | Form | File No. | Exhibit | Filing Date | ||||||||||||||||||
10.1* ** | |||||||||||||||||||||||
31.1 | |||||||||||||||||||||||
31.2 | |||||||||||||||||||||||
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32.2+ | |||||||||||||||||||||||
101.INS | XBRL Instance Document –the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document | ||||||||||||||||||||||
101.SCH | XBRL Taxonomy Extension Schema Document | ||||||||||||||||||||||
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document | ||||||||||||||||||||||
101.DEF | XBRL Taxonomy Extension Definition Linkbase Document | ||||||||||||||||||||||
101.LAB | XBRL Taxonomy Extension Label Linkbase Document | ||||||||||||||||||||||
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document | ||||||||||||||||||||||
104 | Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101) |
CERTARA, INC. | ||||||||
Date: May 7, 2024 | By: | /s/ William F. Feehery | ||||||
Name: | William F. Feehery | |||||||
Title: | Chief Executive Officer (Principal Executive Officer) | |||||||
Date: May 7, 2024 | By: | /s/ John E. Gallagher III | ||||||
Name: | John E. Gallagher III | |||||||
Title: | Chief Financial Officer (Principal Financial Officer) |
Tranche I | Tranche II | |||||||
Performance Condition – 2024 | Revenue Achieved | Adjusted EBITDA Achieved | ||||||
Threshold Level of Achievement | [* * *] | [* * *] | ||||||
Target Level of Achievement | [* * *] | [* * *] | ||||||
Maximum Level of Achievement | [* * *] | [* * *] |
LEVEL OF ACHIEVEMENT | WEIGHTING PERCENTAGE | ||||
Below Threshold | 0% | ||||
Threshold | 50% | ||||
Target | 100% | ||||
Maximum | 200% | ||||
Above Maximum | 200% |
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001325-0210-14400-Active.37203971.1 |
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Date: May 7, 2024 | /s/ William F. Feehery | ||||
William F. Feehery | |||||
Chief Executive Officer | |||||
(Principal Executive Officer) |
Date: May 7, 2024 | /s/ John E. Gallagher III | ||||
John E. Gallagher III | |||||
Chief Financial Officer | |||||
(Principal Financial Officer) |
May 7, 2024 | /s/ William Feehery | |||||||
William Feehery | ||||||||
Chief Executive Officer | ||||||||
(Principal Executive Officer) |
May 7, 2024 | /s/ John E. Gallagher III | |||||||
John E. Gallagher III | ||||||||
Chief Financial Officer | ||||||||
(Principal Financial Officer) |
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands |
Mar. 31, 2024 |
Dec. 31, 2023 |
---|---|---|
Statement of Financial Position [Abstract] | ||
Accounts receivable, allowance for credit loss | $ 1,341 | $ 1,312 |
Accumulated amortization | $ 289,090 | $ 273,522 |
Preferred share, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Preferred share, shares authorized (in shares) | 50,000,000 | 50,000,000 |
Preferred share, shares issued (in shares) | 0 | 0 |
Preferred share, shares outstanding (in shares) | 0 | 0 |
Common share, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common share, shares authorized (in shares) | 600,000,000 | 600,000,000 |
Common share, shares issued (in shares) | 160,687,886 | 160,284,901 |
Common stock, shares, outstanding (in shares) | 160,191,094 | 159,848,286 |
Treasury stock (in shares) | 496,792 | 436,615 |
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) (Parenthetical) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2024 |
Mar. 31, 2023 |
|
Income Statement [Abstract] | ||
Other comprehensive income (loss), foreign currency translation adjustment, tax, portion attributable to parent | $ 60 | $ (182) |
Other comprehensive income (loss), cash flow hedge, gain (loss), before reclassification, tax | $ 186 | $ (588) |
Description of Business |
3 Months Ended |
---|---|
Mar. 31, 2024 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Description of Business | 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. The Company has operations in the United States, Australia, Brazil, Canada, China, Egypt, France, Germany, India, Italy, Japan, Korea, Luxembourg, Netherlands, Philippines, Poland, Portugal, Spain, Switzerland, and the United Kingdom.
|
Summary of Significant Accounting Policies |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Significant Accounting Policies | 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 2023 Annual Report. These unaudited condensed 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, 2023. (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, valuation of interest rate swaps, determination of fair value of equity-based awards, measurement of fair value of contingent consideration, 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, 2024, the condensed consolidated statements of operations and comprehensive income (loss) for the three months ended March 31, 2024 and 2023, the condensed consolidated statements of stockholders’ equity for the three months ended March 31, 2024 and 2023, the condensed consolidated statements of cash flows for the three months ended March 31, 2024 and 2023, and the related interim disclosures are unaudited. 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 2023 audited consolidated financial statements and notes thereto. The information as of December 31, 2023 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 2023 Annual Report. (c) Accounting Pronouncements Not Yet Adopted In November 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") ASU 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures.” The ASU requires an enhanced disclosure of significant segment expenses on an annual and interim basis. This ASU will be effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. Upon adoption, the guidance should be applied retrospectively to all prior periods presented in the financial statements. The Company is currently evaluating the impact of this ASU on the disclosures in our consolidated financial statements. In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures". The ASU requires disclosure of specific categories in the rate reconciliation and provide additional information for reconciling items that meet a quantitative threshold and further disaggregation of income taxes paid for individually significant jurisdictions. The ASU will be effective for public business entities for annual periods beginning after December 15, 2024. Early adoption is permitted. The Company is currently evaluating the impact of this ASU on the disclosures in our 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) Fair Value Measurements The Company follows FASB Accounting Standards Codification (“ASC”) 820-10, “Fair Value Measurements” (“ASC 820-10”), which defines fair value, establishes a framework for measuring fair value in U.S. GAAP, and requires certain disclosures about fair value measurements. ASC 820-10 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the most advantageous market for the asset or liability in an orderly transaction. Fair value measurement is based on a hierarchy of observable or unobservable inputs. The standard describes three levels of inputs that may be used to measure fair value. Level 1 — Inputs to the valuation methodology are quoted prices available in active markets for identical securities as of the reporting date; Level 2 — Inputs to the valuation methodology are other significant observable inputs, including quoted prices for similar securities, interest rates, credit risk etc. as of the reporting date, and the fair value can be determined through the use of models or other valuation methodologies; and Level 3 — Inputs to the valuation methodology are unobservable inputs in situations where there is little or no market activity of the securities and the reporting entity makes estimates and assumptions relating to the pricing of the securities including assumptions regarding risk. If the inputs used to measure fair value fall at different levels of the fair value hierarchy, the hierarchy is based on the lowest level of input that is significant to the fair value measurement. For the acquisitions noted in Note 5, the fair value measurement methods used to estimate the fair value of the assets acquired and liabilities assumed at the acquisition dates utilized a number of significant unobservable inputs of Level 3 assumptions. These assumptions included, among other things, projections of future operating results, implied fair value of assets using an income approach by preparing a discounted cash flow analysis, and other subjective assumptions. Interest rate swaps are valued in the market using discounted cash flows techniques. These techniques incorporate Level 1 and Level 2 inputs. The market inputs are utilized in the discounted cash flows’ calculation considering the instrument’s term, notional amount, discount rate and credit risk. Significant inputs to the derivative instrument valuation model for interest rate swaps are observable in active markets and are classified as Level 2 in the hierarchy. Contingent liabilities related to acquisitions are measured at fair value using Level 3 unobservable inputs. The Company's estimates of fair value are based upon assumptions believed to be reasonable but which are uncertain and involve significant judgments by management. Any changes in the fair value of these contingent liabilities are included in the earnings in the condensed consolidated statements of operations and comprehensive income (loss). The Company utilizes Monte Carlo or a series of Black-Scholes-Merton options models to estimate the fair value of the contingent consideration liabilities of business acquisitions. Significant inputs used in the fair value measurement of contingent consideration include: expected eligible revenue for the acquired businesses over the relevant measurement periods, the risk-profile of the expected eligible revenue for the acquired businesses, the uncertainty regarding the expected eligible revenue for the acquired businesses, the risk-free rate of return, the expected timing at which settlement of the contingent liabilities may occur, and the credit-adjusted discount rate associated with the risk of the Company’s future liability payments. The following table sets forth the assets and liabilities that were measured at fair value on a recurring and non-recurring basis by their levels in the fair value hierarchy at March 31, 2024:
The following table sets forth the assets and liabilities that were measured at fair value on a recurring and non-recurring basis by their levels in the fair value hierarchy at December 31, 2023:
For the period ended March 31, 2024, there were no transfers between the levels within the fair value hierarchy. The Company’s Level 3 liabilities are acquisition related contingent consideration liabilities. The following table summarizes the Level 3 activity of the changes in the contingent consideration liability.
For more information regarding fair value measurements and the fair value hierarchy, see Note 2. “Summary of Significant Accounting Policies” in the notes to the consolidated financial statements in the Company’s 2023 Annual Report. (f) Cash and Cash Equivalents Cash equivalents include highly liquid investments with maturities of three months or less from the date purchased. The cash and cash equivalents was $224,776 and $234,951 at March 31, 2024 and December 31, 2023, respectively. (g) Accounts Receivable Accounts receivable includes current outstanding invoices billed to customers. Invoices are typically issued with net 30 days to net 90 days terms upon delivery of the product or upon achievement of billable events for service-based contracts. Unbilled receivables relate to the Company’s rights to consideration for performance obligations satisfied but not billed at the reporting date on contracts. Unbilled receivables are billed and transferred to customer accounts receivable when the rights become unconditional. The carrying amount of accounts receivable is reduced by a valuation allowance. The Company estimates the expected credit losses for accounts receivables using historical loss data adjusted for current economic conditions, including reasonable and supportable forecasts to estimate the relative size of credit losses to be expected. The Company generally writes off a receivable or records a specific allowance for credit losses if the Company determines that the receivable is not collectible. Allowances for credit losses of $1,341 and $1,312 were provided in the accompanying condensed consolidated financial statements as of March 31, 2024 and December 31, 2023, respectively. Accounts receivable consists of the following:
The following table presents the information regarding the allowance of accounts receivable:
(h) Derivative Instruments In the normal course of business, the Company is subject to risk from adverse fluctuations in interest rates. The Company has chosen to manage this risk through the use of derivative financial instruments that consist of interest rate swap contracts. Counterparties to these contracts are major financial institutions. The Company is exposed to credit loss in the event of nonperformance by these counterparties. The Company does not use derivative instruments for trading or speculative purposes. The objective in managing exposure to market risk is to limit the impact on cash flows. To qualify for hedge accounting, the interest rate swaps must effectively reduce the risk exposure that they are designed to hedge. In addition, at the inception of a qualifying cash flow hedging relationship, the underlying transaction or transactions must be, and be expected to remain, probable of occurring in accordance with the related assertions. FASB ASC 815, “Derivatives and Hedging,” requires the Company to recognize all derivatives on the balance sheet at fair value. The Company may enter into derivative contracts such as interest rate swap contracts that effectively convert portions of the Company’s floating rate debt to a fixed rate, which serves to mitigate interest rate risk. The Company’s objectives in using interest rate swaps are to add stability to interest expense and to manage its exposure to interest rate movements. Interest rate swaps designated as cash flow hedges involve the receipt of variable-rate amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. The Company entered into an interest rate swap agreement in May 2022 that pays a fixed interest rate and receives a variable interest rate 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. During the quarter ended September 30, 2023, the Company and the counter party amended the floating rate of the swap agreement from term LIBOR to term SOFR due to LIBOR cessation. At March 31, 2024 and December 31, 2023, the interest swap had a fair value of $6,374 and $5,624, respectively; The gross fair value recognized in accumulated other comprehensive income was $6,374 and $5,624, respectively, at March 31, 2024 and December 31, 2023. 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 expense in the same period during which the hedged transactions impact earnings. The amount of derivative gains reclassified from accumulated other comprehensive income on derivative instruments recognized in the Company’s condensed consolidated statements of operations and comprehensive income (loss) was $1,525 and $986 for the three months ended March 31, 2024 and 2023, respectively. The notional amounts, fair values, and classification of derivative instruments in the condensed consolidated balance sheets as of March 31, 2024 and December 31, 2023 were as follows:
The net amount of deferred gains related to derivative instruments designated as cash flow hedges that is expected to be reclassified from accumulated other comprehensive gains into earnings over the next twelve months is $5,041. (i) Revenue Recognition In accordance with ASC Topic 606, “Revenue from Contracts with Customers”, the Company determines revenue recognition through the following steps: i. Identification of the contract, or contracts, with a customer ii. Identification of the performance obligations in the contract iii. Determination of the transaction price iv. Allocation of the transaction price to the performance obligations in the contract v. Recognition of revenue when, or as, the Company satisfies a performance obligation The Company’s revenue consists of fees for perpetual and term licenses for its 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 following describes 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. Software Licenses Revenues Software license revenue consists primarily of sales of software licenses downloaded and installed by our customers on their own hardware. The license period is generally one year or less and includes an insignificant amount of customer support to assist the customer with the software. Software license performance obligations are generally recognized upfront at the point in time when the software license has been delivered. Software as a Service (SaaS) Revenues SaaS revenues consist of subscription fees for access to, and related support for, the Company’s cloud-based solutions. The Company typically invoices subscription fees in advance in annual installments. The invoice is initially deferred and revenue is recognized ratably over the life of the contract. The Company’s software contracts do not typically include variable consideration or options for future purchases that would not be similar to the original goods. Software Service Revenues Maintenance services agreements on perpetual software 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. While the 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 insignificant 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. Consulting Service Revenues The Company’s primary professional 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. The Company’s professional services contracts are either time-and-materials or fixed fee. Service 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 are generally recognized over time by applying input methods to estimate progress to completion. Accordingly, the number of resources being paid for and the varying lengths of time they are being paid for determine the measure of progress. Arrangements with Multiple Performance Obligations For contracts with 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 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. The delivery of a particular type of software and each of the user licenses would be one performance obligation. Additionally, any training, implementation, or support and maintenance promises sold 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 less than one year such that there is no significant financing component. 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 condensed 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 condensed 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 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 deferred revenue in the condensed consolidated balance sheets. Contract balances at March 31, 2024 and December 31, 2023 were as follows:
During the three months ended March 31, 2024, the Company recognized revenue of $29,351 related to contract liabilities at December 31, 2023. The unsatisfied performance obligations as of March 31, 2024 were approximately $115,418. We expect to recognize approximately $102,229 or 88.6% of this revenue over the next 12 months and the remainder thereafter. Deferred Contract Acquisition Costs Under ASC Topic 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 recognizes an asset for the incremental costs of obtaining a contract with a customer if the Company expects the benefit of those costs to be longer than one year. The Company has determined that certain sales incentive programs meet the requirements to be capitalized. The costs capitalized are primarily sales commissions for our sales force personnel. Capitalized costs to obtain a contract are amortized on a straight-line basis over the expected period of benefit. Amortization of capitalized costs is included in sales and marketing expenses in our condensed consolidated statements of operations and comprehensive income (loss). Capitalized contract acquisition costs were $597 and $655 as of March 31, 2024 and December 31, 2023, respectively, and were included in prepaid expenses and other current assets in the condensed consolidated balance sheets. Grant Revenue The Company receives grant funding for certain specific projects from time to time. These grants specify the funds provided are to be used exclusively to satisfy the deliverables outlined in the grant agreements. In these agreements, both involved parties receive and sacrifice approximately commensurate value so these are accounted for as exchange transactions and revenue is recognized according to ASC Topic 606. Grant funding is generally provided near contract inception, so a contract liability is initially recorded and revenue is recognized as the performance obligations are satisfied over time. 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:
(j) Earnings per Share Basic earnings per common share is computed by dividing the net earnings by the weighted-average number of shares outstanding during the reporting period, without consideration for potentially dilutive securities. Diluted shares are calculated under the treasury stock method. Diluted earnings per share is calculated by dividing the net earnings attributable to stockholders by the weighted-average number of shares and dilutive securities outstanding during the period.
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Concentrations of Credit Risk |
3 Months Ended |
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Mar. 31, 2024 | |
Risks and Uncertainties [Abstract] | |
Concentrations of Credit Risk | 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, 2024 and December 31, 2023, the investments were bank deposits, overnight sweep accounts, and money market funds. 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, 2024 and December 31, 2023, no single customer accounted for more than 10% of the Company’s accounts receivable. No single customer accounted for more than 10% of the Company’s revenues during the three months ended March 31, 2024 and 2023.
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Business Combinations |
3 Months Ended |
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Mar. 31, 2024 | |
Business Combination and Asset Acquisition [Abstract] | |
Business Combinations | Business Combinations Acquisitions have been accounted for by using the acquisition method of accounting pursuant to FASB ASC 805, “Business Combinations.” Amounts allocated to the purchased assets and liabilities assumed 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 for the acquisitions have been included in the Company’s results of operations prospectively from the date of acquisition. Since 2013, and as of March 31, 2024, the Company has completed 20 acquisitions, of which 13 have included software or technology. Details of acquisitions that have closed since the beginning of fiscal year 2023 are provided below. Drug Interaction Solutions, University of Washington ("DIDB") On June 20, 2023, the Company entered into an asset purchase agreement with the University of Washington and completed the acquisition of DIDB, including the Drug Interaction Database and related products, from The University of Washington for a total consideration of $8,340. The business combination was not significant to the Company’s consolidated financial statements. The total estimated consideration includes a portion of contingent consideration that is payable over the next two years in cash, not to exceed $2,000. Future payments of contingent consideration are based on eligible revenue for the period from July 1, 2023 through June 30, 2025. The fair value of the contingent consideration was estimated to be $790 as of the acquisition date. At March 31, 2024, the contingent consideration was remeasured to $136, resulting in a fair value adjustment of $4 and recorded in general and administrative expenses (“G&A”) on the accompanying condensed consolidated statement of operations and comprehensive income (loss). Based on the Company’s purchase price allocation, approximately $330, $5,600, $360, and $2,289 of the purchase price were assigned to trademarks, database content/technology, customer relationships and goodwill, respectively. The Company expects goodwill to be fully deductible for U.S. federal income tax purposes due to the fact the acquisition was treated as an asset acquisition under the relevant sections of the Internal Revenue Code (“IRC”). Formedix Limited ("Formedix") On October 10, 2023, the Company completed the acquisition of Formedix, a provider of clinical metadata repository and clinical trial automation software, for total estimated consideration of $41,389. The business combination was not material to the Company’s consolidated financial statements. The total estimated consideration includes a portion of contingent consideration that is payable over the next two years in cash, not to exceed $9,000. The fair value of the contingent consideration related to revenue threshold was estimated to be $4,380 as of the acquisition date. Future payments of contingent consideration are based on achieving certain eligible revenue targets for each of the twelve-month periods ended December 31, 2023 and 2024, respectively. Additionally, the Company agreed to further contingent consideration based on the resolution of certain tax contingencies. In total, the fair value of the contingent consideration was estimated to be $5,161 as of the acquisition date. At March 31, 2024, the contingent consideration related to eligible revenue was remeasured to $3,189, resulting in a negative fair value remeasurement and adjustment of $507 and recorded in G&A on the accompanying condensed consolidated statement of operations and comprehensive income (loss). Based on the Company’s purchase price allocation, approximately $11,700, $3,100, and $25,062 of the purchase price were assigned to developed technology, customer relationships and goodwill, respectively. The Company does not expect goodwill to be deductible due to the fact the Company treated the acquisition as a stock acquisition under the relevant sections of the IRC. Applied BioMath, LLC ("ABM") On December 12, 2023, the Company completed the acquisition of ABM, an industry-leader in providing model-informed drug discovery and development support to help accelerate and de-risk therapeutic research and development, for total estimated consideration of $36,594. The business combination was not material to the Company’s consolidated financial statements. Based on the Company’s preliminary purchase price allocation, approximately $4,600, $800, $13,700 and $15,872 of the purchase price were assigned to developed technology, non-compete agreements, customer relationships and goodwill, respectively. The Company expects goodwill to be fully deductible for U.S. federal income tax purposes due to the fact the Company treated the acquisition as an asset acquisition under the relevant sections of the IRC. The total estimated consideration includes a portion of contingent consideration that is payable over the next two years in cash, not to exceed $17,550. Future payments of contingent consideration are based on achieving certain eligible revenue targets for each of the twelve-month periods ended December 31, 2023 and 2024, respectively. The fair value of the contingent consideration was estimated to be $5,357 as of the acquisition date. At March 31, 2024, the contingent consideration was remeasured to $4,442, resulting in a negative fair value adjustment of $938 and recorded in G&A on the accompanying condensed consolidated statement of operations and comprehensive income (loss). The contingent considerations for all acquisitions were classified as liability and included in accrued expense and other long-term liabilities on the Company’s condensed consolidated balance sheet. The contingent consideration related to eligible revenues that are remeasured on a recurring basis at fair value for each reporting period. Any changes in the fair value of these contingent liabilities are included in the earnings in the condensed consolidated statements of operations and comprehensive income (loss). The current purchase price allocations for the acquisitions of Formedix and ABM are preliminary. The primary areas of the preliminary purchase price allocations that are not yet finalized that relate to the fair value of certain tangible assets and liabilities assumed, and residual goodwill. The Company continues to gather information supporting the acquired assets and liabilities, including but not limited to the estimation of the fair value of the identifiable intangible assets, measurement of deferred revenue and corresponding impact on goodwill, 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 results of operations of the acquired businesses and the fair value of the acquired assets and liabilities assumed are included in the Company’s consolidated financial statements with effect from the date of the acquisitions.
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Prepaid Expenses and Other Current Assets and Other Long-Term Assets |
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Prepaid Expenses And Other Current Assets and Other Long-Term Assets | Prepaid Expenses and Other Current Assets and Other Long-Term Assets Prepaid expense and other current assets at March 31, 2024 and December 31, 2023 consist of the following:
Other long-term assets at March 31, 2024 and December 31, 2023 consisted of the following:
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Long-Term Debt and Revolving Line of Credit |
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Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Long-Term Debt and Revolving Line of Credit | Long-Term Debt and Revolving Line of Credit The Company has been a party to a Credit Agreement since August 2017 that provides for a senior secured term loan and commitments under a revolving credit facility. The Company and the lenders most recently modified the Credit Agreement on June 17, 2021, which provides for, among other things, (i) the extension of the termination date applicable to the revolving credit commitments 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 this 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. Borrowings under the Credit Agreement are subject to a variable interest rate at LIBOR plus a margin. The applicable margins were based on achieving certain levels of compliance with financial covenants. In response to the discontinuation of LIBOR, the Company executed a LIBOR transition amendment on June 26, 2023, formalizing the replacement of LIBOR with the Secured Overnight Funding Rate (“SOFR”). As part of this modification, a Credit Spread Adjustment (“CSA”) was introduced to align SOFR with LIBOR in terms of the overall interest rate earned by lenders under the Credit Agreement. The CSA varied depending on the selected interest period. As of March 31, 2024 and December 31, 2023, available borrowings under the revolving lines of credit were $100,000. The effective interest rate was 9.24% and 8.03% for the three months ended March 31, 2024 and 2023 for the term loan debt. 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 $6,798 and $5,974 for the three months ended March 31, 2024 and 2023, respectively. Accrued interest payable on the Credit Agreement with respect to the term loan amounted to $2,382 and $2,400 at March 31, 2024 and December 31, 2023, respectively, and is included in accrued expenses. Interest incurred on the Credit Agreement with respect to the revolving line of credit was $63 for both the three months ended March 31, 2024 and 2023, respectively. There was $2 accrued interest payable on the revolving line of credit each at March 31, 2024 and December 31, 2023, respectively. Long-term debt consists of the following:
The principal amount of long-term debt outstanding as of March 31, 2024 matures in the following years:
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, 2023, the Company was not required to make a mandatory prepayment on the term loan. The Company is required to make a quarterly principal payment of $755 on the term loan. 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.
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Leases |
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Leases | Leases The Company leases certain office facilities and equipment under non-cancelable operating leases with remaining terms from less than to ten years. Operating lease ROU assets are included in other assets. With respect to operating lease liabilities, current operating lease liabilities are included in current liabilities and non-current operating lease liabilities are included in long-term liabilities in the condensed consolidated balance sheets. At March 31, 2024, the weighted average remaining lease terms were 6.09 years for operating leases and the weighted average discount rate was 5.47% for operating leases. For additional information on the Company's leases, see Note 14 to the condensed consolidated financial statements included in the Company’s 2023 Annual Report. The following table summarizes the lease-related assets and liabilities recorded in the condensed consolidated balance sheets at March 31, 2024 and December 31, 2023:
The following table summarizes by year the maturities of our minimum lease payments as of March 31, 2024:
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Leases | Leases The Company leases certain office facilities and equipment under non-cancelable operating leases with remaining terms from less than to ten years. Operating lease ROU assets are included in other assets. With respect to operating lease liabilities, current operating lease liabilities are included in current liabilities and non-current operating lease liabilities are included in long-term liabilities in the condensed consolidated balance sheets. At March 31, 2024, the weighted average remaining lease terms were 6.09 years for operating leases and the weighted average discount rate was 5.47% for operating leases. For additional information on the Company's leases, see Note 14 to the condensed consolidated financial statements included in the Company’s 2023 Annual Report. The following table summarizes the lease-related assets and liabilities recorded in the condensed consolidated balance sheets at March 31, 2024 and December 31, 2023:
The following table summarizes by year the maturities of our minimum lease payments as of March 31, 2024:
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Accrued Expenses and Other Liabilities |
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Accrued Expenses and Other Liabilities | Accrued Expenses and Other Liabilities Accrued expenses consist of the following:
Other long-term liabilities consist of the following:
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Equity-Based Compensation |
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Share-Based Payment Arrangement [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity-Based Compensation | Equity-Based Compensation The Company’s equity-based compensation programs are intended to attract, retain and provide incentives for employees, officers and directors. The Company has the following stock-based compensation plans and programs. Restricted Stock The majority of the Company’s restricted stock awarded to its employees was originally issued on December 10, 2020 in exchange for the Class B Profits Interest Unit (the “Class B Units”) of EQT, which was the former parent of the Company. 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 21 acquisition under which equity-based awards are outstanding. The fair value of the restricted stock awarded was initially based on the fair value of our common stock on the date of grant, then adjusted for time restrictions due to unregistered shares and lack of marketability. The non-vested restricted stock at March 31, 2024 issued in 2021 has a three-year vesting period.
* The Company did not legally authorize or issue any restricted stock during the three month period ended March 31, 2024. During the first quarter of 2024, the Company modified an award for a recipient, resulting in 16,842 shares assumed to be granted, vested, and cancelled. Equity-based compensation expenses related to the restricted stock exchanged for performance-based Class B Units were $250 and $655 for the three months ended March 31, 2024 and 2023, respectively. At March 31, 2024, the total unrecognized equity-based compensation expense related to outstanding restricted stock recognized using the accelerated attribution approach was $637, which is expected to be recognized over a weighted-average period of 12.5 months. Equity-based compensation expenses related to the restricted stock exchanged for time-based Class B Units were $377 and $498 for the three months ended March 31, 2024 and 2023, respectively. At March 31, 2024, the total unrecognized equity-based compensation expense related to outstanding restricted stock recognized using the straight-line attribution approach was $888, which is expected to be recognized over a weighted-average period of 14.8 months. Equity-based employee compensation expense related to the time-based restricted stock for the Pinnacle acquisition was $106 and $292 for the three months ended March 31, 2024 and 2023, respectively. At March 31, 2024, the total unrecognized equity-based compensation expenses related to outstanding restricted stock recognized using the straight-line attribution approach was $212, which is expected to be recognized over a weighted-average period of 6 months. 2020 Incentive Plan In order to align the Company’s equity compensation program with public company practices, the Company’s Board of Directors adopted and stockholders approved the 2020 Incentive Plan. The 2020 Incentive Plan allows for grants of non-qualified stock options, incentive stock options, restricted stock, restricted stock units (“RSUs”), and performance stock units (“PSUs”) to employees, directors, officers, and consultants or advisors of the Company. The 2020 Incentive Plan allows for 20,000,000 shares (the “plan share reserve”) of common stock to be issued. No more than the number of shares of common stock equal to the plan share reserve may be issued in the aggregate pursuant to the exercise of incentive stock options. The maximum number of shares of common stock granted during a single fiscal year to any non-employee director, taken together with any cash fees paid to such non-employee director during the fiscal year, may not exceed $1,000,000 in total value, except for certain awards made to a non-executive chair of our Board of Directors. Restricted Stock Units ("RSU") RSUs represent the right to receive shares of the Company’s common stock at a specified date in the future. The fair value of the RSUs is based on the fair value of the underlying shares on the date of grant. A summary of the Company’s RSU activity is as follows:
*The majority of shares granted during the first quarter of 2024 were issued under the 2020 Incentive Plan. During the first quarter of 2024, the Company modified awards for a recipient, resulting in 38,729 shares assumed to be granted, vested, and cancelled for accounting purpose. **The number of the RSUs vested included 1,492 shares that were withheld on behalf of employees to satisfy the statutory tax withholding requirements. Equity-based compensation expenses related to the RSUs were $7,705 and $4,798 for three months ended March 31, 2024 and 2023, respectively. At March 31, 2024, the total unrecognized equity-based compensation expense related to outstanding RSUs was $35,779, which is expected to be recognized over a weighted-average period of 21.5 months. Performance Stock Units ("PSU") PSUs are issued under the 2020 Incentive Plan and represent the right to receive shares of the Company’s common stock at a specified date in the future based on the satisfaction of various service conditions and the achievement of certain performance thresholds including year over year revenue growth, unlevered free cash flow growth, annual revenue, and annual EBITDA. The PSUs granted in 2023 and 2024 also contains market conditions. Share-based compensation for the PSUs is only recognized to the extent a threshold is probable of being achieved and is recognized using the accelerated attribution approach. The Company will continue to assess the probability of each condition being achieved at each reporting period to determine whether and when to recognize compensation cost. A summary of the Company’s PSU activity for the period ended March 31, 2024 is as follows:
___________________________________ * During the first quarter of 2024, the Company modified an award for a recipient, resulting in 6,651 shares assumed to be granted and cancelled for accounting purpose. Equity-based compensation expenses related to the PSUs were $636 and $2,287 for the three months ended at March 31, 2024 and 2023, respectively. At March 31, 2024, the total unrecognized equity-based compensation expense related to outstanding PSUs was $4,981, which is expected to be recognized over a weighted-average period of 18.6 months. The following table summarizes the components of total equity-based compensation expense included in the condensed consolidated statements of operations and comprehensive income (loss) for each period presented:
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Commitments and Contingencies |
3 Months Ended |
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Mar. 31, 2024 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Commitments and Contingencies Contingent consideration In connection with the Vyasa Analytics LLC, DIDB, Formedix, and ABM acquisitions, the Company is required to pay additional consideration if the acquired businesses achieve certain eligible revenue thresholds for certain periods. The maximum contingent considerations related to revenue thread for Vyasa, DIDB, Formedix, and ABM to be earned are $60,000, $2,000, $9,000, and $17,550, respectively. Additionally, the Company agreed to further contingent consideration based on the resolution of certain tax contingencies related with Formedix acquisition. During the quarter ended March 31, 2024, the Company made a combined payment of $12,356 on the contingent consideration, consisting of $8,649 in cash and $3,707 in Company's stock. The total contingent liabilities were $45,764 and $55,238 at March 31, 2024 and December 31, 2023, respectively. The contingent liabilities are included in accrued expenses and other long-term liabilities in the Company's condensed consolidated balance sheet. Legal proceedings The Company does not have any pending or threatened litigation which, individually or in the aggregate, would have a material adverse effect on its condensed consolidated financial statements as of March 31, 2024. Assurance-type warranty The Company includes an assurance commitment warranting that the application software products will perform in accordance with written user documentation and the agreements negotiated with customers. Since the Company does not customize its application software, warranty costs have historically been insignificant and expensed as incurred. For information related to commitments for future minimum lease payments, please see Note 7 – Leases.
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Segment Data |
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Segment Reporting [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Data | Segment Data Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker (“CODM”), in deciding how to allocate resources and in assessing performance. The Company has determined that its chief executive officer is its CODM. The Company manages its operations as a single segment for the purposes of assessing and making operating decisions. The Company’s CODM allocates resources and assesses performance based upon financial information at the consolidated level. Since the Company operates in one operating segment, all required financial segment information can be found in the condensed consolidated financial statements. The following table summarizes revenue by geographic area for the three months ended March 31, 2024 and 2023:
(1) Revenue is attributable to the countries based on the location of the customer.
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Income Taxes |
3 Months Ended |
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Mar. 31, 2024 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Income Taxes The Company generally records its interim tax provision based upon a projection of the Company's estimated annual effective tax rate ("EAETR"). This EAETR is applied to the year-to-date consolidated pre-tax income to determine the interim provision for income taxes before discrete items. The effective tax rate ("ETR") each period is impacted by a number of factors, including the relative mix of domestic and international earnings, permanent differences, adjustments to the valuation allowances, and discrete items. The currently forecasted ETR may vary from the actual year-end due to the changes in these factors. The Company's global ETR for the three and three months ended March 31, 2024 and 2023 were 14% and 45%, respectively, including discrete tax items. The current year decrease in the ETR was principally due to the combined effect of the overall decrease in pre-tax book income, the impact of non-deductible items, and the tax effect of certain discrete items.
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Earnings per Share |
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings per Share | Earnings per Share Basic earnings per share is computed by dividing net income (loss) attributable to common stockholders by the weighted-average common shares outstanding for the period. Diluted earnings per share is computed by dividing the net income (loss) attributable to stockholders by the weighted-average number of shares and dilutive potential common shares during the period.
__________________________________ •For the period ended March 31, 2024, the Company excluded the restricted stock and RSUs from the calculation of diluted earnings per share that could potentially dilute earnings per share in the future because of the anti-dilutive effect of the reported net loss. •For the period ended March 31, 2023, the Company excluded certain potentially dilutive securities attributable to outstanding RSUs and restricted stocks from the computation of diluted earnings per share because the securities would have had an antidilutive effect.
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Pay vs Performance Disclosure - USD ($) $ in Thousands |
3 Months Ended | |
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Mar. 31, 2024 |
Mar. 31, 2023 |
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Pay vs Performance Disclosure | ||
Net income (loss) available to common shareholders | $ (4,683) | $ 1,358 |
Insider Trading Arrangements |
3 Months Ended |
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Mar. 31, 2024
shares
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Trading Arrangements, by Individual | |
Non-Rule 10b5-1 Arrangement Adopted | false |
Rule 10b5-1 Arrangement Terminated | false |
Non-Rule 10b5-1 Arrangement Terminated | false |
Robert Aspbury [Member] | |
Trading Arrangements, by Individual | |
Material Terms of Trading Arrangement | On March 15, 2024, Robert Aspbury, our President, Certara Scientific Software, adopted a Rule 10b5-1 trading plan. The plan provides for the potential sale, on the dates and prices set forth in the plan, of up to 120,000 shares of our common stock from June 28, 2024 through December 13, 2024 |
Name | Robert Aspbury |
Title | President |
Rule 10b5-1 Arrangement Adopted | true |
Adoption Date | March 15, 2024 |
Arrangement Duration | 168 days |
Aggregate Available | 120,000 |
Summary of Significant Accounting Policies (Policies) |
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Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Basis of Presentation | 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, valuation of interest rate swaps, determination of fair value of equity-based awards, measurement of fair value of contingent consideration, 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.
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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, valuation of interest rate swaps, determination of fair value of equity-based awards, measurement of fair value of contingent consideration, 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.
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Unaudited Interim Financial Statements | The accompanying condensed consolidated balance sheet as of March 31, 2024, the condensed consolidated statements of operations and comprehensive income (loss) for the three months ended March 31, 2024 and 2023, the condensed consolidated statements of stockholders’ equity for the three months ended March 31, 2024 and 2023, the condensed consolidated statements of cash flows for the three months ended March 31, 2024 and 2023, and the related interim disclosures are unaudited. 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 2023 audited consolidated financial statements and notes thereto.
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Accounting Pronouncements Not Yet Adopted | In November 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") ASU 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures.” The ASU requires an enhanced disclosure of significant segment expenses on an annual and interim basis. This ASU will be effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. Upon adoption, the guidance should be applied retrospectively to all prior periods presented in the financial statements. The Company is currently evaluating the impact of this ASU on the disclosures in our consolidated financial statements. In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures". The ASU requires disclosure of specific categories in the rate reconciliation and provide additional information for reconciling items that meet a quantitative threshold and further disaggregation of income taxes paid for individually significant jurisdictions. The ASU will be effective for public business entities for annual periods beginning after December 15, 2024. Early adoption is permitted. The Company is currently evaluating the impact of this ASU on the disclosures in our consolidated financial statements.
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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.
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Fair Value Measurements | The Company follows FASB Accounting Standards Codification (“ASC”) 820-10, “Fair Value Measurements” (“ASC 820-10”), which defines fair value, establishes a framework for measuring fair value in U.S. GAAP, and requires certain disclosures about fair value measurements. ASC 820-10 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the most advantageous market for the asset or liability in an orderly transaction. Fair value measurement is based on a hierarchy of observable or unobservable inputs. The standard describes three levels of inputs that may be used to measure fair value. Level 1 — Inputs to the valuation methodology are quoted prices available in active markets for identical securities as of the reporting date; Level 2 — Inputs to the valuation methodology are other significant observable inputs, including quoted prices for similar securities, interest rates, credit risk etc. as of the reporting date, and the fair value can be determined through the use of models or other valuation methodologies; and Level 3 — Inputs to the valuation methodology are unobservable inputs in situations where there is little or no market activity of the securities and the reporting entity makes estimates and assumptions relating to the pricing of the securities including assumptions regarding risk. If the inputs used to measure fair value fall at different levels of the fair value hierarchy, the hierarchy is based on the lowest level of input that is significant to the fair value measurement. For the acquisitions noted in Note 5, the fair value measurement methods used to estimate the fair value of the assets acquired and liabilities assumed at the acquisition dates utilized a number of significant unobservable inputs of Level 3 assumptions. These assumptions included, among other things, projections of future operating results, implied fair value of assets using an income approach by preparing a discounted cash flow analysis, and other subjective assumptions. Interest rate swaps are valued in the market using discounted cash flows techniques. These techniques incorporate Level 1 and Level 2 inputs. The market inputs are utilized in the discounted cash flows’ calculation considering the instrument’s term, notional amount, discount rate and credit risk. Significant inputs to the derivative instrument valuation model for interest rate swaps are observable in active markets and are classified as Level 2 in the hierarchy. Contingent liabilities related to acquisitions are measured at fair value using Level 3 unobservable inputs. The Company's estimates of fair value are based upon assumptions believed to be reasonable but which are uncertain and involve significant judgments by management. Any changes in the fair value of these contingent liabilities are included in the earnings in the condensed consolidated statements of operations and comprehensive income (loss). The Company utilizes Monte Carlo or a series of Black-Scholes-Merton options models to estimate the fair value of the contingent consideration liabilities of business acquisitions. Significant inputs used in the fair value measurement of contingent consideration include: expected eligible revenue for the acquired businesses over the relevant measurement periods, the risk-profile of the expected eligible revenue for the acquired businesses, the uncertainty regarding the expected eligible revenue for the acquired businesses, the risk-free rate of return, the expected timing at which settlement of the contingent liabilities may occur, and the credit-adjusted discount rate associated with the risk of the Company’s future liability payments.
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Cash and Cash Equivalents | Cash equivalents include highly liquid investments with maturities of three months or less from the date purchased. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accounts Receivable | Accounts receivable includes current outstanding invoices billed to customers. Invoices are typically issued with net 30 days to net 90 days terms upon delivery of the product or upon achievement of billable events for service-based contracts. Unbilled receivables relate to the Company’s rights to consideration for performance obligations satisfied but not billed at the reporting date on contracts. Unbilled receivables are billed and transferred to customer accounts receivable when the rights become unconditional. The carrying amount of accounts receivable is reduced by a valuation allowance. The Company estimates the expected credit losses for accounts receivables using historical loss data adjusted for current economic conditions, including reasonable and supportable forecasts to estimate the relative size of credit losses to be expected. The Company generally writes off a receivable or records a specific allowance for credit losses if the Company determines that the receivable is not collectible.
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Derivative Instruments | In the normal course of business, the Company is subject to risk from adverse fluctuations in interest rates. The Company has chosen to manage this risk through the use of derivative financial instruments that consist of interest rate swap contracts. Counterparties to these contracts are major financial institutions. The Company is exposed to credit loss in the event of nonperformance by these counterparties. The Company does not use derivative instruments for trading or speculative purposes. The objective in managing exposure to market risk is to limit the impact on cash flows. To qualify for hedge accounting, the interest rate swaps must effectively reduce the risk exposure that they are designed to hedge. In addition, at the inception of a qualifying cash flow hedging relationship, the underlying transaction or transactions must be, and be expected to remain, probable of occurring in accordance with the related assertions. FASB ASC 815, “Derivatives and Hedging,” requires the Company to recognize all derivatives on the balance sheet at fair value. The Company may enter into derivative contracts such as interest rate swap contracts that effectively convert portions of the Company’s floating rate debt to a fixed rate, which serves to mitigate interest rate risk. The Company’s objectives in using interest rate swaps are to add stability to interest expense and to manage its exposure to interest rate movements. Interest rate swaps designated as cash flow hedges involve the receipt of variable-rate amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. The Company entered into an interest rate swap agreement in May 2022 that pays a fixed interest rate and receives a variable interest rate 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. During the quarter ended September 30, 2023, the Company and the counter party amended the floating rate of the swap agreement from term LIBOR to term SOFR due to LIBOR cessation. At March 31, 2024 and December 31, 2023, the interest swap had a fair value of $6,374 and $5,624, respectively; The gross fair value recognized in accumulated other comprehensive income was $6,374 and $5,624, respectively, at March 31, 2024 and December 31, 2023. 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 expense in the same period during which the hedged transactions impact earnings.
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Revenue Recognition | In accordance with ASC Topic 606, “Revenue from Contracts with Customers”, the Company determines revenue recognition through the following steps: i. Identification of the contract, or contracts, with a customer ii. Identification of the performance obligations in the contract iii. Determination of the transaction price iv. Allocation of the transaction price to the performance obligations in the contract v. Recognition of revenue when, or as, the Company satisfies a performance obligation The Company’s revenue consists of fees for perpetual and term licenses for its 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 following describes 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. Software Licenses Revenues Software license revenue consists primarily of sales of software licenses downloaded and installed by our customers on their own hardware. The license period is generally one year or less and includes an insignificant amount of customer support to assist the customer with the software. Software license performance obligations are generally recognized upfront at the point in time when the software license has been delivered. Software as a Service (SaaS) Revenues SaaS revenues consist of subscription fees for access to, and related support for, the Company’s cloud-based solutions. The Company typically invoices subscription fees in advance in annual installments. The invoice is initially deferred and revenue is recognized ratably over the life of the contract. The Company’s software contracts do not typically include variable consideration or options for future purchases that would not be similar to the original goods. Software Service Revenues Maintenance services agreements on perpetual software 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. While the 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 insignificant 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. Consulting Service Revenues The Company’s primary professional 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. The Company’s professional services contracts are either time-and-materials or fixed fee. Service 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 are generally recognized over time by applying input methods to estimate progress to completion. Accordingly, the number of resources being paid for and the varying lengths of time they are being paid for determine the measure of progress. Arrangements with Multiple Performance Obligations For contracts with 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 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. The delivery of a particular type of software and each of the user licenses would be one performance obligation. Additionally, any training, implementation, or support and maintenance promises sold 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 less than one year such that there is no significant financing component. 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 condensed 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 condensed 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 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 deferred revenue in the condensed consolidated balance sheets. Contract balances at March 31, 2024 and December 31, 2023 were as follows:
During the three months ended March 31, 2024, the Company recognized revenue of $29,351 related to contract liabilities at December 31, 2023. The unsatisfied performance obligations as of March 31, 2024 were approximately $115,418. We expect to recognize approximately $102,229 or 88.6% of this revenue over the next 12 months and the remainder thereafter. Deferred Contract Acquisition Costs Under ASC Topic 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 recognizes an asset for the incremental costs of obtaining a contract with a customer if the Company expects the benefit of those costs to be longer than one year. The Company has determined that certain sales incentive programs meet the requirements to be capitalized. The costs capitalized are primarily sales commissions for our sales force personnel. Capitalized costs to obtain a contract are amortized on a straight-line basis over the expected period of benefit. Amortization of capitalized costs is included in sales and marketing expenses in our condensed consolidated statements of operations and comprehensive income (loss). Capitalized contract acquisition costs were $597 and $655 as of March 31, 2024 and December 31, 2023, respectively, and were included in prepaid expenses and other current assets in the condensed consolidated balance sheets. Grant Revenue The Company receives grant funding for certain specific projects from time to time. These grants specify the funds provided are to be used exclusively to satisfy the deliverables outlined in the grant agreements. In these agreements, both involved parties receive and sacrifice approximately commensurate value so these are accounted for as exchange transactions and revenue is recognized according to ASC Topic 606. Grant funding is generally provided near contract inception, so a contract liability is initially recorded and revenue is recognized as the performance obligations are satisfied over time. Sources and Timing of Revenue The Company’s performance obligations are satisfied either over time or at a point in time.
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Earnings per Share | Basic earnings per common share is computed by dividing the net earnings by the weighted-average number of shares outstanding during the reporting period, without consideration for potentially dilutive securities. Diluted shares are calculated under the treasury stock method. Diluted earnings per share is calculated by dividing the net earnings attributable to stockholders by the weighted-average number of shares and dilutive securities outstanding during the period. |
Summary of Significant Accounting Policies (Tables) |
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Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis | The following table sets forth the assets and liabilities that were measured at fair value on a recurring and non-recurring basis by their levels in the fair value hierarchy at March 31, 2024:
The following table sets forth the assets and liabilities that were measured at fair value on a recurring and non-recurring basis by their levels in the fair value hierarchy at December 31, 2023:
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Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation | The following table summarizes the Level 3 activity of the changes in the contingent consideration liability.
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Schedule of Accounts, Notes, Loans and Financing Receivable | Accounts receivable consists of the following:
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Accounts Receivable, Allowance for Credit Loss | The following table presents the information regarding the allowance of accounts receivable:
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Schedule of Derivative Instruments in Statement of Financial Position, Fair Value | The notional amounts, fair values, and classification of derivative instruments in the condensed consolidated balance sheets as of March 31, 2024 and December 31, 2023 were as follows:
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Contract Balances, Contract Asset, Contract Liability, and Receivable | Contract balances at March 31, 2024 and December 31, 2023 were as follows:
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Summary of Revenue by Timing of Revenue Recognition | 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:
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Prepaid Expenses and Other Current Assets and Other Long-Term Assets (Tables) |
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Mar. 31, 2024 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Prepaid Expense and Other Assets, Current [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Prepaid and Other Current Assets |
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Schedule of Other Long-Term Assets | Other long-term assets at March 31, 2024 and December 31, 2023 consisted of the following:
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Long-Term Debt and Revolving Line of Credit (Tables) |
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Mar. 31, 2024 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Schedule of Long-term debt | Long-term debt consists of the following:
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Schedule of Maturity of Long-Term Debt | The principal amount of long-term debt outstanding as of March 31, 2024 matures in the following years:
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Leases (Tables) |
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Leases [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule Of Operating And Financing Lease Right Of Use Assets And Lease Liabilities | The following table summarizes the lease-related assets and liabilities recorded in the condensed consolidated balance sheets at March 31, 2024 and December 31, 2023:
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Schedule Of Minimum Lease Payments Of Operating Leases | The following table summarizes by year the maturities of our minimum lease payments as of March 31, 2024:
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Schedule Of Minimum Lease Payments Of Finance Leases | The following table summarizes by year the maturities of our minimum lease payments as of March 31, 2024:
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Accrued Expenses and Other Liabilities (Tables) |
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Mar. 31, 2024 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accrued Liabilities, Current [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule Of Accrued Expenses | Accrued expenses consist of the following:
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Other Noncurrent Liabilities | Other long-term liabilities consist of the following:
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Equity-Based Compensation (Tables) |
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Share-Based Payment Arrangement [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary Of The Restricted Stock |
* The Company did not legally authorize or issue any restricted stock during the three month period ended March 31, 2024. During the first quarter of 2024, the Company modified an award for a recipient, resulting in 16,842 shares assumed to be granted, vested, and cancelled.
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Summary Of The Company's RSU activity | A summary of the Company’s RSU activity is as follows:
*The majority of shares granted during the first quarter of 2024 were issued under the 2020 Incentive Plan. During the first quarter of 2024, the Company modified awards for a recipient, resulting in 38,729 shares assumed to be granted, vested, and cancelled for accounting purpose. **The number of the RSUs vested included 1,492 shares that were withheld on behalf of employees to satisfy the statutory tax withholding requirements.
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Schedule Of Nonvested Performance-Based Units Activity | A summary of the Company’s PSU activity for the period ended March 31, 2024 is as follows:
___________________________________ * During the first quarter of 2024, the Company modified an award for a recipient, resulting in 6,651 shares assumed to be granted and cancelled for accounting purpose.
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Schedule Of Compensation Expense | The following table summarizes the components of total equity-based compensation expense included in the condensed consolidated statements of operations and comprehensive income (loss) for each period presented:
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Segment Data (Tables) |
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Segment Reporting [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Revenue by Geographic Area | The following table summarizes revenue by geographic area for the three months ended March 31, 2024 and 2023:
(1) Revenue is attributable to the countries based on the location of the customer.
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Earnings per Share (Tables) |
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Basic and Diluted Earnings per Share |
__________________________________ •For the period ended March 31, 2024, the Company excluded the restricted stock and RSUs from the calculation of diluted earnings per share that could potentially dilute earnings per share in the future because of the anti-dilutive effect of the reported net loss. •For the period ended March 31, 2023, the Company excluded certain potentially dilutive securities attributable to outstanding RSUs and restricted stocks from the computation of diluted earnings per share because the securities would have had an antidilutive effect.
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Summary of Significant Accounting Policies - Fair Value Measurements (Details) - USD ($) $ in Thousands |
Mar. 31, 2024 |
Dec. 31, 2023 |
---|---|---|
Assets | ||
Money market funds | $ 149,397 | $ 147,478 |
Interest rate swap assets | 6,374 | 5,624 |
Total assets | 155,771 | 153,102 |
Liabilities | ||
Contingent liabilities | 44,982 | 54,457 |
Total liabilities | 44,982 | 54,457 |
LEVEL 1 | ||
Assets | ||
Money market funds | 149,397 | 147,478 |
Interest rate swap assets | 0 | 0 |
Total assets | 149,397 | 147,478 |
Liabilities | ||
Contingent liabilities | 0 | 0 |
Total liabilities | 0 | 0 |
LEVEL2 | ||
Assets | ||
Money market funds | 0 | 0 |
Interest rate swap assets | 6,374 | 5,624 |
Total assets | 6,374 | 5,624 |
Liabilities | ||
Contingent liabilities | 0 | 0 |
Total liabilities | 0 | 0 |
LEVEL 3 | ||
Assets | ||
Money market funds | 0 | 0 |
Interest rate swap assets | 0 | 0 |
Total assets | 0 | 0 |
Liabilities | ||
Contingent liabilities | 44,982 | 54,457 |
Total liabilities | $ 44,982 | $ 54,457 |
Summary of Significant Accounting Policies - Level 3 Contingent Liability Roll Forward (Details) $ in Thousands |
3 Months Ended |
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Mar. 31, 2024
USD ($)
| |
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward] | |
Beginning balance at December 31, 2023 | $ 54,457 |
Additions | 0 |
Payments | (12,356) |
Fair value remeasurement | 2,881 |
Ending balance at March 31, 2024 | $ 44,982 |
Summary of Significant Accounting Policies - Cash and Cash Equivalents (Details) - USD ($) $ in Thousands |
Mar. 31, 2024 |
Dec. 31, 2023 |
---|---|---|
Accounting Policies [Abstract] | ||
Cash and cash equivalents | $ 224,776 | $ 234,951 |
Summary of Significant Accounting Policies - Accounts Receivable Narrative (Details) - USD ($) $ in Thousands |
Mar. 31, 2024 |
Dec. 31, 2023 |
Dec. 31, 2022 |
---|---|---|---|
Accounting Policies [Abstract] | |||
Accounts receivable, allowance for credit loss | $ 1,341 | $ 1,312 | $ 1,250 |
Summary of Significant Accounting Policies - Accounts Receivable (Details) - USD ($) $ in Thousands |
Mar. 31, 2024 |
Dec. 31, 2023 |
Dec. 31, 2022 |
---|---|---|---|
Accounting Policies [Abstract] | |||
Trade receivables | $ 71,268 | $ 75,410 | |
Unbilled receivables | 10,767 | 10,405 | |
Other receivables | 255 | 354 | |
Allowances for credit losses | (1,341) | (1,312) | $ (1,250) |
Accounts receivable, net | $ 80,949 | $ 84,857 |
Summary of Significant Accounting Policies - Allowance of Accounts Receivable (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | |
---|---|---|---|
Mar. 31, 2024 |
Mar. 31, 2023 |
Sep. 30, 2023 |
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Accounts Receivable, Allowance for Credit Loss [Roll Forward] | |||
Beginning balance | $ 1,312 | $ 1,250 | $ 1,250 |
(Recovery of) provision for credit losses | 59 | $ (168) | 684 |
Charge-offs, net of recoveries | (30) | $ (622) | |
Ending balance | $ 1,341 |
Prepaid Expenses and Other Current Assets and Other Long-Term Assets - Prepaid and Other Current Assets (Details) - USD ($) $ in Thousands |
Mar. 31, 2024 |
Dec. 31, 2023 |
---|---|---|
Prepaid Expense and Other Assets, Current [Abstract] | ||
Prepaid expenses | $ 8,077 | $ 6,363 |
Income tax receivable | 2,396 | 3,395 |
Research and development tax credit receivable | 5,804 | 5,004 |
Current portion of interest rate swap asset | 5,033 | 4,473 |
Other current assets | 1,422 | 1,158 |
Prepaid expenses and other current assets | $ 22,732 | $ 20,393 |
Prepaid Expenses and Other Current Assets and Other Long-Term Assets - Other Long-term Assets (Details) - USD ($) $ in Thousands |
Mar. 31, 2024 |
Dec. 31, 2023 |
---|---|---|
Prepaid Expense and Other Assets, Current [Abstract] | ||
Long-term deposits | $ 1,517 | $ 1,451 |
Interest rate swap asset - long-term | 1,341 | 1,151 |
Deferred financing cost | 382 | 451 |
Total other long-term assets | $ 3,240 | $ 3,053 |
Long-Term Debt and Revolving Line of Credit - Narrative (Details) - USD ($) $ in Thousands |
3 Months Ended | |||
---|---|---|---|---|
Mar. 31, 2024 |
Mar. 31, 2023 |
Dec. 31, 2023 |
Jun. 17, 2021 |
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Debt Instrument | ||||
Accrued interest payable | $ 2,317 | $ 2,351 | ||
Revolving Credit Facility | ||||
Debt Instrument | ||||
Available borrowings | $ 100,000 | $ 100,000 | $ 80,000 | |
Maximum borrowing capacity of revolving line of credit | $ 100,000 | |||
Effective interest rate | 9.24% | 8.03% | ||
Interest incurred | $ 63 | |||
Accrued interest payable | 2 | $ 2 | ||
Prepayment on the loan | 755 | |||
Variable Interest Term Loan | ||||
Debt Instrument | ||||
Interest incurred | 6,798 | $ 5,974 | ||
Interest payable | $ 2,382 | $ 2,400 |
Long-Term Debt and Revolving Line of Credit - Long-Term Debt (Details) - USD ($) $ in Thousands |
Mar. 31, 2024 |
Dec. 31, 2023 |
---|---|---|
Debt Instrument | ||
Term loans | $ 293,695 | |
Less: debt issuance costs | (2,903) | $ (3,213) |
Total | 290,792 | 291,237 |
Current portion of long-term debt | (3,020) | (3,020) |
Long-term debt, net of current portion and debt issuance costs | 287,772 | 288,217 |
Term Loan | ||
Debt Instrument | ||
Term loans | 293,695 | 294,450 |
Revolving Credit Facility | ||
Debt Instrument | ||
Revolving line of credit | $ 0 | $ 0 |
Long-Term Debt and Revolving Line of Credit - Maturity of Long Term Debt (Details) $ in Thousands |
Mar. 31, 2024
USD ($)
|
---|---|
Maturities | |
Remainder of 2024 | $ 2,265 |
2025 | 3,020 |
2026 | 288,410 |
TOTAL | $ 293,695 |
Leases - Narrative (Details) |
Mar. 31, 2024 |
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Leases | |
Operating leases - Weighted-average remaining lease term (years) | 6 years 1 month 2 days |
Operating leases - Weighted-average discount rate | 5.47% |
Minimum | |
Leases | |
Remaining operating and capital lease term | 1 year |
Maximum | |
Leases | |
Remaining operating and capital lease term | 10 years |
Leases - Lease-related Assets and Liabilities (Details) - USD ($) $ in Thousands |
Mar. 31, 2024 |
Dec. 31, 2023 |
---|---|---|
Assets | ||
Operating lease right-of-use assets | $ 14,292 | $ 9,604 |
Liabilities [Abstract] | ||
Current portion of operating lease liabilities | 4,331 | 4,375 |
Operating lease liabilities, net of current portion | 11,631 | 6,955 |
Total | $ 15,962 | $ 11,330 |
Leases - Maturities of our Minimum Lease Payments (Details) - USD ($) $ in Thousands |
Mar. 31, 2024 |
Dec. 31, 2023 |
---|---|---|
OPERATING LEASES | ||
Remainder of 2024 | $ 3,460 | |
2025 | 3,839 | |
2026 | 2,528 | |
2027 | 1,777 | |
2028 | 979 | |
Thereafter | 6,107 | |
Total future lease payments | 18,690 | |
Less: imputed interest | (2,728) | |
Total | $ 15,962 | $ 11,330 |
Accrued Expenses and Other Liabilities - Accrued expenses (Details) - USD ($) $ in Thousands |
Mar. 31, 2024 |
Dec. 31, 2023 |
---|---|---|
Accrued Liabilities, Current [Abstract] | ||
Accrued compensation | $ 16,390 | $ 28,624 |
Legal and professional accruals | 3,060 | 3,913 |
Interest payable | 2,317 | 2,351 |
Income taxes payable | 1,321 | 1,010 |
Short-term contingent consideration liabilities | 6,787 | 18,410 |
Other | 2,869 | 2,471 |
Total accrued expenses | $ 32,744 | $ 56,779 |
Accrued Expenses and Other Liabilities - Other Long Term Liabilities (Details) - USD ($) $ in Thousands |
Mar. 31, 2024 |
Dec. 31, 2023 |
---|---|---|
Payables and Accruals [Abstract] | ||
Uncertain tax position liability | $ 1,267 | $ 2,381 |
Contingent consideration | 38,977 | 36,828 |
Total other long-term liabilities | $ 40,244 | $ 39,209 |
Equity-Based Compensation - Non-vested Restricted Stock (Details) - Restricted Stock |
3 Months Ended |
---|---|
Mar. 31, 2024
$ / shares
shares
| |
Share-Based Compensation Arrangement by Share-Based Payment Award, Equity Instruments Other than Options, Nonvested, Number of Shares [Roll Forward] | |
Non-vested restricted stock beginning balance (in shares) | 538,661 |
Granted (in shares) | 16,842 |
Vested (in shares) | (63,041) |
Forfeited (in shares) | 0 |
Cancelled (in shares) | (16,842) |
Non-vested restricted stock ending balance (in shares) | 475,620 |
WEIGHTED- AVERAGE GRANT DATE FAIR VALUE | |
Non-vested restricted stock of beginning balance (in dollars per share) | $ / shares | $ 23.18 |
Granted (in dollars per share) | $ / shares | 17.35 |
Vested (in dollars per share) | $ / shares | 21.49 |
Forfeited (in dollars per share) | $ / shares | 0 |
Cancelled (in dollars per share) | $ / shares | 23.00 |
Non-vested restricted stock of ending balance (in dollars per share) | $ / shares | $ 23.20 |
Assumed, granted, and cancelled (in shares) | 16,842 |
Equity-Based Compensation - Performance Stock Units (Details) - Performance Shares |
3 Months Ended |
---|---|
Mar. 31, 2024
$ / shares
shares
| |
Share-Based Compensation Arrangement by Share-Based Payment Award, Equity Instruments Other than Options, Nonvested, Number of Shares [Roll Forward] | |
Non-vested restricted stock beginning balance (in shares) | 849,467 |
Granted (in shares) | 315,814 |
Vested (in shares) | 0 |
Forfeited (in shares) | 0 |
Cancelled (in shares) | (394,050) |
Non-vested restricted stock ending balance (in shares) | 771,231 |
WEIGHTED- AVERAGE GRANT DATE FAIR VALUE | |
Non-vested restricted stock of beginning balance (in dollars per share) | $ / shares | $ 24.84 |
Granted (in dollars per share) | $ / shares | 19.08 |
Vested (in dollars per share) | $ / shares | 0 |
Forfeited (in dollars per share) | $ / shares | 0 |
Cancelled (in dollars per share) | $ / shares | 27.09 |
Non-vested restricted stock of ending balance (in dollars per share) | $ / shares | $ 21.33 |
Assumed, granted, and cancelled (in shares) | 6,651 |
Equity-Based Compensation - Compensation Expense (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2024 |
Mar. 31, 2023 |
|
Equity-Based Compensation | ||
Compensation expense | $ 9,073 | $ 8,543 |
Cost of revenues | ||
Equity-Based Compensation | ||
Compensation expense | 3,239 | 2,042 |
Sales and marketing | ||
Equity-Based Compensation | ||
Compensation expense | 617 | 381 |
Research and development | ||
Equity-Based Compensation | ||
Compensation expense | 1,649 | 1,650 |
General and administrative | ||
Equity-Based Compensation | ||
Compensation expense | $ 3,568 | $ 4,470 |
Segment Data (Details) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2024
USD ($)
segment
|
Mar. 31, 2023
USD ($)
|
|
Segments | ||
Number of operating segment | segment | 1 | |
Revenue | $ 96,654 | $ 90,301 |
Americas | ||
Segments | ||
Revenue | 69,165 | 67,023 |
EMEA | ||
Segments | ||
Revenue | 20,843 | 16,915 |
Asia Pacific | ||
Segments | ||
Revenue | $ 6,646 | $ 6,363 |
Income Taxes (Details) |
3 Months Ended | |
---|---|---|
Mar. 31, 2024 |
Mar. 31, 2023 |
|
Income Tax Disclosure [Abstract] | ||
Effective tax rate | 14.00% | 45.00% |
Earnings per Share (Details) - USD ($) $ / shares in Units, $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2024 |
Mar. 31, 2023 |
|
Earnings Per Share [Abstract] | ||
Net income (loss) available to common shareholders | $ (4,683) | $ 1,358 |
Basic weighted-average common shares outstanding (in shares) | 159,524,270 | 158,177,025 |
Basic earnings per common share (in dollars per share) | $ (0.03) | $ 0.01 |
Diluted earnings per share | ||
Net income (loss) available to common shares | $ (4,683) | $ 1,358 |
Dilutive potential common shares (in shares) | 0 | 1,550,387 |
Diluted weighted average common shares outstanding (in shares) | 159,524,270 | 159,727,412 |
Diluted earnings per common share (in dollars per share) | $ (0.03) | $ 0.01 |
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