Certara, Inc.

Good day and thank you for standing by. Welcome to the CITAR fourth quarter 2021 earnings conference call. At this time, all participants are on the listen-only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star 0. I would now like to hand the conference over to your first speaker today, to Mr. David Dutkler, Investor Relations. You may begin.

David Dutkler Good afternoon, everyone. Thank you all for participating in today's conference call. On the call from Sartara, we have William Ferry, Chief Executive Officer, and Andrew Schemick, Chief Financial Officer. Earlier today, Sartara released financial results for the quarter ended December 31st, 2021. A copy of the press release is available on the company's website. Before we begin, I'd like to remind you that management will make statements during this call that include forward-looking statements within the meaning of federal securities laws, which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Any statements contained in this call that relate to expectations or predictions of future events, results, or performance are forward-looking statements. Actual results may differ materially from those expressed or implied in the forward-looking statements due to a variety of factors. For a list and description of the risks and uncertainties associated with Sitara's business, please refer to the risk factors section of our Form 10-K filed with the Securities and Exchange Commission on March 1, 2022, which will be filed shortly after this call. We urge you to consider these factors, and you should be aware that these statements should be considered estimates only and are not a guarantee of future performance. Also, in their remarks or responses to questions, management may mention some non-GAAP financial measures. reconciliations of adjusted EBITDA, adjusted net income, adjusted EPS, and certain other non-GAAP financial measures to the most directly comparable GAAP measures are available in the recent earnings release, which is available on the company's website. The conference call contains time-sensitive information and is accurate only as of the live broadcast today, March 1st, 2022. Sitara disclaims any intention or obligation except as required by law to update or revise any financial projections or forward-looking statements whether because of new information, future events, or otherwise. And with that, I will turn the call over to William.

Thank you, David. Good afternoon, everyone. Thank you for joining Sartara's fourth quarter and full year earnings call. Andrew and I will start with prepared remarks, and then we will take questions. 2021 was a milestone year for Sartara. It was our first full year as a public company, and we made progress on a number of key priorities and initiatives. We are very excited about the opportunities ahead, and as we continue delivering on our mission to accelerate the drug development process with our proprietary biostimulation software, technologies, and services. At Certara, our strategy is to transform the drug R&D process with our end-to-end platform, powered by innovative technology and our global team of leading experts. We not only speed up the process, but also helped to advance safety and efficacy of drugs for millions of patients worldwide. For the full year, we reported total revenue of $286 million, growing 17% year-over-year, including Pinnacle 21, and 15% excluding Pinnacle 21's contribution in the fourth quarter. 2021 revenue growth was in the double digits in every region of the world, Fourth quarter total company revenue was $75.3 million, growing 17% versus the same period a year ago. Pinnacle 21 contributed $6.1 million in the quarter. Excluding Pinnacle 21, revenue was $69.2 million, growing 7% compared with the same period a year ago. Excluding Pinnacle 21, fourth quarter software revenue was in line with expectations, growing 13 percent compared with the fourth quarter of 2020. But technology-driven services came in below our expectations, growing 6 percent compared with the fourth quarter of 2020. Our technology-driven services performance in the fourth quarter was driven by two issues, both of which impacted the timing of work being executed. First, as we commented in our third quarter earnings call in November, We have been experiencing variability in the timing of our regulatory services projects due to COVID-related delays. We did not have cancellations, and our bookings in regulatory services projects continue to be strong. As you recall, in Q3 2021, we experienced significant growth, 28 percent year-over-year in technology-driven services due to the recognition of delayed regulatory services projects. In Q4, the COVID-related slowdown in closing out clinical trials impacted timing of projects and revenue recognition in regulatory, which resulted in a shortfall in Q4 in services. In the back half of the year, technology-driven services revenue grew 16% year-over-year, and we expected to continue growing in the mid-teens in 2022. We expect these delays will moderate in 2022, and we will recapture most of this regulatory services revenue over the course of the year. We continue to work hard to manage consistent conversion of our bookings and billings to smooth out our revenue recognition throughout the year. Second, the surge in COVID-19 cases resulting from the Omicron variant reduced the capacity of our employees and clients in the back half of the fourth quarter. We believe that these are transitory factors that we are well equipped to manage in 2022. As we look forward to the coming year, we remain optimistic about activity returning to more normal levels as the year progresses with conferences coming back and more people back in the office. Turning to software, we were pleased with our performance during the fourth quarter, which grew 46%, including Pinnacle 21, and 13% excluding Pinnacle 21. The growth was driven by a 96% software renewal rate and strong demand for our proprietary biostimulation software, our Phoenix and SIMSIP platforms, and Pinnacle 21 also delivered according to our expectations. As we mentioned at our December Investor Day, we see a number of compelling opportunities ahead for Sartara in software, And we've increased our investment to support those R&D activities in 2022. Specifically, we're focused on expanding the use cases of our SIMSIP simulator, which continues to grow in adoption to reduce or waive drug-drug interaction and bioequivalent studies, as well as support better dosing for special patient populations. Looking to 2022, we expect strong momentum in software to continue, and we believe that transitory headwinds experienced in regulatory services projects during the fourth quarter will subside over the course of the year. Bookings trends in both software and technology-driven services remain strong. Fourth quarter bookings grew 30 percent year-over-year, and trailing 12-month bookings grew 18 percent over the prior period, including the contribution from Pinnacle 21. As such, we remain well positioned to achieve our long-term financial and strategic plans. Moving to performance for the year, in 2021, we drove strong growth in new customers, and we now serve more than 2,000 customers, including more than 350 additional software end customers who engage with us through our distributors in Asia-Pacific. Our land and expand strategy has also delivered solid growth among existing customers. We ended the year with 299 customers with annual contract value of more than $100,000, representing growth of 15% year over year. The integration of Pinnacle 21 into our software group was an important focus in the fourth quarter. We are now beginning to execute on the promise of the compelling opportunities identified when we acquired Pinnacle 21. In December, we released the latest version of the Pinnacle 21 enterprise software, which offers immense value to experts in biostatistics and biometrics in ensuring that submissions to regulatory agencies comply with data standards requirements. The feature-rich release proactively supports the new Define XML 2.1 data standards, This is the first of many growth milestones we expect to emerge from the Pinnacle 21 platform. Updating Sertara software remains a top priority for our team, and we continue to innovate during the fourth quarter with the release of SimSip Simulator version 21 and D360 Scientific Informatics Software version 21.5. The latest update to the SimSip Simulator aligns with recent regulatory guidances. and it includes other updates to support customers' development priorities, including additions to the compound library to facilitate drug-drug interaction analysis and updates to our renal and hepatic impaired population models. The latest version of D360 software increases efficiency in analyzing and guiding the design of small molecule drugs and biologic. We remain very encouraged by the growing pipeline and opportunity for our software to advance discovery research. During the quarter, we announced that the FDA has renewed and expanded licenses of SIRTAR's biostimulation software, with more than 400 user licenses of SimSip and Phoenix platforms across 12 divisions and offices. The FDA also recently licensed our immunogenicity simulator for the first time, to research and evaluate immunogenicity and regulatory submissions for biologics. Immunogenicity, or the tendency of protein-based therapeutics to trigger an immune response, is a major problem in drug development. Our immunogenicity simulator predicts the immunogenicity incidence of therapeutics to guide dosing and study design for better clinical outcomes for patients. It continues to be a privilege for us to provide software that global regulatory agencies can rely on to inform their reviews of regulatory submissions. 2021 was also the eighth consecutive year that Sertaris customers received 90% of the novel drug approvals by the FDA, excluding diagnostic products. The SimSib simulator was used in 13 of these approvals to inform the drug labels. We are excited by the recent launch of the FDA's Project Optimist Initiative, which aims to reform the dose optimization and dose selection paradigm in oncology drug development. This is important for drug developers and patients because the current approach of maximum tolerated dose may lead to a selection of a dose that provides more toxicity without additional efficacy. So, Tara is well-positioned to address these upcoming changes in dose finding and the evolving regulatory landscape with our extensive experience in oncology, as well as dose optimization, trial design, regulatory strategy, and submissions. As outlined in our strategy, we continue to invest in the business and add to our expert team worldwide. Toward the end of the year, we experienced an increase in attrition due to a variety of factors. Our attrition was fairly low in 2020, so now we're getting back to more normal levels of attrition that we had experienced pre-COVID. We continue to prioritize adding top talent, and in 2021, we hired leading scientists and subject matter experts to support our ongoing growth. We ended the year with approximately 1,100 employees, including more than 350 employees with doctorate degrees. Sartara's culture and commitment to innovation and customer partnerships continue to attract top talent in a competitive hiring environment. We remain focused on making Sartara the employer of choice in the industry. In summary, I'm pleased with the performance of the company in 2021, delivering double-digit growth in software and services, advancing the adoption of BIOS simulation, and acquiring and integrating Pinnacle 21. While revenue from our regulatory services business in the fourth quarter did not meet our expectations, our bookings growth and our momentum remain strong. I am confident in our Sitara team to execute our plan. I will now turn this over to our CFO, Andrew Shemek, to discuss the fourth quarter and full-year financial results in more detail.