CERT — Q2 2026 Financial Report Analysis

Flat revenue, a loss-making divestiture and a cut to the earnings outlook

Certara sells software and consulting services that drug companies use to simulate how a medicine will behave in the body. This is called "biosimulation" or model-informed drug development, and it helps companies choose doses and design trials before testing in people. In the second quarter of 2026 (three months to June 30), revenue from the businesses Certara is keeping rose 1% to $93.3 million. Software grew 4% to $48.8 million; services fell 3% to $44.5 million. The company swung to a loss from continuing operations of $6.1 million, from a $1.5 million profit a year earlier. Including the business it sold in May, the total net loss was $55.3 million, or $0.36 per share.

At a glance

• Revenue +1% to $93.3M: software is growing slowly and services is shrinking. Management kept its full-year growth range of 0% to 4%.
• $48.6M after-tax loss on the sale of the Regulatory and Medical Writing business: Certara sold the unit for less than it was carried at on the balance sheet. This loss, not the ongoing business, is most of the quarter's $55.3M net loss.
• Adjusted EPS guidance lowered to $0.31–$0.36 from $0.35–$0.41 in May. Part of that reflects removing the sold unit's profit, but the range moved down even with a lower expected share count.

Key figures (continuing operations)

Year-ago bookings are implied from the growth rates Certara reports. Bookings are new contracts signed in the quarter, so they hint at future revenue. Software bookings growing faster than software revenue (+9% vs +4.5%) is the most encouraging number in the release. The services bookings decline points to more weakness in that half of the business.

Takeaway: Certara is now roughly half software and half services, and the two halves are moving in opposite directions: software bookings +9%, services bookings -6%. Overall growth is close to zero, and the GAAP loss is driven mainly by restructuring, currency and a missing prior-year accounting gain. The second half has to show services stabilising, because full-year guidance assumes it, and first-half margins came in below the new margin range.

What happened in the quarter

The divestiture. On May 8, Certara closed the sale of its Regulatory and Medical Writing business to Veristat. That unit wrote documents drug companies submit to regulators. Per the 10-Q, Certara received $69.4 million in cash, plus $15.0 million in escrow to be released once post-closing conditions are met and an earn-out of up to $35.0 million tied to the unit's future performance. The sale produced a $65.5 million pre-tax loss ($48.6 million after tax), recorded in discontinued operations. The divested unit had $19.2 million of revenue in 2026 before the sale. All prior periods are restated without it, which is why the year-ago revenue here ($92.4 million) is lower than Certara originally reported for Q2 2025.

Reorganization. Certara reorganized into two business units, Model Informed Discovery and Drug Development (MID3) and Accelerated Clinical Evidence (ACE). It cut about 5% of staff, mostly overhead, which the release says should produce about $13 million in annual run-rate savings. Reorganization costs were $3.2 million in the quarter versus $0.9 million a year ago. There is also management turnover: an interim CFO (Faiz Mohammed) signed off the release, a new Chief Commercial Officer started August 1, and $0.7 million went on executive recruiting.

Revenue drivers. The 10-Q attributes software growth to "increased demand from existing customers and expanded relationships with existing customers". It gives no reason for the $1.2 million services decline. In May the previous CFO had described services as "mixed, reflecting execution and go-to-market challenges that we expect to resolve during the second half of the year".

Why the profit disappeared

Operating expenses rose $7.9 million (+16%) while revenue rose $0.9 million. The 10-Q breaks down the increase:

• $5.7 million from contingent-consideration accounting. A year ago Certara cut its estimate of what it owed sellers of an acquired business, which reduced expenses. That non-recurring gain is absent this year. This single item explains most of the swing.
• $1.1 million more professional and consulting fees, $1.0 million more employee costs, $0.8 million more depreciation (computer equipment), $0.6 million executive recruiting and $0.5 million lease abandonment.
• Partly offset by lower stock-based pay.

Below the operating line, a $2.4 million currency remeasurement loss turned other income into a $1.2 million expense. Interest expense was $5.0 million on the $294.0 million term loan.

What the headline numbers hide

• The year-ago profit was flattered by a one-off. Stripping the $5.7 million contingent-consideration benefit out of Q2 2025, operating income would have been about $2.0 million then (our calculation), versus -$0.2 million now. The underlying trend is still down, but by about $2 million, not $8 million.
• The GAAP vs. adjusted gap is wide. Adjusted EBITDA of $26.2 million (28.1% of revenue) adds back $16.3 million of depreciation and amortization, $6.1 million of stock-based pay, $3.2 million of reorganization costs, a $2.4 million currency loss and $0.7 million of executive recruiting. About $10.8 million of the amortization relates to past acquisitions. That is a non-cash charge, but the deals it reflects were real spending, and goodwill and intangibles are still $1.06 billion of the $1.40 billion balance sheet.
• Cash conversion is weaker. Operating cash flow from continuing operations was $15.6 million for the first half, down from $23.3 million. The 10-Q blames "lower cash-adjusted net income, an increase in cash used for prepaid and other assets and a decrease in cash collected on accounts receivable". It is still positive against a $17.9 million first-half loss from continuing operations, because amortization and stock pay are non-cash.
• Buybacks are lifting per-share figures. Certara bought back 9.0 million shares for $57.4 million in the first half, finishing its $100 million program. The board added $50 million in Q3. Shares outstanding fell to 152.5 million from 159.1 million at year-end, which supports adjusted EPS. Adjusted net income was $12.5 million vs $12.7 million, yet adjusted EPS was flat at $0.08. Cash was $184.1 million, nearly unchanged from year-end despite the buyback, because the sale proceeds funded it.
• The tax line is noisy. The continuing-operations effective tax rate was 5%, versus 66% a year ago. The rate swings with the mix of U.S. and foreign income and discrete items, so neither quarter is a useful run-rate.
• The backlog is healthy. Remaining contracted revenue (unsatisfied performance obligations) was $151.0 million, with 73.2% expected within 12 months. Deferred revenue rose to $80.0 million from $77.7 million at year-end.

Guidance and outlook

Management's full-year 2026 guidance for continuing operations:

The May figures included the sold unit and the August figures do not, so the comparison is not exact. Still, the adjusted EPS range moved down by about 12% at the midpoint, even with fewer shares expected.

Our read: first-half continuing revenue was $187.4 million (+1.6%). Hitting the guidance midpoint of about $374.5 million needs roughly $187 million in the second half, about 2–3% growth by our calculation. That is achievable only if services stops shrinking. First-half adjusted EBITDA margin was 28.2%, below the new 29%–31% range, so the second half must run at roughly 30% or better. The $13 million in savings from the job cuts is what makes that plausible. In the Q3 report, watch services bookings (negative this quarter) and whether software bookings growth of +9% starts showing up as faster software revenue.