Certara, Inc. 10-K

Item 8. Financial Statements and Supplementary Data. Certara, Inc. Index to Consolidated Financial Statements ​ ​ ​ ​ PAGE ​ ​ ​ ​ ​ Reports of Independent Registered Public Accounting Firm (PCAOB ID 596 ) 78 Management's Report on Internal Control Over Financial Reporting 82 Consolidated Balance Sheets 84 Consolidated Statements of Operations and Comprehensive Loss 85 Consolidated Statements of Stockholders’ Equity 86 Consolidated Statements of Cash Flows 87 Notes to the Consolidated Financial Statements 88 ​ ​ ​ ​ 77 Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Board of Directors and Stockholders Certara, Inc. Opinion on the Consolidated Financial Statements We have audited the accompanying consolidated balance sheets of Certara, Inc. and Subsidiaries (the “Company”) as of December 31, 2021 and 2020, and the related consolidated statements of operations and comprehensive loss, stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2021, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) and our report dated March 1, 2022 expressed an adverse opinion on the effectiveness of the Company’s internal control over financial reporting. Change in Accounting Principle As disclosed in Note 2 to the consolidated financial statements, the Company has changed its method of accounting for leases as of January 1, 2021 due to the adoption of Financial Accounting Standards Board Accounting Standards Codification Topic 842, Leases. Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matters The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. 78 Table of Contents ​ Valuation of intangible assets related to the acquisition of Pinnacle 21, LLC - developed technology, customer relationships and trademarks As described in Note 5 to the consolidated financial statements, on October 1, 2021, the Company completed the acquisition of Pinnacle 21, LLC (“Pinnacle”) which resulted in $143.4 million of intangible assets being recorded. Those intangible assets were comprised of developed technology of $103 million, customer relationships of $24.6 million and trademarks of $15.8 million. Fair values of the developed technology were estimated by management using the multi-period excess earnings method, fair values of the customer relationship intangible assets were estimated using the distributor method and the trademarks intangible assets were estimated using the relief from royalty method. Management’s determination of the fair value of the developed technology included significant assumptions related to future expected cash flows from the developed technology, obsolescence factors, contributory asset charges and discount rates. Management’s determination of the fair value of the customer relationships acquired included significant assumptions related to revenue growth rates, estimated earnings, customer attrition and discount rates. Significant judgment is exercised by management when determining the valuation of intangible assets related to the valuation of developed technology, customer relationships and trademark assets, which in turn led to a high degree of auditor judgment, in performing procedures relating to management’s significant assumptions related to the revenue growth rates, estimated earnings, contributory asset charges, customer attrition, royalty rates, obsolescence factors, and discount rates. Also, the audit effort involved the use of professionals with valuation skill and knowledge. Given these factors, the related audit effort in evaluating management’s judgments in determining the valuation of intangible assets acquired in the Pinnacle acquisition was challenging, subjective, and complex and required a high degree of auditor judgment. Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to the acquisition accounting, including controls over management’s valuation of the developed technology, customer relationships, and trademarks intangible assets. These procedures also included, among others (i) reading the purchase agreement; (ii) evaluating the appropriateness of the multi-period excess earnings, distributor and relief from royalty methods; (iii) evaluating the reasonableness of management’s assumptions relating to the revenue growth rates, estimated earnings, contributory asset charges, customer attrition, royalty rates, obsolescence factors, and discount rates used in the methods; and (iv) testing the completeness and accuracy of underlying data used in the methods. Evaluating the assumptions related to the revenue growth rates and estimated earnings involved evaluating whether the assumptions were reasonable considering (i) the current and past performance of the reporting unit; (ii) the consistency with external market and industry data; and (iii) whether these assumptions were consistent with evidence obtained in other areas of the audit. Professionals with valuation skill and knowledge were used to assist in the evaluation of the Company’s multi-period excess earnings, distributor and relief from royalty methods as well as assumptions related to customer attrition, contributory asset charges, royalty rates, obsolescence factors, and discount rates. Revenue recognition on the Company’s fixed price contract revenue As described further in Note 2 to the consolidated financial statements, the Company performs professional services under fixed price contracts with the associated revenue recognized over time. For fixed price revenue contracts recognized over time, management utilizes the input method to measure progress toward the complete satisfaction of the performance obligations based upon the hours incurred to date as a percentage of the total estimated hours. We identified revenue recognition for fixed price contracts as a critical audit matter. The principal consideration for our determination that revenue recognition for fixed price contracts was a critical audit matter is that the measure of progress towards completion utilizes assumptions for future hours to complete the performance obligations, and those assumptions have significant estimation uncertainty. A significant change in the assumptions could affect both the profitability of the contract and the amount of revenue and profit recognized in an accounting period. Also, there is a high volume of contracts and a high degree of judgment when evaluating the contracts. 79 Table of Contents Given these factors, the related audit effort in evaluating management’s judgments in determining the revenue recognition for fixed price contracts was challenging, subjective, and complex and required a high degree of auditor judgment. Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to revenue recognition for fixed price contracts, including controls over management’s process for recognizing revenue over time. In response to management’s assessment of its internal control over financial reporting, a change in our audit plan was required with an increase in audit effort. Our procedures included, among others (i) for a sample of contracts, inquiring regarding the status of the project and obtaining an understanding for significant changes in budgeted to actual hours; (ii) inspecting a sample of contracts to evaluate the existence of an enforceable right to payment for performance completed to date, and evaluating the progress towards completion of contracts based on hours incurred, and testing the appropriateness of the timing and amount of revenue recognized; and (iii) evaluating management’s ability to estimate progress towards completion, we selected a sample of fixed price contracts completed during the year, and obtained the internal budget at inception and compared the budgeted hours at inception to the actual hours upon completion. We also selected an additional sample of fixed price contracts completed during the year and compared the hours incurred during the current year to the hours that were estimated to be incurred at completion as of the prior year end. In addition, we confirmed hours incurred per the contract management system directly with a sample of consultants working on the Company’s fixed price contracts. ​ /s/ CohnReznick LLP ​ We have served as the Company's auditor since 2019. ​ Tysons, Virginia March 1, 2022 ​ ​ REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ​ Board of Directors and Stockholders Certara, Inc. ​ Opinion on Internal Control Over Financial Reporting We have audited Certara, Inc. and Subsidiaries (the “Company”) internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, because of the effect of the material weakness, described below, on the achievement of the objectives of the control criteria, the Company has not maintained effective internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2021 and 2020, the related consolidated statements of operations and comprehensive loss, stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2021, and the related notes (collectively, the consolidated financial statements), and our report dated March 1, 2022 expressed an unqualified opinion on those consolidated financial statements. ​ 80 Table of Contents A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company's annual or interim financial statements will not be prevented or detected on a timely basis. The following material weakness has been identified and included in management’s assessment. Information technology general controls (“ITGCs”) were not designed and implemented over a cloud-based software system that supports the Company’s project set-up and time submissions for services provided to the Company’s customers. As a result, certain business process automated and manual controls were also considered ineffective because they relied on data and reports accumulated in such software system. These control deficiencies were a result of: information technology processes lacking adequate reviews and documentation to maintain effective controls related to access management, change management and complementary user-organization controls to those implemented at the Service Organization that hosts the software system. The material weakness was considered in determining the nature, timing and extent of audit tests applied in our audit of the 2021 consolidated financial statements, and this report does not affect our report on those consolidated financial statements. The Company acquired Pinnacle 21, LLC (“Pinnacle”) on October 1, 2021. Management excluded from its assessment of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2021, Pinnacles’ internal control over financial reporting associated with 23% of total assets and 2% of total revenues included in the consolidated financial statements of the Company as of and for the year ended December 31, 2021. Our audit of internal control over financial reporting also excluded an evaluation of the internal control over financial reporting of Pinnacle. Basis for Opinion The Company’s management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control Over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the entity; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America, and that receipts and expenditures of the entity are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. 81 Table of Contents Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ CohnReznick LLP ​ Tysons, Virginia March 1, 2022 ​ ​ ​ ​ Management's Annual Report on Internal Control Over Financial Reporting ​ Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as is defined in the Exchange Act. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of financial statements for external reporting purposes in accordance with GAAP and includes those policies and procedures that: (1) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect our transactions and the dispositions of our assets; (2) provide reasonable assurance that our transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP and that our receipts and expenditures are being made only in accordance with appropriate authorizations; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our consolidated financial statements. ​ Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. ​ Our management conducted an evaluation, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our internal control over financial reporting based on the framework in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on this evaluation, our management concluded that our internal control over financial reporting was not effective at December 31, 2021 because of the material weakness described below. ​ Based on the COSO criteria, management identified control deficiencies that constitute a material weakness. A “material weakness” is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is more than a reasonable possibility that a material misstatement of the Company's annual or interim financial statements will not be prevented or detected on a timely basis. The following material weakness was identified: ​ ​ Material weakness related to Information Technology General Controls ​ We concluded that we did not have effective information technology general controls over a cloud-based software system that supports our project set-up and time submissions for services provided to our customers. As a result, certain business process automated and manual controls were also considered ineffective because they relied on data and reports accumulated in such software system. We believe these control deficiencies were a result of our information technology processes lacking adequate reviews and documentation to maintain effective controls related to access management, change management and complementary user-organization controls to those implemented at the Service Organization that hosts the software system. ​ The material weakness did not result in any identified misstatements. and there were no changes to previously released financial results. ​ 82 Table of Contents The Company’s independent registered public accounting firm, CohnReznick LLP, has issued an adverse opinion on the effectiveness of the Company’s internal control over financial reporting as of December 31, 2021, which appears in Item 8. of this Annual Report on Form 10-K. ​ Management’s Plan to Remediate the Material Weakness ​ Management has outlined a remediation plan and continues to implement measures designed to ensure that control deficiencies contributing to the material weakness are remediated, such that these controls are designed, implemented, and operating effectively. Management remediation actions include: ​ (i) Implement a controlled process for the onboarding, offboarding, and access rights modifications in the application environment to ensure appropriate provisioning of rights on a least privileged basis; (ii) Document the levels of privileged access roles with specific “allowed” capabilities warranting levels of access for specific roles; (iii) Implement a quarterly log review by business owners to ensure that no privileged account access was provided and removed outside of documented service requests; (iv) Implement a controlled process for application and system level changes in the application environment to ensure appropriate understanding of the changes on financial reporting; and (v) Strengthen ownership and reporting through the IT Governance Process currently in place which will serve as the mechanism to monitor the remediation update. ​ We believe that these actions will remediate the material weakness. The weakness will not be considered remediated, until the applicable controls operate for a sufficient period of time and management concludes, through testing, that these controls operate effectively. We expect that the remediation of this material weakness will be completed by or before September 30, 2022. ​ ​ ​ ​ /s/ WILLIAM F. FEEHERY ​ /s/ M. ANDREW SCHEMICK William F. Feehery ​ M. Andrew Schemick Chief Executive Officer ​ Chief Financial Officer March 1, 2022 ​ March 1, 2022 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 83 Table of Contents ​ ​ CERTARA, INC. AND SUBSIDIARIES ​ CONSOLIDATED BALANCE SHEETS ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ DECEMBER 31, (IN THOUSANDS, EXCEPT PER SHARE AND SHARE DATA) ​ 2021 2020 Assets ​ ​ ​ Current assets: ​ ​ ​ Cash and cash equivalents ​ $ 185,797 ​ $ 271,382 Accounts receivable, net of allowance for credit losses of $ 262 and $ 132 , respectively ​ 69,555 ​ 54,091 Restricted cash ​ 827 ​ 1,909 Prepaid expenses and other current assets ​ 18,548 ​ 19,202 Total current assets ​ 274,727 ​ 346,584 Other assets: ​ ​ Property and equipment, net ​ 2,935 ​ 3,872 Operating lease right-of-use assets ​ 12,634 ​ — Goodwill ​ 703,371 ​ 518,592 Intangible assets, net of accumulated amortization of $ 169,329 and $ 127,172 , respectively ​ 511,823 ​ 396,445 Deferred income taxes ​ 4,073 ​ 2,744 Other long-term assets ​ ​ 2,167 ​ ​ 1,163 Total assets ​ $ 1,511,730 ​ $ 1,269,400 Liabilities and stockholder’s equity ​ ​ Current liabilities: ​ ​ Accounts payable ​ $ 7,458 ​ $ 6,394 Accrued expenses ​ 29,830 ​ 30,729 Current portion of deferred revenue ​ 45,496 ​ 30,662 Current portion of long-term debt ​ 3,020 ​ 4,680 Other current liabilities ​ 6,421 ​ 2,880 Total current liabilities ​ 92,225 ​ 75,345 Long-term liabilities: ​ ​ Deferred revenue, net of current portion ​ 1,531 ​ 545 Deferred income taxes ​ 76,098 ​ 75,894 Operating lease liabilities, net of current portion ​ 8,256 ​ — Long-term debt, net of current portion and debt discount ​ ​ 291,746 ​ ​ 294,100 Other long-term liabilities ​ 25 ​ 1,384 Total liabilities ​ 469,881 ​ 447,268 Commitments and contingencies (Note 12) ​ ​ Stockholder’s equity ​ ​ Preferred shares, $ 0.01 par value, 50,000,000 and no shares authorized as of December 31, 2021 and 2020, respectively, no shares issued and outstanding as of December 31, 2021 and 2020, respectively ​ ​ — ​ ​ — Common shares, 0.01 par value, 600,000,000 shares authorized, 159,658,948 and 152,979,479 shares outstanding at December 31, 2021 and 2020, respectively ​ 1,596 ​ 1,529 Additional paid-in capital ​ 1,119,821 ​ 884,528 Accumulated deficit ​ ( 75,604 ) ​ ( 62,338 ) Accumulated other comprehensive loss ​ ​ ( 3,926 ) ​ ​ ( 1,587 ) Treasury stock at cost, 1,100 and no shares at December 31, 2021 and 2020, respectively ​ ( 38 ) ​ — Total stockholder’s equity ​ 1,041,849 ​ 822,132 Total liabilities and stockholder’s equity ​ $ 1,511,730 ​ $ 1,269,400 ​ The accompanying notes are an integral part of the consolidated financial statements 84 Table of Contents ​ CERTARA, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ YEAR ENDED DECEMBER 31, (IN THOUSANDS, EXCEPT PER SHARE AND SHARE DATA) ​ 2021 2020 2019 Revenues ​ $ 286,104 ​ $ 243,530 ​ $ 208,511 Cost of revenues ​ 111,616 ​ 100,765 ​ ​ 79,770 Operating expenses: ​ ​ ​ ​ ​ ​ ​ Sales and marketing ​ 20,141 ​ 19,202 ​ ​ 10,732 Research and development ​ 20,379 ​ 19,644 ​ ​ 11,633 General and administrative ​ 79,539 ​ 88,482 ​ ​ 47,926 Intangible asset amortization ​ 38,715 ​ 37,414 ​ ​ 36,241 Depreciation and amortization expense ​ 2,135 ​ 2,443 ​ ​ 2,596 Total operating expenses ​ 160,909 ​ 167,185 ​ ​ 109,128 Income (loss) from operations ​ 13,579 ​ ( 24,420 ) ​ ​ 19,613 Other expenses: ​ ​ ​ ​ Interest expense ​ ( 16,837 ) ​ ( 25,296 ) ​ ​ ( 28,004 ) Miscellaneous, net ​ ( 117 ) ​ ( 465 ) ​ ​ ( 760 ) Total other expenses ​ ( 16,954 ) ​ ( 25,761 ) ​ ​ ( 28,764 ) Loss before income taxes ​ ( 3,375 ) ​ ( 50,181 ) ​ ​ ( 9,151 ) Provision for (benefit) from income taxes ​ 9,891 ​ ( 784 ) ​ ​ ( 225 ) Net loss ​ ( 13,266 ) ​ ( 49,397 ) ​ ​ ( 8,926 ) Other comprehensive income (loss) ​ ​ ​ ​ Foreign currency translation adjustment, net of tax of $ 195 , $( 227 ), $ 267 ​ ( 5,154 ) ​ 5,045 ​ ​ 433 Change in fair value of interest rate swap, net of tax of $( 16 ), $( 384 ), $( 520 ) ​ 547 ​ ( 1,135 ) ​ ​ ( 4,283 ) Reclassification of fair value of interest rate swap, net of tax of $( 765 ), $ 0 , $ 0 ​ ​ 2,268 ​ ​ — ​ ​ — Total other comprehensive income (loss) ​ ( 2,339 ) ​ 3,910 ​ ​ ( 3,850 ) Comprehensive loss ​ $ ( 15,605 ) ​ $ ( 45,487 ) ​ $ ( 12,776 ) Net loss per common shares — basic and diluted ​ $ ( 0.09 ) ​ $ ( 0.37 ) ​ $ ( 0.07 ) Basic and diluted weighted average common shares outstanding ​ 149,842,668 ​ 133,247,212 ​ ​ 132,407,786 The accompanying notes are an integral part of the consolidated financial statements ​ 85 Table of Contents CERTARA, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ACCUMULATED ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ OTHER ​ ​ ​ ​ TOTAL ​ ​ COMMON STOCK ​ ADDITIONAL ​ ACCUMULATED ​ COMPREHENSIVE ​ ​ ​ ​ STOCKHOLDER’S (IN THOUSANDS, EXCEPT SHARE DATA) SHARES AMOUNT PAID-IN CAPITAL DEFICIT LOSS ​ ​ Treasury Stock ​ EQUITY Balance as of December 31, 2018 132,407,786 ​ $ 1,324 ​ $ 507,524 ​ $ ( 14,432 ) ​ $ ( 1,647 ) ​ $ — ​ $ 492,769 Cumulative effect adjustment upon adoption of Topic 606 — ​ — ​ — ​ 10,417 ​ — ​ ​ — ​ 10,417 Equity compensation — ​ — ​ 1,691 ​ — ​ — ​ ​ — ​ 1,691 Repurchase of Parent Class B units — ​ — ​ ( 703 ) ​ — ​ — ​ ​ — ​ ( 703 ) Capital contribution — ​ — ​ 650 ​ — ​ — ​ ​ — ​ 650 Change in fair value of interest rate swap, net of tax — ​ — ​ — ​ — ​ ( 4,283 ) ​ ​ — ​ ( 4,283 ) Net loss — ​ — ​ — ​ ( 8,926 ) ​ — ​ ​ — ​ ( 8,926 ) Foreign currency translation adjustment, net of tax — ​ — ​ — ​ — ​ 433 ​ ​ — ​ 433 Balance as of December 31, 2019 132,407,786 ​ ​ 1,324 ​ 509,162 ​ ​ ( 12,941 ) ​ ​ ( 5,497 ) ​ ​ — ​ ​ 492,048 Equity-based compensation awards 5,941,693 ​ 59 ​ 64,448 ​ — ​ — ​ ​ — ​ 64,507 Repurchase of Parent Class B units — ​ — ​ ( 1,079 ) ​ — ​ — ​ ​ — ​ ( 1,079 ) Capital contribution — ​ — ​ 250 ​ — ​ — ​ ​ — ​ 250 Issuance of common stock upon initial public offering, net ​ 14,630,000 ​ ​ 146 ​ ​ 311,747 ​ ​ — ​ ​ ​ ​ ​ — ​ ​ 311,893 Change in fair value of interest rate swap, net of tax — ​ — ​ — ​ — ​ ( 1,135 ) ​ ​ — ​ ( 1,135 ) Net loss — ​ — ​ — ​ ( 49,397 ) ​ — ​ ​ — ​ ( 49,397 ) Foreign currency translation adjustment, net of tax — ​ — ​ — ​ — ​ 5,045 ​ ​ — ​ 5,045 Balance as of December 31, 2020 152,979,479 ​ ​ 1,529 ​ ​ 884,528 ​ ​ ( 62,338 ) ​ ​ ( 1,587 ) ​ ​ — ​ ​ 822,132 Equity-based compensation awards ​ ( 59,148 ) ​ — ​ 29,483 ​ — ​ — ​ ​ — ​ ​ 29,483 Restricted stock units withheld for tax liability ​ — ​ ​ — ​ ​ ( 234 ) ​ ​ — ​ ​ — ​ ​ — ​ ​ ( 234 ) Issuance common stock from public offerings, net ​ 4,500,000 ​ 45 ​ 133,306 ​ — ​ — ​ ​ — ​ ​ 133,351 Common shares issued in connection with Pinnacle acquisition ​ 2,239,717 ​ ​ 22 ​ ​ 72,738 ​ ​ — ​ ​ — ​ ​ — ​ ​ 72,760 Restricted stock withheld for tax liability and in treasury ​ ( 1,100 ) ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ ( 38 ) ​ ​ ( 38 ) Change in fair value from interest rate swap, net of tax ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 547 ​ ​ — ​ ​ 547 Reclassification of fair value of interest rate swap, net of tax ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 2,268 ​ ​ — ​ ​ 2,268 Net loss ​ — ​ ​ — ​ ​ — ​ ​ ( 13,266 ) ​ ​ — ​ ​ — ​ ​ ( 13,266 ) Foreign currency translation adjustment, net of tax ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ ( 5,154 ) ​ ​ — ​ ​ ( 5,154 ) Balance as of December 31, 2021 ​ 159,658,948 ​ $ 1,596 ​ $ 1,119,821 ​ $ ( 75,604 ) ​ $ ( 3,926 ) ​ $ ( 38 ) ​ $ 1,041,849 ​ ​ The accompanying notes are an integral part of the consolidated financial statements ​ 86 Table of Contents CERTARA, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ YEAR ENDED DECEMBER 31, (IN THOUSANDS) 2021 2020 2019 Cash flows from operating activities: ​ ​ ​ ​ Net loss ​ $ ( 13,266 ) ​ $ ( 49,397 ) ​ $ ( 8,926 ) Adjustments to reconcile net loss to net cash provided by operating activities: ​ ​ ​ ​ ​ ​ ​ Depreciation and amortization of property and equipment ​ 2,135 ​ 2,443 ​ ​ 2,596 Amortization of intangible assets ​ 42,980 ​ 40,310 ​ ​ 38,964 Amortization of debt issuance costs ​ 1,531 ​ 1,520 ​ ​ 1,536 (Recovery of) provision for credit losses ​ 130 ​ ( 53 ) ​ ​ 10 Loss on retirement of assets ​ 351 ​ 19 ​ ​ 113 Equity-based compensation expense ​ 29,483 ​ 64,507 ​ ​ 1,691 Unrealized loss on derivative ​ ​ 1,144 ​ ​ — ​ ​ — Deferred income taxes ​ ( 1,184 ) ​ ( 7,825 ) ​ ​ ( 6,703 ) Changes in assets and liabilities, net of acquisitions: ​ ​ ​ ​ ​ ​ ​ Accounts receivable ​ ( 10,066 ) ​ ( 3,932 ) ​ ​ ( 1,521 ) Prepaid expenses and other assets ​ 585 ​ ( 8,257 ) ​ ​ ( 1,831 ) Accounts payable and accrued expenses ​ 1,130 ​ 2,381 ​ ​ 10,031 Deferred revenue ​ 5,435 ​ 3,094 ​ ​ 2,065 Net cash provided by operating activities ​ 60,388 ​ 44,810 ​ ​ 38,025 Cash flows from investing activities: ​ ​ ​ ​ Capital expenditures ​ ( 1,143 ) ​ ( 863 ) ​ ​ ( 2,107 ) Capitalized development costs ​ ( 7,759 ) ​ ( 7,074 ) ​ ​ ( 7,410 ) Business acquisitions, net of cash acquired ​ ( 261,020 ) ​ ( 675 ) ​ ​ — Net cash used in investing activities ​ ( 269,922 ) ​ ( 8,612 ) ​ ​ ( 9,517 ) Cash flows from financing activities: ​ ​ ​ ​ Capital contributions ​ — ​ 250 ​ ​ 650 Unit repurchase ​ — ​ ( 1,079 ) ​ ​ ( 703 ) Proceeds from issuance of common stock, net of underwriters' discounts and commissions ​ ​ 133,351 ​ ​ 316,301 ​ ​ — Proceeds from borrowings on long-term debt ​ 89 ​ — ​ ​ — Payments on long-term debt and finance lease obligations ​ ​ ( 3,973 ) ​ ​ ( 104,358 ) ​ ​ ( 3,436 ) Proceeds from line of credit ​ — ​ 19,880 ​ ​ — Payments on financing component of interest rate swap ​ ​ ( 1,095 ) ​ ​ — ​ ​ — Payments on line of credit ​ — ​ ( 19,880 ) ​ ​ ( 5,000 ) Payment of deferred offering costs ​ ​ ( 1,767 ) ​ ​ ( 2,900 ) ​ ​ — Payment of debt issuance costs ​ ( 2,942 ) ​ — ​ ​ — Payment of taxes on shares and units withheld for employee taxes ​ ​ ( 272 ) ​ — ​ ​ — Net cash provided by (used in) financing activities ​ 123,391 ​ 208,214 ​ ​ ( 8,489 ) Effect of foreign exchange rate changes on cash, cash equivalents, and restricted cash ​ ( 524 ) ​ ( 883 ) ​ ​ ( 2,444 ) Net (decrease) increase in cash, cash equivalents, and restricted cash ​ ( 86,667 ) ​ 243,529 ​ ​ 17,575 Cash, cash equivalents, and restricted cash, at beginning of period ​ 273,291 ​ 29,762 ​ ​ 12,187 Cash, cash equivalents, and restricted cash, at end of period ​ $ 186,624 ​ $ 273,291 ​ $ 29,762 Supplemental disclosures of cash flow information ​ ​ ​ ​ Cash paid for interest ​ $ 14,169 ​ $ 27,607 ​ $ 26,428 Cash paid for taxes ​ $ 8,595 ​ $ 12,278 ​ $ 4,109 Supplemental schedule of noncash investing and financing activities ​ ​ ​ ​ ​ ​ ​ Property and equipment controlled through capital lease obligations ​ $ — ​ $ 831 ​ $ — Deferred offering costs, accrued but not paid ​ $ — ​ $ 1,767 ​ $ — Operating right-of-use assets recognized upon adoption of ASC 842 ​ $ 15,857 ​ $ — ​ $ — Operating lease liability recognized upon adoption of ASC 842 ​ $ 16,809 ​ $ — ​ $ — Common shares issued in connections with the Pinnacle acquisition ​ $ 72,760 ​ $ — ​ $ — ​ The accompanying notes are an integral part of the consolidated financial statements ​ ​ 87 Table of Contents CERTARA, INC. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (IN THOUSANDS, EXCEPT PER SHARE PERCENTAGES AND SHARE AND UNIT DATA) 1. Description of Business Certara, Inc. and its wholly-owned subsidiaries (together, the “Company”) deliver software products and technology-driven services to customers to efficiently carry out and realize the full benefits of biosimulation in drug discovery, preclinical and clinical research, regulatory submissions and market access. The Company is a global leader in biosimulation, and the Company’s biosimulation software and technology-driven services help optimize, streamline, or even waive certain clinical trials to accelerate programs, reduce costs, and increase the probability of success. The Company’s regulatory science and market access software and services are underpinned by technologies such as regulatory submissions software, natural language processing, and Bayesian analytics. When combined, these solutions allow the Company to offer customers end-to-end support across the entire product life cycle. On October 1, 2020, the Company amended the certificate of incorporation of EQT Avatar Topco, Inc. to change the name of the Company to Certara, Inc. The Company has operations in the United States, Canada, Spain, Luxembourg, Portugal, United Kingdom, Germany, France, Netherlands, Denmark, Switzerland, Italy, Poland, Japan, Philippines, India, Australia and China. ​ ​ 2. Summary of Significant Accounting Policies (a) Basis of Presentation and Use of Estimates The preparation of 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 consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates include, among other estimates, assumptions used in the allocation of the transaction price to separate performance obligations, estimates towards the measure of progress of completion on fixed-price service contracts, the determination of fair values and useful lives of long-lived assets as well as intangible assets, goodwill, allowance for credit losses for accounts receivable, recoverability of deferred tax assets, recognition of deferred revenue, value of interest rate swaps, determination of fair value of equity-based awards and assumptions used in testing for impairment of long-lived assets. Actual results could differ from those estimates, and such differences may be material to the consolidated financial statements. (b) Recently Adopted Accounting Pronouncements In October 2021, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2021-08, “Business Combinations (Topic 805) - Accounting for Contract Assets and Contract Liabilities from Contracts with Customers”, which requires that at the acquisition date, an acquirer should account for the related revenue contracts in accordance with ASC Topic 606, “Revenue from Contracts with Customers” (“Topic 606”), as if it had originated the contracts. Generally, this results in an acquirer recognizing and measuring the acquired contract assets and contract liabilities consistent with how they were recognized and measured in the acquiree’s financial statements if the acquiree prepared financial statements in accordance with U. S. GAAP. For public business entities, the ASU is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Early adoption of the ASU is permitted. The Company early adopted ASU 2021-08 early and has carried over the contract assets and liabilities from the 2021 business acquisitions into the Company’s 2021 consolidated financial statements. In December 2019, the FASB issued ASU 2019-12, "Simplifying the Accounting for Income Taxes" which removes certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. The Company adopted this guidance on January 1, 2021 on a prospective basis. The adoption of this guidance did not have an impact on the Company's consolidated financial statements. 88 Table of Contents In January 2017, the FASB issued ASU No. 2017-04, “Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment”, which simplifies the subsequent measurement of goodwill and eliminated Step 2 test from goodwill impairment test. Step 2 required an entity to perform procedures that determine the fair value of its reporting units at the impairment testing date of its assets and liabilities following the procedure that would be required in determining the fair value of assets acquired and liabilities assumed in a business combination. Under the new guidance, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with it carrying amount. The Company adopted the standard as of December 31, 2021. The adoption of this guidance did not have a material impact on the Company's consolidated financial statements. In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments”, which amended the existing accounting standard for the measurement of credit losses. The new standard primarily requires using the current expected credit losses approach to measure and recognize credit losses of financial assets held at amortization cost. It replaces the existing incurred loss model with an expected loss model and requires using historical data and adjusting for current economic conditions, including reasonable and supportable forecasts to estimate credit losses to be expected. The Company adopted the standard as of December 31, 2021. The adoption of this guidance did not have a material impact on the Company's consolidated financial statements. In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842)”, which supersedes FASB Topic 840, “Leases (Topic 840)” and requires lessees to recognize most leases on the balance sheet with a corresponding right of use asset. Leases will be classified as financing or operating which will drive the expense recognition pattern. For lessees, the income statement presentation and expense recognition pattern for financing and operating leases is similar to the current model for capital and operating leases, respectively. Companies may elect to exclude short-term leases. The update also requires additional disclosures that will better enable users of financial statements to assess the amount, timing, and uncertainty of cash flows arising from leases. The Company adopted the new standard as of January 1, 2021, due to its loss of emerging growth company (“EGC”) status, using the effective date transition method. As permitted under the effective date transition method, financial information and disclosure for periods prior to the date of initial application was not updated. An adjustment to opening accumulated deficit was not required in conjunction with the Company’s adoption. The Company has elected not to reassess whether expired or existing contracts contain leases, nor did the Company reassess the classification of existing leases as of the adoption date. The Company did not use hindsight in the assessment of lease terms as of the effective date. For additional information, see Note 14 - Leases. (c) Recently Issued Accounting Pronouncements In November 2021, the FASB issued ASU 2021-10, “Government Assistance (Topic 832): Disclosures by Business Entities about Government Assistance”. The ASU requires that entities increase disclosures about government assistance received relating to accounting policy, nature of the assistance, and the effect of the assistance on the financial statements. The ASU is effective for annual periods beginning after December 15, 2021. Early application of the ASU is permitted. The Company is currently evaluating the impact of these amendments on its consolidated financial statements. (d) Principles of Consolidation The accompanying 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 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. 89 Table of Contents 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 in different levels of the fair value hierarchy, the hierarchy is based upon 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. (f) Cash and Cash Equivalents and Restricted Cash Cash equivalents include highly-liquid investments with maturities of three months or less from the date purchased. At times, cash balances held at financial institutions were in excess of the Federal Deposit Insurance Corporation’s (“FDIC”) insured limits; however, the Company primarily places its temporary cash with high-credit quality financial institutions. The Company has never experienced losses related to these balances and believes it is not exposed to any significant credit risk on cash. Restricted cash represents cash that is reserved to support a financing program and unexpended restricted grant funds. The restricted cash balance was $ 827 and $ 1,909 at December 31, 2021 and 2020, respectively. As of December 31, 2021 and 2020, the carrying values reflected in the Consolidated Balance Sheets reasonably approximate the fair values of cash and cash equivalents and restricted cash due to the short-term maturity of these items. The following table provides a reconciliation of cash and cash equivalents and restricted cash reported within the consolidated balance sheets to the amounts presented in the consolidated statements of cash flows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ DECEMBER 31, ​ ​ 2021 2020 2019 Cash and cash equivalents ​ $ 185,797 ​ $ 271,382 ​ $ 29,256 Restricted cash, current ​ 827 ​ 1,909 ​ 506 Total cash and cash equivalents, and restricted cash ​ $ 186,624 ​ $ 273,291 ​ $ 29,762 ​ (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 product or upon achievement of billable events for service-based contracts. 90 Table of Contents 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 trade receivables using historical loss data adjusted for current economic conditions, including reasonable and supportable forecasts to estimate relative size of credit losses to be expected under the CECL model. 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 $ 262 and $ 132 were provided in the accompanying consolidated financial statements as of December 31, 2021 and 2020, respectively. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ DECEMBER 31, ​ 2021 2020 Trade receivables ​ $ 60,167 ​ $ 46,395 Unbilled receivables ​ 9,071 ​ 7,698 Other receivables ​ ​ 579 ​ ​ 130 Allowances for credit losses ​ ( 262 ) ​ ( 132 ) Accounts receivable, net ​ $ 69,555 ​ $ 54,091 ​ The following is the allowance rollforward of credit losses for the Company’s accounts receivable as of December 31, 2021 and 2020. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ DECEMBER 31, ​ 2021 2020 Beginning balance ​ $ 132 ​ $ 185 Provision for credit losses ​ 215 ​ 23 Charge-offs ​ ​ ( 85 ) ​ ​ ( 89 ) Recoveries ​ — ​ 13 Ending Balance ​ $ 262 ​ $ 132 ​ ​ (h) Property and Equipment Property and equipment are stated at cost, less accumulated depreciation and amortization. Depreciation and amortization is provided using the straight-line method over the estimated useful lives of the assets, which range from three to ten years for equipment and furniture, the shorter of the useful lives of the improvement or the life of the related lease term for leasehold improvements, and one to three years for purchased software. The Company seeks to match the book useful life of assets to the expected productive lives. Assets deemed to be impaired or no longer productive are written down to their net realizable value. The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying value of the asset may not be recoverable. If such events or changes in circumstances are present, an impairment loss would be recognized if the sum of the expected future net cash flows is less than the carrying amount of the asset. An impairment loss would be recorded for the excess of the carrying value of the asset over the estimated fair value. There was no impairment of property and equipment for the years ended December 31, 2021, 2020, and 2019. 91 Table of Contents (i) Leases The Company determines if a contract contains a lease at contract inception and whether its classification as either an operating or finance lease at lease commencement. The Company’s current portfolio includes operating leases of real estate and capital leases of equipment. The Company records a lease liability, as of the lease commencement date, in an amount equal to the present value of future fixed payments over the lease term. Options to extend or terminate a lease are considered in the lease term to the extent that the option is reasonably certain of exercise. A right-of-use (“ROU”) asset is recorded in an amount equal to the corresponding lease liability adjusted for prepayments, initial directs costs and lease incentives, if applicable. The Company has elected not to recognize ROU assets and lease liabilities for short-term leases of real estate with a lease term of 12 months or less. The Company generally uses its incremental borrowing rate in determining the present value of future payments as the rate implicit in the lease is unknown. The incremental borrowing rate represents the rate of interest that the Company would expect to pay on a collateralized basis to borrow an amount equal to the lease payments under similar terms. Fixed lease payments on operating leases are recognized on a straight-line basis over the lease term, while variable payments are recognized in the period incurred. Variable lease payments include real estate taxes and charges for other non-lease services due to lessors that are not dependent on an index or rate. The Company’s real estate contracts may include fixed consideration attributable to both lease and non-lease components, including non-lease services provided by the lessor, which are accounted for as a single fixed minimum payment. ROU assets under finance leases are depreciated in a manner similar to other property and equipment. (j) Software Development Costs Software development costs are accounted for in accordance with FASB ASC Subtopic 985-20 if the software is to be sold, leased or otherwise marketed, or by FASB ASC Subtopic 350-40 if the software is for internal use. After the technological feasibility of the software has been established (for software to be marketed), or at the beginning of application development (for internal-use software), software development costs, which include primarily salaries and related payroll costs and costs of independent contractors incurred during development, are capitalized. Research and development (“R&D”) costs incurred prior to the establishment of technological feasibility (for software to be marketed), or prior to application development (for internal-use software), are expensed as incurred. Software development costs are amortized on a product-by-product basis commencing on the date of general release of the products (for software to be marketed) or the date placed in service (for internal-use software). During the years ended December 31, 2021, 2020 and 2019, costs of $ 7,759 , $ 7,074 , and $ 7,410 , respectively, were capitalized related to software development activities. Software development costs for software to be marketed are amortized using the straight-line method over its estimated useful life, which is typically three years . The Company reviews capitalized software for impairment whenever events or changes in circumstances indicate that the carrying value of the asset may not be recoverable. If such events or changes in circumstances are present, an impairment loss would be recognized if the sum of the expected future net cash flows is less than the carrying amount of the asset. An impairment loss would be recorded for the excess of the carrying value of the asset over the estimated fair value. There was no impairment of software development costs for the years ended December 31, 2021, 2020, and 2019. (k) Debt Issuance Costs Debt issuance costs are capitalized and amortized over the term of the related debt using the effective interest rate method. Amortization of debt issuance costs is included in interest expense within the Consolidated Statements of Operations and Comprehensive Loss. The unamortized amount is included as an offset against long-term debt on the Consolidated Balance Sheets. Debt issuance costs related to line-of-credit arrangements are capitalized and are included in other long-term assets on the Consolidated Balance Sheets. The capitalized costs are amortized ratably over the term of the line-of-credit arrangement. The amortization costs are included in interest expense within the Consolidated Statements of Operations and Comprehensive Loss, regardless of whether there are any outstanding borrowings on the line-of-credit arrangement. 92 Table of Contents (l) Goodwill and Other Intangible Assets The Company has four reporting units – Software reporting unit (“Software”), SimCyp reporting unit (“SimCyp”), Integrated Drug Development reporting unit (“IDD”), and Regulatory Writing reporting unit (“Regulatory Writing”) which are within a single operating segment of the Company. Goodwill is tested for impairment at the reporting unit level, which is one level below or the same as an operating segment. When testing goodwill for impairment, the Company performs a qualitative assessment to determine whether events or circumstances lead to a determination that it is more-likely-than-not that the fair values of the reporting units are less than their carrying amounts. If the Company determines that it is not more-likely-than-not that the fair values of the reporting units are less than their carrying values, no further assessment is performed. If the Company determines that it is more-likely-than-not that the fair values of the report units are less than carrying value, the Company proceed to perform a quantitative goodwill impairment test. If the result of the quantitative test show that carrying amount of reporting unit exceeds its fair values, an impairment loss is recognized in an amount equal to that excess, limited to the total amount of goodwill allocated to that reporting unit. For the years ended December 31, 2021, 2020, and 2019, the Company performed quantitative assessments of goodwill. The most recent assessment was performed on October 1, 2021. The quantitative assessments resulted in no impairment as the estimated fair value of each reporting unit significantly exceeded its carrying value. Accordingly, no impairment loss was recorded for the years ended December 31, 2021, 2020, and 2019. Other identifiable intangible assets with finite lives, such as software products acquired in acquisitions, non-compete agreements, tradenames and customer relationship assets, are amortized over their estimated lives using either a straight-line method or a method based on pattern of expected economic benefit of the asset as follows: acquired software — 3 to 14 years ; non-compete agreements —  2 to 5 years ; tradenames — 20 years ; customer relationships — 11 to 16 years ; and trademarks — 10 to 17 years . The Company evaluates finite intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset might not be recoverable. An impairment loss is recognized when estimated undiscounted future cash flows expected to result from the use of the asset are less than its carrying amount. There were no impairment charges related to intangible assets for the years ended December 31, 2021, 2020, and 2019. (m) Foreign Currency Translation Generally, the functional currency of the Company’s international subsidiaries is the local currency of the country in which they operate. The Company translates the assets and liabilities of its non-U.S. dollar functional currency subsidiaries into U.S. dollars using exchange rates in effect at the end of each reporting period. Revenue and expenses for these subsidiaries are translated using average exchange rates prevailing during the period. Gains and losses from these translations are recognized as a cumulative translation adjustment and included as a separate component in accumulated other comprehensive loss within stockholders’ equity. For transactions that are not denominated in the local functional currency, the Company remeasures monetary assets and liabilities at exchange rates in effect at the end of each reporting period. Foreign currency transaction gains and losses are included net within comprehensive gain or loss in the Consolidated Statements of Operations and Comprehensive Loss and resulted in foreign currency gain (losses) of $ 175 , $( 715 ), and $( 431 ) for the years ended December 31, 2021, 2020, and 2019, respectively. (n) 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 93 Table of Contents addition, at 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 has an interest rate swap agreement that was designated as a cash flow hedge of interest rate risk for a notional amount of $ 230,000 that fixed the interest rate at 2.1284 %, non-inclusive of the fixed credit spread through May 31, 2022. In the second quarter of 2021, the Company determined that the hedge had not been highly effective from April 2018 and did not qualify for hedge accounting. As a result, the Company performed an analysis of the materiality of the out of period error correction in accordance with ASC 250, “Accounting Changes and Error Corrections”, both quantitively and qualitatively, and concluded that the error correction was immaterial to all periods. The Company reclassified $ 3,033 of accumulated comprehensive loss to interest expense in the Consolidated Statements of Operations and Comprehensive Loss in the second quarter of 2021. Changes in the fair value of the interest rate swap recognized in interest expense excluding the reclassification discussed previously for the year ended December 31, 2021 amounted to $ 638 . On August 31, 2021, the Company entered an amendment to the interest rate swap agreement. The amended interest rate swap agreement does not in its entirety meet the definition of a derivative instrument because of its off market fixed rate at inception and is deemed to be a hybrid instrument with a financing component and an embedded at-the-market derivative. Such embedded derivative is bifurcated and accounted for separately. At inception, the financing component of $ 1,966 was recorded as the amortized cost. The embedded at-the-market derivative was designated and qualified as a cash flow hedge of interest rate risk for a notional amount of $ 230,000 that fixed the interest rate at 1.2757 %, non-inclusive of the fixed credit spread through May 31, 2022. The fair value of the embedded at-the-market derivative is recognized in the Consolidated Balance Sheets and the changes in the fair value of the embedded at-the-market derivative is recognized in other comprehensive income(loss). At December 31, 2021, the financing component is recorded as current portion of interest rate swap liability in the amount of $ 1,088 and is included in other current liabilities on the Consolidated Balance Sheet. Due to an other-than-insignificant financing element on a portion of such hybrid instrument, the cash flows associated with this hybrid instrument are classified as financing activities in the Consolidated Statements of Cash Flows. At December 31, 2021, the Company recorded the fair value of the embedded at-the-market derivative as current portion of interest rate swap assets in the amount of $ 57 in prepaid expenses and other current assets on the Consolidated Balance Sheet. ​ The following table sets forth the 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, 2021: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ LEVEL 1 LEVEL 2 LEVEL 3 TOTAL Asset ​ ​ ​ ​ Interest rate swap asset ​ $ — ​ $ 57 ​ $ — ​ $ 57 Total ​ $ — ​ $ 57 ​ $ — ​ $ 57 ​ The following table sets forth the 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, 2020: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ LEVEL 1 LEVEL 2 LEVEL 3 TOTAL Liability ​ ​ ​ ​ Interest rate swap liability ​ $ — ​ $ 3,671 ​ $ — ​ $ 3,671 Total ​ $ — ​ $ 3,671 ​ $ — ​ $ 3,671 ​ 94 Table of Contents The net amount of deferred gains (losses) related to derivative instruments designated as cash flow hedges that is expected to be reclassified from accumulated other comprehensive loss into interest expense over the next 12 months is insignificant. (o) Warranty ‌ The Company includes an assurance commitment warranting 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 applications software, warranty costs are insignificant and expensed as incurred. (p) 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 earnings per share is computed by dividing the net earnings attributable to stockholders by the weighted-average number of shares and dilutive securities outstanding during the period. (q) Income Taxes The Company accounts for income taxes under the asset and liability method. Under this method, the amount of taxes currently payable or refundable is accrued, and deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial reporting and tax basis of existing assets and liabilities. Deferred tax assets also include realizable tax losses and tax credit carryforwards. The deferred tax assets may be reduced by a valuation allowance, which is established when it is more likely than not that some portion or all of the deferred tax assets will not be realized. In addition, management is required to evaluate all available evidence, both positive and negative, when making its judgment to determine whether to record a valuation allowance for a portion, or all, of its deferred tax assets. Deferred tax assets and liabilities are measured using enacted income tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in income tax rate is recognized in the period that includes the enactment date. Uncertainty in Income Taxes The Company accounts for uncertainty in income taxes using a two-step approach. The first step requires the Company to conclude that a tax position, based solely on its technical merits, is more likely than not to be sustained upon examination by a tax authority. The second step requires the Company to measure the largest amount of benefit, determined on a cumulative probability basis, that is more likely than not to be realized upon ultimate settlement with tax authority. The Company recognizes the effect of income tax positions only if those positions are more likely than not of being sustained. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs. Further, the benefit to be recorded in the consolidated financial statements is the amount most likely to be realized assuming a review by the tax authorities having all relevant information and applying current conventions. The Company's policy is to recognize interest and penalties related to income tax positions taken as a component of the provision for income taxes. The Company has recorded unrecognized tax benefits of $ 1,059 and $ 897 as of December 31, 2021 and 2020, respectively. As of and for the years ended December 31, 2021 and 2020, there were no interest or penalties recorded. The Company does not anticipate any significant changes to its uncertain tax positions during the next 12 months. U.S. federal income tax returns are generally subject to examination for a period of three years after the filing of the return. However, the Internal Revenue Service can audit the NOLs generated in respective years in the years that the NOLs are utilized. State income tax returns are generally subject to examination for a period of three to six years after the filing of the respective tax return. The state impact of any federal changes remains subject to examination by various states for a period of up to one year after formal notification to the states. Foreign income tax returns are generally subject to examination based on the tax laws of the respective jurisdictions. 95 Table of Contents (r) Revenue Recognition The Company’s revenue consists of fees for perpetual and term licenses for the Company’s software products, post-contract customer support (referred to as maintenance), software as a service (“SaaS”) and professional services including training and other revenue. Revenue is recognized upon transfer of control of promised products or services to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for promised goods or services. The Company typically recognizes license revenue at a point in time upon delivering the applicable license. The revenue related to the support and maintenance performance obligation will be recognized on an over-time basis using time elapsed methodology. The revenue related to software training and software implementation performance will be recognized at the completion of the service. The following describes the accounting policies for multiple performance obligations and the nature of the Company’s primary types of revenues and the revenue recognition policies as they pertain to the types of transactions the Company enters into with its customers. Arrangements with Multiple Performance Obligations For contracts with multiple performance obligations, the Company determines if the products or services are distinct and allocates the consideration to each distinct performance obligation on a relative standalone selling price basis. When products and services are not distinct, the Company determines an appropriate measure of progress based on the nature of its overall promise for the single performance obligation. The delivery of a particular type of software and each of the user licenses would be one performance obligation. However, any training, implementation, or support and maintenance promises as part of the software license agreement would be considered separate performance obligations, as those promises are distinct and separately identifiable from the software licenses. The payment terms in these arrangements are sufficiently short such that there is no significant financing component to the transaction. Software Licenses and Support License revenue includes perpetual license fees and term license fees, which provide customers with the same functionality and differ mainly in the duration over which the customer benefits from the use of software. Both revenues from perpetual license and term license performance obligations are generally recognized upfront at the point in time when the software license has been delivered. A source of software license revenue is from term and bundled licenses that are time-based arrangements for one or multiple software products sold together with maintenance and support for the term of the license arrangement. The Company has determined that post customer support and the right to unspecified enhancements and upgrades on a “when-and-if-available” basis included with term licenses is an immaterial component of the transaction price and, therefore, recognized these performance obligation components up front with the license when delivered. Software License contracts do not provide for any non-cash consideration nor is there consideration payable to a customer. Software Services For contracts that include multiple performance obligations, such as a software license plus software training, implementation, and/or maintenance/support, or in contracts where there are multiple software licenses, the transaction price is allocated to each of the performance obligations on a pro-rata basis based on the relative standalone selling price (“SSP”) of each performance obligation. Maintenance services agreements consist of fees for providing software updates and for providing technical support for software products for a specified term. Revenue allocated to maintenance services is recognized ratably over the contract term beginning on the delivery date of each offering. Maintenance contracts generally have a term of one year . Expenses related to maintenance and subscription are recognized as incurred. While transfer of control of the software training and implementation performance obligations are over time, the services are typically started and completed within a few days. Due to the quick nature of the performance obligation from start to finish and the immaterial amounts, the Company recognizes any software training or implementation revenue at the completion of the service. Any unrecognized portion of amounts paid in advance for licenses and services is recorded as 96 Table of Contents deferred revenue. Certara’s software contracts do not typically include discounts, variable consideration, or options for future purchases that would not be similar to the original goods. Consortium revenues consist of contractual agreements with customers where the customer receives multiple benefits as part of their contract with the Company, as follows: access to the latest version simulator software, which has at least one new release per year, free access to a preset number of training workshops, a block of consulting hours to be used at the customer’s discretion, as well as voting rights at the annual consortium meeting where development priorities for the upcoming year are set. The Company’s consortium contracts are generally for three years with annual termination clauses and with annual upfront billings. Consortium revenues are recognized over time as the benefits of the consortium arrangement are realized over the course of the contract. Both the training and consulting services performance obligations will utilize an output method to measure the progress at the end of each reporting period. Revenue from the Company’s performance obligation under the simulation license, which provides customers with access to the latest version of the simulation software, is recognized evenly over the contract period. License revenue and post contract services are combined and reported as software revenue on the Consolidated Statements of Operations and Comprehensive Loss. Subscription Revenues Subscription revenues consists of subscription fees for access to, and related support for, our cloud-based solutions. The Company typically invoices subscription fees in advance in annual installments and recognizes subscription revenue ratably over the term of the applicable agreement, usually one to three years which is initially deferred and recognized ratably over the life of the contract. The output method that accurately depicts the transfer of control was determined to be the delivery of accessibility to the customer. Unearned maintenance and subscription revenue are recorded as deferred revenue. The Company’s subscription services arrangements are generally non-cancelable and do not contain refund-type provisions. In rare instances that subscription services arrangements are deemed cancelable, the Company will adjust the transaction price and period for revenue recognition accordingly to be reflective of the contract term. The contract transaction price is based on the fixed fee for each subscription. Services and Other Revenues The Company’s primary services offering includes consulting services, which may be either strategic consulting services, reporting and analysis services, regulatory writing services, or any combination of the three. Strategic consulting services consists of consulting, training, and process redesign that enables customers to identify which uncertainties are greatest and matter most and then to design development programs, trial sequences, and individual trials in such a way that those trials systematically reduce the identified uncertainties in the most rapid and cost-effective manner possible. The Company’s professional services contracts are either time-and-materials, fixed fee or prepaid. Services revenues are generally recognized over time as the services are performed. Generally, these services are delivered to customers electronically. Revenue from time-and-material contracts is recognized on an output basis as labor hours are delivered and/or direct expenses are incurred. Revenues for fixed price services and prepaid are generally recognized over time applying input methods to estimate progress to completion. Accordingly, the number of resources being paid for and varying lengths of time they are being paid for, determine the measure of progress. Training revenues are recognized as the services are performed over time. However, due to short period over which the transfer of control occurs for a classroom or on-site training course, the revenue related to these performance obligations is recognized at the completion of the course for administrative feasibility purposes. The training services generally do not provide for any non-cash consideration nor is there consideration payable to a customer. At contract inception, the Company assesses the products and services promised in its contracts with customers and identifies a performance obligation for each promise to transfer to the customer a product or service (or bundle of products or services) that is distinct — i.e., if a product or service is separately identifiable from other items in the bundled package and if a customer can benefit from it on its own or with other resources that are readily available to the customer. Determining whether products and services are considered distinct performance obligations that should be accounted for separately versus together may require significant judgment. The Company has contracts with customers that may have 97 Table of Contents multiple performance obligations, including some or all of the following: software licenses, maintenance, subscriptions, professional services and/or training. For these contracts, the Company accounts for individual performance obligations separately if they are distinct within the context of the contract by allocating the contract’s total transaction price to each performance obligation in an amount based on the relative SSP, of each distinct good or service in the contract. In order to determine the SSP of its promised goods or services, the Company conducts an annual analysis to determine whether its goods or services have an observable SSP. In determining SSP, the Company requires that a substantial majority of the standalone selling prices for goods or services fall within a reasonably narrow pricing range. If the Company does not have a directly observable SSP for a particular good or service, then the Company estimates a SSP by the Company’s overall pricing objectives, taking into consideration market factors, pricing practices including historical discounting, historical standalone sales of similar products, customer demographics, geographic locations, and the number and types of users within the Company’s contracts. The determination of SSP is made by the Company’s management. Selling prices are analyzed at least on an annual basis to identify if the Company has experienced significant changes in its selling prices. The Company allocates the transaction price to each performance obligation identified in the contract on a relative SSP basis and recognizes revenue when or as it satisfies a performance obligation by transferring control of a product or service to a customer. Taxes collected from customers and remitted to governmental authorities are not included in revenue. The Company does not incur shipping and handling for its goods as they are generally delivered to a customer electronically. The Company does not believe that it currently has any rights to return that would result in a material impact to revenues. Contract Balances The timing of revenue recognition, billings and cash collections results in billed accounts receivable, unbilled receivables (contract assets), and customer advances and deposits (deferred revenue, contract liabilities) on the Consolidated Balance Sheets. Amounts are billed as work progresses in accordance with agreed-upon contractual terms, either at periodic intervals (e.g., quarterly or monthly) or upon achievement of contractual milestones. Contract assets relate to the Company’s rights to consideration for performance obligations satisfied but not billed at the reporting date on contracts (i.e., unbilled revenue, a component of accounts receivable in the Consolidated Balance Sheets). Contract assets are billed and transferred to customer accounts receivable when the rights become unconditional. The Company typically invoices customers for term licenses, subscriptions, maintenance and support fees in advance with payment due before the start of the subscription term, ranging from one to three years . The Company records the amounts collected in advance of the satisfaction of performance obligations, usually over time, as a contract liability or deferred revenue. Invoiced amounts for non-cancelable services starting in future periods are included in contract assets and deferred revenue. The portion of deferred revenue that will be recognized within 12 months is recorded as current deferred revenue, and the remaining portion is recorded as non-current deferred revenue in the Consolidated Balance Sheets. The unsatisfied performance obligation as of December 31, 2021 was approximately $ 91,943 . Deferred Contract Acquisition Costs Under ASC 606, sales commissions paid to the sales force and the related employer payroll taxes, collectively “deferred contract acquisition costs”, are considered incremental and recoverable costs of obtaining a contract with a customer. The Company has determined that sales commissions paid are an immaterial component of obtaining a customer’s contract and has elected to expense sales commissions when paid. 98 Table of Contents 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: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ YEAR ENDED DECEMBER 31, ​ ​ 2021 ​ 2020 2019 Software licenses transferred at a point in time ​ $ 40,167 ​ $ 36,388 ​ $ 35,261 Software licenses transferred over time ​ 46,658 ​ 37,075 ​ 33,080 Service revenues earned over time ​ 199,279 ​ 170,067 ​ 140,170 Total ​ $ 286,104 ​ $ 243,530 ​ $ 208,511 ​ (s) Equity-Based Compensation The Company measures equity-based compensation at fair value and recognizes the expense over the vesting period. Compensation costs for our legacy Class B Units, issued by EQT, that vested based on continued service requirements and the restricted stock into which they were exchanged are recognized on a straight-line basis over the requisite service period. Compensation costs for our restricted stock units are recognized on a straight-line basis over the requisite service period. Compensation costs for our restricted stock exchanged for our legacy Class B Units with performance vesting conditions are recognized using the accelerated attribution approach. Forfeitures are recognized as they occur for all awards. (t) Comprehensive Income (Loss) FASB ASC 220, “Comprehensive Income,” establishes standards for reporting of comprehensive income and its components (revenue, gains, and losses) in a full set of general-purpose financial statements. FASB ASC 220 requires that all components of comprehensive income, including net income, be reported in a financial statement that is displayed with the same prominence as other financial statements. Comprehensive income (loss) is defined as the change in equity during a period from transactions and other events and circumstances from non-owner sources. Net income (loss) and other comprehensive income (loss), including foreign currency translation adjustments, and changes in fair value of derivative instruments (interest rate swap agreements) designated as cash flow hedges, shall be reported to arrive at comprehensive (loss). Comprehensive income (loss) is displayed in the Consolidated Statements of Operations and Comprehensive Income (Loss). The components of other comprehensive income (loss) consisted of foreign currency translation adjustments totaling $( 5,154 ), $ 5,045 and $ 433 , respectively, and the changes in fair value of interest rate swap (excluding $ 2,268 reclassification, net of tax), totaling $ 547 , $( 1,135 ), and $( 4,283 ) for the years ended December 31, 2021, 2020, and 2019, respectively. (u) Reclassification Certain previously reported amounts in the consolidated financial statements have been reclassified to conform to the current year presentation. ​ (v) COVID-19 Since the first quarter of 2020, the COVID-19 pandemic has posed a significant threat to public health as well as the global and U.S. economies. The continued spread of variants of COVID-19 may adversely impact our business, financial condition or results of operations as a result of increased costs, negative impacts to our workforce, or a sustained economic downturn. Although the economy has rebounded in many areas, the outlook for containing the outbreak is still highly uncertain. Given its ongoing and dynamic nature, it is difficult to predict the full impact of the COVID-19 outbreak on the global and US economy and our business. 99 Table of Contents 3. Public Offerings On December 15, 2020, the Company completed its initial public offering (“IPO”), pursuant to which the Company issued and sold 14,630,000 shares of common stock and certain selling stockholders, including former controlling shareholder, EQT, sold 18,783,250 shares of our common stock (representing the full exercise of the underwriters’ option to purchase additional shares), at a public offering price of $ 23.00 per share. The Company received net proceeds of $ 316,301 , after deducting underwriters' discounts and commissions. In addition, $ 4,408 of legal, accounting and other offering costs, net of the tax effect of $ 259 , incurred in connection with the sale of the Company's common stock in the IPO, were capitalized and offset against the proceeds received in the IPO. The Company is party to a registration rights agreement with EQT AB and its affiliates (“EQT AB”), Arsenal, EQT, and certain other stockholders (“Institutional Investors”). The registration rights agreement was amended and restated in connection with the IPO. It contains provisions that entitle EQT AB, Arsenal, EQT, and the other stockholder parties thereto to certain rights to have their securities registered by the Company under the Securities Act. EQT AB will be entitled to an unlimited number of “demand” registrations, subject to certain limitations. Every stockholder that holds registration rights will also be entitled to customary “piggyback” registration rights. In addition, the amended and restated registration rights agreement provides that the Company will pay certain expenses of the stockholder parties relating to such registrations and indemnify them against certain liabilities which may arise under the Securities Act of 1933 (“Securities Act”). The registration rights agreement will terminate (i) with the prior written consent of the Institutional Investors in connection with a change of control; (ii) for those holders (other than the Institutional Investors) that beneficially own less than 5 % of the Company’s outstanding shares, if all of the Registrable Securities then owned by such holder could be sold in any 90-day period pursuant to Rule 144; (iii) as to any holder, if all of the Registrable Securities held by such holder have been sold or otherwise transferred in a Registration pursuant to the Securities Act or pursuant to an exemption therefrom; or (iv) with respect to any holder that is an officer, director, employee or consultant of the Company on the date that is 90 days after the date on which such holder ceases to be an employee, director or consultant (as applicable) of the Company. The rights and obligations do not transfer without the written consent of the Company and the Institutional Investors. ​ On March 29, 2021, the Company completed an underwritten secondary public offering in which certain selling stockholders, including EQT, sold 11,500,000 shares of the Company’s common stock, including 1,500,000 shares of common stock pursuant to the full exercise of the underwriters’ option to purchase additional shares. The Company did no t offer any common stock in this transaction and did no t receive any proceeds from the sale of the shares of common stock by the selling stockholders. The Company incurred costs of $ 1,100 , recorded in general and administrative expenses, in relation to the secondary public offering. On September 13, 2021, the Company completed another public offering, at a price of $ 31.00 per share, pursuant to which the Company sold 4,500,000 shares of its common stock, and certain selling stockholders sold 18,500,000 shares of the Company’s common stock, including 3,000,000 shares of common stock pursuant to the full exercise of the underwriters’ option to purchase additional shares. The Company received net proceeds of $ 134,096 , after deducting underwriters' discounts and commissions. In addition, $ 745 of legal, accounting and other offering costs incurred in connection with the sale of the Company's common stock in the public offering were capitalized and offset against the proceeds received. ​ On November 22, 2021, the Company completed another secondary public offering in which certain selling stockholders, including EQT, sold 10,000,000 shares of the Company’s common stock. The Company did no t offer any common stock in this transaction and did no t receive any proceeds from the sale of the shares of common stock by the selling stockholders. The Company incurred costs of $ 644 , recorded in general and administrative expenses, in relation to the secondary public offering. ​ ​ 100 Table of Contents 4. Concentrations of Credit Risk Financial instruments that potentially subject the Company to concentrations of credit risk have consisted principally of cash and cash equivalent investments and trade receivables. The Company invests available cash in bank deposits, investment-grade securities, and short-term interest-producing investments, including government obligations and other money market instruments. At December 31, 2021 and 2020, the investments were bank deposits and overnight sweep accounts. The Company has adopted credit policies and standards to evaluate the risk associated with sales that require collateral, such as letters of credit or bank guarantees, whenever deemed necessary. Management believes that any risk of loss is significantly reduced due to the nature of the customers and distributors with which the Company does business. As of December 31, 2021and 2020, no customer accounted for more than 10% of the Company’s accounts receivable. For the years ended December 31, 2021, 2020, and 2019, no customer accounted for more than 10% of the Company’s revenues. ​ 5. Business Combinations Acquisitions have been accounted for using the acquisition method of accounting pursuant to FASB ASC 805, “Business Combinations.” Amounts allocated to the purchased assets and liabilities are based upon the total purchase price and the estimated fair values of such assets and liabilities on the effective date of the purchase as determined by an independent third party. The results of operations have been included in the Company’s results of operations prospectively from the date of acquisition. Author! B.V. On March 2, 2021, the Company completed a transaction which qualified as a business combination for a total consideration of $ 2,667 . The business combination was not material to our consolidated financial statements. Based on the Company’s purchase price allocation, approximately $ 1,200 , $ 100 and $ 1,200 of the purchase price was assigned to customer relationships, non-compete agreements and goodwill, respectively. Insight Medical Writing Limited On June 7, 2021, the Company completed a transaction which qualified as a business combination for a total consideration of $ 15,197 . The business combination was not material to our consolidated financial statements. Based on the Company’s purchase price allocation, approximately $ 7,400 and $ 4,700 of the purchase price was assigned to customer relationships and goodwill, respectively. Pinnacle 21, LLC On October 1, 2021, the Company acquired 100 % of the equity of Pinnacle. Pinnacle provides software and services for preparing clinical trial data for regulatory submission. The acquisition executes on the Company’s strategy to invest in innovation to increase the use cases of biosimulation and grow adoption of Certara’s end-to-end platform. The acquisition of Pinnacle was treated as a purchase in accordance with ASC 805, “Business Combinations”, which requires allocation of the purchase price to the estimated fair values of assets and liabilities acquired in the transaction. 101 Table of Contents The following table summarizes the fair value of the consideration paid as well as the fair values of the assets acquired and liabilities assumed as of the date of the acquisition: ​ ​ ​ ​ ​ Fair value of consideration: ​ Pinnacle Cash paid to sellers ​ $ 249,115 Cash paid to others and escrow ​ ​ 17,200 Unregistered shares of Certara, Inc. ( 2,239,717 shares) ​ ​ 72,760 Total consideration ​ $ 339,075 ​ ​ ​ ​ Assets acquired and liabilities assumed: ​ ​ ​ Cash and cash equivalents ​ $ 19,409 Accounts receivable ​ ​ 2,925 Other current assets ​ ​ 619 Property and equipment ​ ​ 258 Deferred tax assets ​ ​ 2,907 Identifiable intangible assets: ​ ​ ​ Trademark ​ ​ 15,800 Acquired software ​ ​ 103,000 Customer relationships ​ ​ 24,600 Goodwill ​ ​ 180,947 Long-term deposits ​ ​ 34 Current liabilities ​ ​ ( 794 ) Current portion of deferred revenue ​ ​ ( 10,630 ) Net assets acquired ​ $ 339,075 ​ The fair value of the unregistered shares given as part of the purchase consideration was determined based on the market price of Certara stock on the closing date less a 7 % discount for lack of marketability. The acquisition was structured as an asset acquisition for income tax purposes; therefore, the Company’s tax basis in Pinnacle’s identifiable assets reflects the fair value of consideration paid. However, the company did not recognize tax basis in certain liabilities assumed at the acquisition date; resulting in deferred income taxes being recorded in purchase accounting. The fair value of the intangible assets is based on significant inputs that are not observable in the market and, therefore, represent Level 3 measurements within the fair value measurement hierarchy. The fair value of the customer relationships (Distributor method), trademarks (Relief from Royalty method) and developed technology (Multi-Period Excess Earnings Method) was determined under the income approach. Goodwill of $ 180,947 was recorded to reflect the excess of the purchase price over the estimated fair value of the net identifiable assets acquired, which is generally deductible for income tax purposes. The excess of the purchase prices over the fair values of the acquired business's net assets represent cost and revenue synergies specific to the Company, as well as non-capitalizable intangible assets, such as the employee workforces acquired, and has been allocated to goodwill. The current purchase price allocation is preliminary. The primary areas of the preliminary purchase price allocations that are not yet finalized relate to the fair value of certain tangible and intangible assets acquired and liabilities assumed, and residual goodwill. The Company expects to continue to obtain information to assist in determining the fair values of the net assets acquired at the acquisition dates during the measurement periods. 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 Company incurred $ 7,615 of transaction costs related to this acquisition, which are included in general and administrative expenses in the Consolidated Statement of Operations for the year ended December 31, 2021. 102 Table of Contents The results of operations of the acquired business 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 acquisition. The Company’s Consolidated Statement of Operations and Comprehensive Loss for the year ended December 31, 2021 includes revenues of $ 6,129 and a net income of $ 380 which includes the effects of purchase accounting adjustments, primarily changes in amortization of intangible assets. Supplemental Pro Forma Information (unaudited) The following unaudited pro forma combined financial information assumes that the acquisition of Pinnacle occurred on January 1, 2020. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the year ended December 31 ​ ​ ​ 2021 ​ ​ 2020 Revenues ​ $ 303,234 ​ $ 262,048 Net loss ​ $ ( 11,307 ) ​ $ ( 49,012 ) ​ The unaudited pro forma combined results for the years ended December 31, 2021 and 2020 primarily include the following pro forma adjustments: ● Incremental amortization expense, net of tax, related to Pinnacle purchased intangible assets in an amount of $ 5,246 and $ 7,001 for the years ended December 31, 2021 and 2020, respectively. ● Incremental equity-based compensation expense, net of tax, related to replacement awards in an amount of $ 641 and $ 856 for the years ended December 31, 2021 and 2020, respectively. Integrated Nonclinical Development Solutions, Inc. On January 3, 2022, the Company completed the acquisition of Integrated Nonclinical Development Solutions, Inc. (“INDS”), a company that provides the SEND Explorer® software and drug development consulting, for total consideration of $ 7,078 . The Company will complete the initial accounting for the acquisition of INDS, including the allocation of purchase consideration, in the first quarter of 2022. ​ 6. Prepaid Expenses and Other Current Assets and Other Supplemental Assets Information Prepaid and other current assets consisted of the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ DECEMBER 31, ​ 2021 2020 Prepaid expenses ​ $ 8,973 ​ $ 7,372 Income tax receivable ​ 4,800 ​ 7,098 Research and development tax credit receivable ​ 3,951 ​ 3,610 Current portion of interest rate swap asset ​ ​ 57 ​ ​ — Other current assets ​ 767 ​ 1,122 Prepaid expenses and other current assets ​ $ 18,548 ​ $ 19,202 ​ ​ ​ 103 Table of Contents Other long-term assets consisted of the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ DECEMBER 31, ​ 2021 2020 Long-term deposits ​ $ 1,160 ​ $ 1,163 Deferred financing cost ​ 1,007 ​ — Total other long-term assets ​ $ 2,167 ​ $ 1,163 ​ ​ 7. Property and Equipment Property and equipment consisted of the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ DECEMBER 31, ​ 2021 2020 Computer and office equipment ​ $ 5,955 ​ $ 5,619 Furniture ​ 3,075 ​ 3,147 Purchased software for internal use ​ 698 ​ 679 Leasehold improvements ​ 1,762 ​ 2,386 Property and equipment ​ 11,490 ​ 11,831 Less: Accumulated depreciation and amortization ​ ( 8,555 ) ​ ( 7,959 ) Property and equipment, net ​ $ 2,935 ​ $ 3,872 ​ Depreciation and amortization expense were $ 2,135 , $ 2,443 , and $ 2,596 for the years ended December 31, 2021, 2020, and 2019, respectively. ​ 8. Goodwill and Other Intangible Assets The following table presents the Company’s intangible assets (other than goodwill) and the related amortization: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ WEIGHTED ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ AVERAGE ​ DECEMBER 31, 2021 ​ DECEMBER 31, 2020 ​ ​ AMORTIZATION ​ GROSS ​ ​ ​ ​ ​ ​ ​ GROSS ​ ​ ​ ​ ​ ​ ​ ​ PERIOD ​ CARRYING ​ ACCUMULATED ​ ​ ​ ​ CARRYING ​ ACCUMULATED ​ ​ ​ ​ (IN YEARS) ​ AMOUNT ​ AMORTIZATION ​ NET ​ AMOUNT ​ AMORTIZATION ​ NET Acquired software 14.38 ​ $ 127,123 ​ $ ( 12,258 ) ​ $ 114,865 ​ $ 24,275 ​ $ ( 8,099 ) ​ $ 16,176 Capitalized software development costs 2.71 ​ 31,477 ​ ( 20,137 ) ​ 11,340 ​ 24,009 ​ ( 13,930 ) ​ 10,079 Non-compete agreements 1.73 ​ 1,391 ​ ( 1,247 ) ​ 144 ​ 1,353 ​ ( 1,145 ) ​ 208 Trade names 15.36 ​ 56,483 ​ ( 9,142 ) ​ 47,341 ​ 40,683 ​ ( 6,845 ) ​ 33,838 Customer relationships 11.04 ​ 464,678 ​ ( 126,545 ) ​ 338,133 ​ 433,297 ​ ( 97,153 ) ​ 336,144 Total ​ $ 681,152 ​ $ ( 169,329 ) ​ $ 511,823 ​ $ 523,617 ​ $ ( 127,172 ) ​ $ 396,445 ​ Amortization expense for intangible assets was $ 42,980 , $ 40,310 , and $ 38,964 for the years ended December 31, 2021, 2020, and 2019, respectively. Amortization expense of $ 4,265 , $ 2,896 , and $ 2,723 was recorded in cost of revenues for the years ended December 31, 2021, 2020, and 2019, respectively. The remaining amortization of $ 38,715 , $ 37,414 , and $ 36,241 was recorded in operating expenses for the years ended December 31, 2021, 2020, and 2019, respectively. 104 Table of Contents Based on the current amount of intangibles subject to amortization, the estimated annual amortization expense for each of the succeeding five years and thereafter is as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ CAPITALIZED ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ SOFTWARE ​ NON- ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ACQUIRED ​ DEVELOPMENT ​ COMPETE ​ TRADE ​ CUSTOMER ​ ​ ​ ​ SOFTWARE COSTS AGREEMENTS NAMES RELATIONSHIPS TOTAL 2022 ​ $ 9,243 ​ $ 5,316 ​ $ 97 ​ $ 3,087 ​ $ 31,134 ​ $ 48,877 2023 ​ ​ 9,054 ​ ​ 3,690 ​ ​ 43 ​ ​ 3,087 ​ ​ 31,134 ​ ​ 47,008 2024 ​ ​ 8,686 ​ ​ 2,310 ​ ​ 4 ​ ​ 3,087 ​ ​ 31,134 ​ ​ 45,221 2025 ​ ​ 8,531 ​ ​ 24 ​ ​ — ​ ​ 3,087 ​ ​ 31,134 ​ ​ 42,776 2026 ​ ​ 8,388 ​ ​ — ​ ​ — ​ ​ 3,087 ​ ​ 31,134 ​ ​ 42,609 Thereafter ​ ​ 70,963 ​ ​ — ​ ​ — ​ ​ 31,906 ​ ​ 182,463 ​ ​ 285,332 Total ​ $ 114,865 ​ $ 11,340 ​ $ 144 ​ $ 47,341 ​ $ 338,133 ​ $ 511,823 ​ Goodwill The Company has no t recognized any impairment charges for the years ended December 31, 2021, 2020, and 2019. A reconciliation of the change in the carrying value of goodwill is as follows: ​ ​ ​ ​ ​ Balance, December 31, 2019 $ 514,996 Goodwill associated with 2020 business combinations ​ 685 Foreign currency translation ​ 2,911 Balance, December 31, 2020 ​ 518,592 Goodwill associated with 2021 business combinations ​ 186,771 Foreign currency translation ​ ( 1,992 ) Balance, December 31, 2021 ​ $ 703,371 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 9. Accrued Expenses and Other Supplemental Liabilities Information Accrued expenses consist of the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ DECEMBER 31, ​ 2021 2020 Accrued compensation $ 24,848 ​ $ 24,941 Accrued severance ​ ​ — ​ ​ 143 Product distributor fees — ​ 149 Legal and professional accruals 2,477 ​ 2,779 Local sales and VAT taxes — ​ 58 Interest payable 96 ​ 39 Income taxes payable 1,398 ​ 854 Deferred rent — ​ 919 Contingent earn out — ​ 230 Other 1,011 ​ 617 Total accrued expenses $ 29,830 ​ $ 30,729 ​ ​ ​ ​ ​ ​ 105 Table of Contents Other current liabilities consist of the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ DECEMBER 31, ​ 2021 2020 Current portion of interest rate swap liability $ 1,088 ​ $ 2,605 Current operating lease liabilities ​ ​ 5,040 ​ ​ — Current finance lease liabilities 293 ​ 275 Total other current liabilities $ 6,421 ​ $ 2,880 ​ ​ Other long-term liabilities consist of the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ DECEMBER 31, ​ 2021 2020 Non-current portion of interest rate swap liability $ — ​ $ 1,066 Non-current finance lease liabilities 25 ​ 318 Total other long-term liabilities $ 25 ​ $ 1,384 ​ ​ ​ ​ 10. Long-Term Debt and Revolving Line of Credit Effective August 14, 2017, the Company entered into a credit agreement with lenders for a $ 250,000 term loan (“Credit Agreement”). The Credit Agreement is a syndicated arrangement with various lenders providing the financing. The $ 250,000 term loan is due to mature on August 14, 2024. The Company also entered into a $ 20,000 revolving line of credit with lenders with a sub-commitment for issuance of letters of credit of $ 10,000 . The Company and lenders entered into Amendment No. 1 to the Credit Agreement on January 25, 2018, where an additional tranche of $ 25,000 was added to the term loan. The amortization schedule of the new tranche was made coterminous with the rest of the term loan. There were no other changes to the terms of the Credit Agreement. The Company and lenders entered into Amendment No. 2 to the Credit Agreement on April 3, 2018, where an additional tranche of $ 40,000 was added to the term loan. The amortization schedule of the new tranche was made coterminous with the rest of the term loan. There were no other changes to the terms of the Credit Agreement. The Company and lenders entered into a third amended and restated loan agreement on June 17, 2021 (“Third Amendment”), which provides for, among other things, (i) the extension of the termination date applicable to the revolving credit commitments under the Credit Agreement to August 2025, (ii) the extension of the maturity date applicable to the term loans under the Credit Agreement to August 2026, and (iii) an increase of approximately $ 80,000 in commitments available under the revolving line of credit (resulting in an aggregate amount of commitments of $ 100,000 ). The term loan under the Third Amendment has substantially the same terms as the existing term loans and revolving credit commitments. The Credit Agreement is collateralized by substantially all U.S. assets and stock pledges for the non-U.S. subsidiaries and contain various financial and nonfinancial covenants. As of December 31, 2021 and 2020, available borrowings under the revolving lines of credits were $ 100,000 and $ 20,000 , respectively. Available borrowings under the revolving lines of credits of $ 100,000 and $ 20,000 as of December 31, 2021 and 2020, respectively, were reduced by $ 239 and $ 120 standby letter of credit issued to a landlord in lieu of a security deposit. The Company was in compliance with all covenants as of December 31, 2021 and 2020. Borrowings under the Credit Agreement are subject to a variable interest rate at LIBOR plus a margin. The applicable margins are based on achieving certain levels of compliance with financial covenants. 106 Table of Contents The effective interest rate was 3.65 % and 4.48 % for the years ended December 31, 2021 and 2020, respectively, for the Credit Agreement. As discussed previously, the Company entered into interest rate swap agreements that fixed the interest rate. Interest paid on the Credit Agreement with respect to the term loan amounted to $ 11,211 , $ 13,960 , and $ 18,520 for the years ended December 31, 2021, 2020, and 2019, respectively. Accrued interest payable on the Credit Agreement with respect to the term loan amounted to $ 30 and $ 32 at December 31, 2021 and 2020, respectively, and is included in accrued expenses. Interest paid on the Credit Agreement with respect to the revolving line of credit amounted to $ 93 , $ 457 , and $ 174 for the years ended December 31, 2021, 2020, and 2019, respectively. There was $ 66 accrued interest payable and no accrued interest payable on the revolving line of credit at December 31, 2021 and 2020, respectively. Effective August 14, 2017, the Company entered into an unsecured credit agreement with another lender for a $ 100,000 term loan (“Loan Agreement”). The loan bears interest at 8.25 % which is payable in semi-annual installments on January and July 15 through August 14, 2025, at which time all outstanding principal and interest are due. Under the Loan Agreement, the Company could voluntarily repay outstanding loans without premium or penalty. On July 15, 2020, the Company made a $ 20,000 prepayment on the loan, which reduced the amount outstanding to $ 80,000 . On December 28, 2020, the Company repaid the remaining $ 80,000 aggregate principal amount owed under the Loan Agreement, including $ 3,000 of accrued interest using a portion of the proceeds from the IPO. The Company's obligations under the Loan Agreement were discharged on that date. Interest paid on the loan amounted to $ 0 , $ 11,449 , and $ 8,365 for the years ended December 31, 2021, 2020, and 2019, respectively. Long-term debt consists of the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ DECEMBER 31, ​ ​ 2021 2020 Term loans ​ $ 300,490 ​ $ 304,099 Revolving line of credit ​ — ​ — Less: debt issuance costs ​ ( 5,724 ) ​ ( 5,319 ) Total ​ 294,766 ​ 298,780 Current portion of long-term debt ​ ( 3,020 ) ​ ( 4,680 ) Long-term debt, net of current portion and debt issuance costs ​ $ 291,746 ​ $ 294,100 ​ The principal amount of long-term debt outstanding as of December 31, 2021, matures in the following years: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2022 2023 2024 2025 2026 TOTAL Maturities ​ $ 3,020 ​ $ 3,020 ​ $ 3,020 ​ $ 3,020 ​ $ 288,410 ​ $ 300,490 ​ The Credit Agreement requires the Company to make an annual mandatory prepayment as it relates to the Company’s Excess Cash Flow calculation. For the year ended December 31, 2021, and 2020, the Company was required to make a mandatory prepayment on the term loan of $ 0 , and $ 1,527 , respectively. For the third credit agreement, the Company is required to make a quarterly principal payment of $ 755 on the term loan each quarter starting from the end of September 2021. The fair values of the Company’s variable interest term loan and revolving line of credit are not significantly different than their carrying value because the interest rates on these instruments are subject to change with market interest rates. ​ 11. Employee Benefit Plan The Company established a defined contribution 401(k) plan covering all U.S. employees who are at least 21 years of age. Employees may contribute to the plan up to 50 % of their compensation, which may be further limited by law. In addition, employees who reached the age of 50 during the calendar years 2021, 2020, and 2019 are eligible to make an additional catch up contribution of 6.0 %, subject to income limitations. The Company matches employee contributions for a percentage of the employee’s deferral, not to exceed the first 6 % of each employee’s compensation. 107 Table of Contents The Company also operates a Group Personal defined contribution plan covering all U.K. employees. Employees are auto enrolled in the plan who are at least 22 years of age and paid more than £ 10 a year, up to the State Pension Age. However, all employees who are between the ages of 16 and 75 can elect to join the Plan. Employees may contribute to their personal pension account and then convert that account into income at retirement. The Company contributes an additional 8 % of salary for those employees who have registered for the Plan, which exceeds their duties under U.K. auto enrolment legislation. Total 401(k) contributions made by the Company were $ 4,138 , $ 3,342 , and $ 2,864 for the years ended December 31, 2021, 2020, and 2019 respectively. ​ 12. Commitments and Contingencies 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 the consolidated financial statements as of December 31, 2021. Assurance-type warranty ​ The Company includes an assurance commitment warranting 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 applications software, warranty costs are insignificant and expensed as incurred. ​ For information related to commitments for future minimum lease payments, please see Note 14 – Lease. ​ ​ ​ 13. Equity-Based Compensation Class B Plan The Company’s management, through the Company’s affiliation with its shareholder and former parent, EQT, participated in a 2017 Class B Profits Interest Unit Incentive Plan (the “Class B Plan”), whereby EQT was authorized to issue a total of 6,366,891 Profit Interest Units (“Class B Units”), representing the right to share a portion of the value appreciation in EQT. The majority of the employee grant agreements for the Class B Units were comprised of 50 % time-based vesting units (“Time-based Units”) and 50 % performance-based vesting units (“Performance-based Units”). The Time-based Units generally vested over a five-year period; The Performance-based Units would vest if EQT achieved specified levels of return on investment at the time of i) a change in control, ii) a reduction in holdings of the Company by EQT to 10 % or less following an IPO or iii) certain distributions to EQT. There were also certain grant agreements for the Class B Units that were entirely comprised of Time-based Units. Upon vesting, the holder of Class B Units received a right to a fractional portion of the profits and distributions of the parent in excess of a “participation threshold” determined in accordance with the EQT limited partnership agreement. In addition to the performance conditions above, the Chief Executive Officer’s (“CEO”) performance-based Class B Units also vested if the aggregate value attributable to an IPO equaled or exceeded an amount equivalent to the return on investment performance targets. The Class B Units were in a secondary position to the Class A units in EQT, in that in any event in which the EQT equity was valued and paid out, holders of the Class B Units would only be paid if an amount at least equal to the applicable participation threshold was first allocated to all of the outstanding classes of units under EQT’s limited partnership agreement. In addition, EQT had the right, but not the obligation, to repurchase units at fair value upon certain events, such as a termination of employment. During the years ended December 31, 2020 and 2019, EQT repurchased 87,930 and 241,601 Class B Units at their intrinsic value of $ 1,079 and $ 703 respectively. These repurchases were funded through 108 Table of Contents dividends paid by the Company to EQT. These Class B Units do not have a maximum contractual life, and as such, these Class B Units do not expire. The fair value of the Time-based Units that vested solely upon continued employment was measured at the grant date and was recognized as cost over the employee’s requisite service period, which was generally five years . The expense related to the vesting of the Time-based Units was recorded on the Company’s books because the Company directly benefited from the services provided by Class B Unit holders. The grant date fair values were determined based on the pricing models and valuation assumptions noted in the following table, shown at their weighted-average values: ​ ​ ​ ​ ​ ​ ​ ​ ​ YEAR ENDED DECEMBER 31, ​ 2020 2019 Pricing model Monte Carlo Monte Carlo ​ Expected dividend yield ​ 0.0 % 0.0 % Risk-free interest rate (1) 0.3 % 1.6 % Expected stock price volatility (2) 59 % 55 % Expected exercise term (in years) (3) 2.3 2.0 ​ (1) Based on the U.S. Treasury constant maturity interest rate whose term is consistent with the expected exercise term of our incentive units (2) In projecting expected stock price volatility, we consider the historical volatility of the stock prices of comparable public companies. (3) The Company estimates the expected life of incentive units based upon the timing of a potential liquidity event. A summary of the Class B Units activity for the period is presented below (dollar amounts are not in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ WEIGHTED AVERAGE ​ ​ ​ ​ ​ Weighted-Average ​ ​ ​ ​ ​ ​ Grant-Date ​ Weighted-Average ​ ​ ​ ​ Fair Value ​ Exercise Price ​ ​ UNITS ​ Per Unit ​ Per Unit Outstanding, as of December 31, 2019 5,436,299 ​ $ 3.53 ​ 11.43 Granted 1,357,408 ​ 7.39 ​ 26.96 Exercised ( 87,930 ) ​ 3.55 ​ 10.2 Forfeited ( 377,626 ) ​ 3.63 ​ 10.3 Exchanged ​ ( 6,328,151 ) ​ ​ 4.37 ​ — Outstanding, December 31, 2020 — ​ $ — ​ — ​ Outstanding units represent the total of vested Class B Units and those expected to vest, including Time-based Units for which the requisite service period has not yet been rendered. Of those Class B Units that were vested and exercisable at December 31, 2019, the weighted-average distribution threshold was $ 10.16 . The weighted-average grant date fair value per unit was $ 3.53 as of December 31, 2019. The aggregate intrinsic value of Class B Units outstanding, vested and exercisable at December 31, 2019 was $ 38,440 . There were no Class B Units outstanding as of December 31, 2020. The total fair value of Class B Units vested and exercisable during 2019 was $ 1,872 . Equity-based compensation expense related to the Time-based Units was $ 2,776 and $ 1,691 for the years ended December 31, 2020 and 2019. The Performance-based Units were not probable of vesting prior to the exchange of Class B Units for common shares, as described below; as such, no expense was recorded for these Units prior to the IPO. As of December 31, 2020, there were no unrecognized compensation costs related to the Units as they had been exchanged for restricted stock as discussed below. ​ Exchange Effective as of December 10, 2020 (the “Exchange Date”), all vested Class B Units were exchanged by EQT for shares of common stock of the Company held by EQT, and unvested Class B Units were exchanged for shares of restricted common 109 Table of Contents stock of the Company. On the Exchange Date, holders of unvested Time-based and Performance-based Units elected to either (1) exchange their unvested Class B Units with shares of restricted common stock of the Company that maintained the same vesting conditions (both time-based and performance-based) of such unvested Class B Units or (2) exchange their unvested Class B Units (both Time-based and Performance-based Units) with shares of restricted common stock of the Company that would be subject only to the same time-vesting conditions of such unvested Time-based Units, based on the original grant date. 53 holders of Class B Units elected the latter option. The CEO elected for the former option, based on the fact that his Performance-based Units vested upon the consummation of the offering. The number of shares of common stock exchanged by EQT for vested Class B Units and number of shares of restricted common stock exchanged by EQT for unvested Class B Units were based on their deemed value as of the date of the offering divided by the estimated per share offering price. The deemed value of Class B Units considered the overall implied value of the Company based on the offering price and considering their economic rights pursuant to the contractual waterfall and related distribution thresholds. ​ Based on the IPO price of $ 23.00 per share, the Company issued 5,941,693 shares of restricted common stock to holders of unvested Class B Units in exchange for such unvested Class B Units and holders of vested Class B Units received an aggregate of 4,211,598 shares of common stock in exchange for vested Class B Units. Modification accounting was not required for the time-based vesting Class B Units for which the vesting conditions, classification and fair market value did not change as a result of the shares of restricted common stock that replaced them. The original grant date fair value will continue to be recognized on a straight-line basis. Modification accounting was required for the performance-based vesting Class B Units that were exchanged for time-based vesting restricted common stock, given the vesting conditions were changed. Such performance-vesting Class B Units that were improbable of vesting were remeasured based on the modification date fair value of the shares of restricted common stock replacing such Class B Units. The total fair value of the restricted stock was $ 83,260 . Because the service inception date preceded the grant date of the replacement awards, a catch up-adjustment of $ 56,487 was recorded at the modification date, based on the portion of the requisite service period that had elapsed since the original grant date for each tranche of the award. Considering the original awards contained performance conditions necessary to vest, the accelerated attribution approach was applied. The accelerated attribution approach results in cost being allocated to each of the tranches of the awards and recognized ratably over each tranche as if they were separate awards. Separately, upon completion of the offering, $ 3,912 of compensation cost was recognized related to our Chief Executive Officer’s 853,001 performance-based Class B Units that automatically vested upon the IPO of the Company and were exchanged for 1,561,950 common shares of the Company. 110 Table of Contents Restricted Stock As detailed above, unvested Class B Units were exchanged for restricted stock 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. ​ A summary of the restricted stock in 2021 is shown below: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ WEIGHTED-AVERAGE ​ ​ ​ ​ ​ ​ GRANT-DATE ​ ​ ​ SHARES ​ ​ FAIR VALUE Non-vested restricted stock as of December 31, 2020 ​ 5,941,693 ​ $ 23.00 Granted ​ 87,127 ​ 31.70 Vested ​ ( 1,957,054 ) ​ 23.02 Forfeited ​ ( 161,044 ) ​ 23.00 Non-vested restricted stock as of December 31, 2021 ​ ​ 3,910,722 ​ $ 23.18 ​ The Company granted 87,127 replacement shares of restricted stock in 2021 in connection with the Pinnacle business acquisition under which equity-based awards are outstanding. The fair value of the per share of restricted stock issued in 2021 was measured using grant date fair market value adjusted lack of marketability for these shares. Total grant date fair value was $ 2,762 . The restricted stock issued in 2021 generally have a three year vesting period except for one holder whose shares vests equally on a monthly basis for 2 years . The Company exchanged 5,941,693 shares discussed in previous section in 2020 and was no t authorized and did no t issue any restricted stock in 2019. Equity-based compensation expenses related to the restricted stock exchanged for performance-based Class B units were $ 12,349 and $ 57,421 for the years ended December 31, 2021 and 2020, respectively. At December 31, 2021, the total unrecognized equity-based compensation expenses related to outstanding restricted stock recognized using the accelerated attribution approach was $ 11,638 . The unrecognized compensation expense for the category at December 31, 2021 is expected to be recognized over a weighted-average period of 24.6 months. Equity-based compensation expenses related to the time-based restricted stock were $ 3,104 and $ 167 for the years ended December 31, 2021 and 2020, respectively. At December 31, 2021, the total unrecognized equity-based compensation expenses related to outstanding restricted stock recognized using the straight-line attribution approach were $ 6,394 . The unrecognized compensation expense for the category at December 31, 2021 is expected to be recognized over a weighted-average period of 33.2 months. Equity-based employee compensation expense related to the time-based restricted stock for the Pinnacle acquisition was $ 292 for the year ended December 31, 2021. At December 31, 2021, the total unrecognized equity-based compensation expenses related to outstanding restricted stock recognized using the straight-line attribution approach was $ 2,470 . The unrecognized compensation expense for the category at December 31, 2021 is expected to be recognized over a weighted-average period of 26.7 months. 111 Table of Contents 2020 Incentive Plan In order to align our 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, and restricted stock units (RSUs) to employees, directors and 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. At December 31, 2021, there was 19,898,104 shares reserved for future issuance. The plan share reserve will be increased on the first day of each fiscal year beginning with the 2021 fiscal year and ending after the tenth anniversary of the effective date in an amount equal to the lesser of (i) the positive difference, if any, between (x) 4.0 % of the outstanding common stock on the last day of the immediately preceding fiscal year and (y) the plan share reserve on the last day of the immediately preceding fiscal year and (ii) a lower number of shares of our common stock as determined by our board of directors. Restricted Stock Units Restricted stock units (“RSUs”) represent the right to receive shares of the Company’s common stock at a specified date in the future. During year ended December 2021, the Company granted 1,347,265 RSUs under the 2020 Incentive Plan that generally vest over an average three-year period. 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: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ WEIGHTED- ​ ​ ​ ​ ​ AVERAGE ​ ​ ​ ​ ​ GRANT DATE ​ ​ UNITS ​ FAIR VALUE Non-vested RSUs as of December 31, 2020 ​ ​ 30,052 ​ $ 23.00 Granted ​ ​ 1,347,265 ​ ​ 29.19 Vested ​ ​ ( 24,728 ) ​ ​ 23.00 Forfeited ​ ​ ( 63,865 ) ​ ​ 26.80 Non-vested RSUs as of December 31, 2021 ​ ​ 1,288,724 ​ $ 29.28 ​ Equity-based compensation expense related to the RSUs was $ 8,257 and $ 81 for the years ended December 31, 2021 and 2020, respectively. At December 31, 2021, the total unrecognized equity-based compensation expense related to outstanding RSUs was $ 29,914 , which is expected to be recognized over a weighted-average period of 28.5 months. ​ Performance Restricted Stock Units ​ Performance stock units (“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 and unlevered free cash flow growth. ​ Equity-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 112 Table of Contents condition being achieved at each reporting period to determine whether and when to recognize compensation cost. The following table presents a summary of activity on the PSUs for the period ended December 31, 2021. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ WEIGHTED- ​ ​ ​ ​ ​ AVERAGE ​ ​ ​ ​ ​ GRANT DATE ​ ​ UNITS ​ FAIR VALUE Non-vested PSUs as of December 31, 2020 ​ ​ — ​ $ — Granted ​ ​ 418,480 ​ ​ 27.36 Vested ​ ​ — ​ ​ — Forfeited ​ ​ ( 11,905 ) ​ ​ 27.45 Non-vested PSUs as of December 31, 2021 ​ ​ 406,575 ​ $ 27.35 ​ ​ Equity-based compensation expense related to the PSUs was $ 5,481 for the year ended December 31, 2021. At December 31, 2021, the total unrecognized equity-based compensation expense related to outstanding PSUs was $ 5,141 , which is expected to be recognized over a weighted-average period of 19.77 months. ​ The number of restricted stock awards and RSUs vested in 2021 includes 11,103 shares that were withheld on behalf of employees to satisfy the statutory tax withholding requirements. ​ 2020 Employee Stock Purchase Plan ​ On December 10, 2020, stockholders approved the 2020 Employee Stock Purchase Plan (the “Employee Stock Purchase Plan”). Under the Employee Stock Purchase Plan, employees, and those of the Company’s subsidiaries, may purchase shares of common stock, during pre-specified offering periods. Named executive officers will be eligible to participate in the Employee Stock Purchase Plan on the same terms and conditions as all other participating employees. The maximum number of shares authorized for sale under the Employee Stock Purchase Plan is 1,700,000 shares. Generally, all employees and those of the Company’s subsidiaries will be eligible to participate in the Employee Stock Purchase Plan, except for employees who own 5 % or more of the combined voting power or value of all issued and outstanding stock. Employees may contribute through payroll deductions of 1 % to 15 % of such employees’ base compensation on each payroll date that falls within an offering period. Participants may not acquire rights to purchase more than $ 25 of common stock under the Employee Stock Purchase Plan for any calendar year. Common stock will be available for purchase for up to 27 months . Shares will be purchased at a discounted per-share purchase price equal to 85 % of the per-share closing price of the Company’s common stock on the last day of the applicable offering period. As of December 31, 2021,  no  shares of common stock have been purchased under the Employee Stock Purchase Plan and no offering has been made to eligible employees under the Plan. ​ 113 Table of Contents Equity-based compensation expense The following table summarizes the components of total equity-based compensation expense included in the Consolidated Statements of Operations and Comprehensive Loss for each period presented: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ YEAR ENDED DECEMBER 31, ​ 2021 2020 2019 Cost of revenues ​ $ 5,193 ​ $ 8,805 ​ $ 156 Sales and marketing ​ 2,204 ​ 7,390 ​ ​ 110 Research and development ​ 2,872 ​ 7,133 ​ ​ 121 General and administrative expenses ​ 19,214 ​ 41,179 ​ ​ 1,304 Total ​ $ 29,483 ​ $ 64,507 ​ $ 1,691 ​ The tax benefit related to compensation expense was $ 117 for the year ended December 31, 2021. There were no tax benefits related to compensation expense for the year ended December 31, 2020 and 2019. ​ ​ ​ 14. Leases The Company leases certain office facilities and equipment under non-cancelable operating and finance leases with remaining terms from one to seven years . Operating lease ROU assets are included in other asset section while finance lease ROU assets are included in "Property and equipment, net" in the consolidated balance sheets. With respect to operating lease liabilities, current and non-current operating lease liabilities are included in "Other current liabilities" and "Operating lease liabilities, net of current portion.” Current and non-current finance lease liabilities are included in "Other current liabilities" and "Other long-term liabilities" in the Consolidated Balance Sheets. The following table presents information about the operating and finance lease right-of-use assets and lease liabilities as well as lease term and discount rates: ​ ​ ​ ​ ​ ​ ​ Lease right-of-use assets, lease liabilities, lease term and discount rate: December 31, 2021 ​ ​ ​ ​ ​ ​ ​ ​ Lease right of use assets ​ ​ ​ ​ ​ Operating leases ​ $ 12,634 ​ ​ Financing leases ​ ​ 271 ​ ​ ​ ​ $ 12,905 ​ ​ Lease liabilities ​ ​ ​ ​ ​ Current ​ ​ ​ ​ ​ Operating leases ​ $ 5,040 ​ ​ Financing leases ​ ​ 293 ​ ​ Noncurrent ​ ​ ​ ​ ​ Operating leases ​ ​ 8,256 ​ ​ Financing leases ​ ​ 25 ​ ​ ​ ​ $ 13,614 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the year ended Weighted-average remaining lease term (years): December 31, 2021 Operating leases ​ ​ 3.63 ​ ​ Financing leases ​ ​ 1.08 ​ ​ ​ ​ ​ ​ ​ ​ Weighted-average discount rate: ​ ​ ​ ​ ​ Operating leases ​ ​ 3.91 % ​ ​ Financing leases ​ ​ 6.19 % ​ ​ 114 Table of Contents ​ The components of total lease cost were as follows: ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2021 Operating lease cost ​ $ 5,815 ​ ​ Short-term lease cost ​ ​ 404 ​ ​ Variable lease cost ​ ​ 744 ​ ​ Sublease income ​ ​ ( 490 ) ​ ​ Finance lease cost: ​ ​ ​ ​ ​ Amortization of right-of-use assets ​ ​ 277 ​ ​ Interest on lease liabilities ​ ​ 29 ​ ​ Total lease cost ​ $ 6,779 ​ ​ ​ Supplemental cash flow and non-cash flow information was as follows: ​ ​ ​ ​ ​ ​ ​ December 31, 2021 Cash paid for amounts included in the measurement of lease liabilities ​ ​ ​ Operating cash flows from finance leases ​ $ 29 Operating cash flows from operating leases ​ $ 6,105 Financing cash flows from finance leases ​ $ 275 Right-of-use assets obtained in exchange for new and remeasured operating leases ​ $ 520 Right-of-use assets obtained through acquisition ​ $ 1,648 ​ The following table summarizes by year the maturities of our minimum lease payments as of December 31, 2021. ​ ​ ​ ​ ​ ​ ​ ​ ​ OPERATING FINANCE ​ ​ LEASES ​ LEASES Year ending December 31, ​ ​ 2022 ​ $ 5,138 ​ $ 304 2023 ​ 3,246 ​ 25 2024 ​ 2,564 ​ — 2025 ​ 1,930 ​ - 2026 ​ 1,326 ​ - Thereafter ​ 135 ​ - Total future lease payments ​ 14,339 ​ 329 Less: imputed interest ​ ( 1,043 ) ​ ( 11 ) Total ​ $ 13,296 ​ $ 318 G ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ The gross amounts of assets under capital leases, in accordance with the superseded leasing standard (ASC 840), was $ 1,501 at December 31, 2020. The total accumulated amortization associated with equipment under capital leases was approximately $ 946 at December 31, 2020. The related amortization expense is included in depreciation expense. Rent expense under the operating leases was $ 6,534 and $ 6,377 for the years ended December 31, 2020 and 2019, respectively. ​ 115 Table of Contents Non-cancelable future minimum lease commitments as of December 31, 2020, in accordance with the superseded leasing standard, were: ​ ​ ​ ​ ​ ​ ​ ​ Year ending December 31, ​ ​ Operating Leases ​ ​ Capital Leases 2021 ​ $ 6,023 ​ $ 304 2022 ​ ​ 4,698 ​ ​ 304 2023 ​ ​ 3,191 ​ ​ 25 2024 ​ ​ 2,559 ​ ​ — 2025 ​ ​ 2,065 ​ ​ — Thereafter ​ ​ 2,372 ​ ​ — Non-cancelable future minimum lease payments ​ ​ 20,908 ​ ​ 633 Less amount representing interest ​ ​ — ​ ​ ( 40 ) Net non-cancelable future minimum lease payments ​ $ 20,908 ​ $ 593 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 15. 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 (“CEO”) is its CODM. The Company manages its operations as a single segment for the purpose 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 consolidated financial statements. The following table summarizes revenue by geographic area: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ YEAR ENDED ​ DECEMBER 31, ​ 2021 2020 ​ 2019 Revenue (1) : ​ ​ ​ Americas ​ $ 205,377 ​ $ 182,629 ​ $ 154,505 EMEA ​ 56,410 ​ 42,844 ​ 40,299 Asia Pac ​ 24,317 ​ 18,057 ​ 13,707 Total ​ $ 286,104 ​ $ 243,530 ​ $ 208,511 (1) Revenue is attributable to the countries based on the location of the customer The following table summarizes property, plant and equipment, net by geographic area as of December 31, 2021 and 2020: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ DECEMBER 31, ​ 2021 2020 Property, plant and equipment, net: ​ ​ Americas ​ $ 1,903 ​ $ 2,691 EMEA ​ 712 ​ 817 Asia Pac ​ 320 ​ 364 Total ​ $ 2,935 ​ $ 3,872 ​ ​ ​ ​ 116 Table of Contents 16. Income Taxes The components of loss before income taxes were as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ YEAR ENDED DECEMBER 31, ​ 2021 2020 2019 Domestic ​ $ ( 10,373 ) ​ $ ( 55,355 ) ​ $ ( 12,995 ) Foreign ​ 6,998 ​ 5,174 ​ 3,844 Total ​ $ ( 3,375 ) ​ $ ( 50,181 ) ​ $ ( 9,151 ) ​ The components of provision for (benefit from) income taxes were as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ DECEMBER 31, ​ 2021 2020 2019 Current tax provision ​ ​ ​ Federal ​ $ 451 ​ $ 326 ​ $ 483 State and local ​ 1,798 ​ 1,659 ​ 1,692 Foreign ​ 8,826 ​ 4,634 ​ 4,303 Total current ​ 11,075 ​ 6,619 ​ 6,478 Deferred tax benefit ​ ​ ​ Federal ​ ( 4,416 ) ​ ( 3,620 ) ​ 3,137 State and local ​ ( 1,156 ) ​ 276 ​ ( 5,431 ) Foreign ​ 4,388 ​ ( 4,059 ) ​ ( 4,409 ) Total deferred ​ ( 1,184 ) ​ ( 7,403 ) ​ ( 6,703 ) Total provision (benefit) ​ $ 9,891 ​ $ ( 784 ) ​ $ ( 225 ) ​ The effective income tax rate was ( 293.06 %), 1.56 %, and 2.46 % for the years ended December 31, 2021, 2020 and 2019, respectively. The primary reconciling items between the statutory income tax rate of 21 % and the effective income tax rate were as a result of the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2021 2020 2019 ​ Tax at U.S. federal statutory rate ​ $ ( 709 ) 21.00 % $ ( 10,538 ) 21.00 % $ ( 1,919 ) ​ 21.00 % State taxes, net of federal benefit ​ 226 ( 6.71 ) % 1,125 ( 2.24 ) % ​ ( 3,852 ) ​ 42.14 % Foreign rate differential ​ 3,872 ( 114.72 ) % 2,296 ( 4.58 ) % ​ 1,654 ​ ( 18.09 ) % Permanent items ​ ( 670 ) 19.84 % ( 139 ) 0.28 % ​ ( 177 ) ​ 1.93 % Equity compensation ​ ​ 3,534 ​ ( 104.70 ) % ​ 13,562 ​ ( 27.03 ) % ​ 412 ​ ( 4.51 ) % GIL TI inclusion ​ ​ 540 ​ ( 16.00 ) % ​ 932 ​ ( 1.86 ) % ​ 570 ​ ( 6.24 ) % Tax credits ​ ( 7,060 ) 209.19 % ( 7,618 ) 15.18 % ​ ( 4,264 ) ​ 46.65 % Rate change ​ ​ 5,256 ​ ( 155.75 ) % ​ 2,076 ​ ( 4.14 ) % ​ ( 2,922 ) ​ 31.97 % Other adjustments ​ 3,131 ( 92.76 ) % 1,223 ( 2.43 ) % ​ 3,736 ​ ( 40.87 ) % Return to provision adjustments ​ ( 66 ) 1.95 % ( 103 ) 0.21 % ​ ( 139 ) ​ 1.52 % Valuation allowance ​ 1,837 ( 54.40 ) % ( 3,600 ) 7.17 % ​ 6,676 ​ ( 73.04 ) % Effective tax rate ​ $ 9,891 ( 293.06 ) % $ ( 784 ) 1.56 % $ ( 225 ) ​ 2.46 % ​ A portion of the Company’s income was attributable to Madeira, Portugal, which qualified for special tax programs authorized by the European Union. For the period of 2008 through 2011, the Company was subject to Madeira's income tax rate of 0 %, for 2012 an income tax rate of 4 % applied, and for the period of 2013 through 2020 an income tax rate of 5 % applied, and for the period 2021 through 2027 an income tax rate of 5 % will apply. 117 Table of Contents The tax effects of temporary differences that gave rise to deferred tax assets and liabilities are summarized as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ DECEMBER 31, ​ 2021 2020 Deferred tax assets ​ ​ Accounts receivable ​ $ 61 ​ $ 29 Accrued compensation ​ 3,552 ​ 4,222 Accrued expenses ​ - ​ 137 Deferred revenue ​ ​ 696 ​ ​ — Net operating loss carryforwards ​ 4,117 ​ 5,229 R&D credit carryforward ​ 4,965 ​ 7,054 Foreign tax credits ​ 15,054 ​ 12,485 Interest rate hedge ​ 253 ​ 925 Equity based compensation ​ ​ 3,015 ​ ​ — Other assets ​ 380 ​ ​ 115 Interest expense ​ 224 ​ ​ 869 Right-of-use (ROU) Liability ​ ​ 2,944 ​ ​ — Total gross deferred tax asset ​ ​ 35,261 ​ ​ 31,065 Less: Valuation allowance ​ ( 18,235 ) ​ ​ ( 16,715 ) Net deferred tax asset ​ 17,026 ​ 14,350 Deferred tax liabilities ​ ​ Property, equipment, and other long-lived assets ​ ( 272 ) ​ ( 359 ) Goodwill and intangible assets ​ ( 83,844 ) ​ ( 83,935 ) Prepaid expenses ​ ( 1,968 ) ​ ( 1,724 ) Accrued expenses ​ ​ ( 184 ) ​ ​ — Deferred revenue ​ — ​ ( 1,482 ) Right-of-use (ROU) Asset ​ ​ ( 2,783 ) ​ ​ — Total gross deferred tax liability ​ ( 89,051 ) ​ ( 87,500 ) Net deferred tax liability ​ $ ( 72,025 ) ​ $ ( 73,150 ) ​ The net change in the total valuation allowance resulted in an increase of $ 1,520 in 2021 compared to a decrease of $ 3,831 in 2020. The valuation allowance is determined separately for each jurisdiction. A U.S. valuation allowance was required against the foreign tax credit carryforward. At the foreign subsidiaries, the valuation allowance was primarily related to foreign net operating losses that, in the judgment of management, are not more likely than not to be realized. In assessing the realizability of deferred tax assets, management considered whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible and carryforward attributes can be utilized. Management considered the reversal of deferred tax liabilities in making this assessment. Management believes it is more likely than not that the Company will realize the benefits of the deferred tax assets, net of the existing valuation allowance, at December 31, 2021. At December 31, 2021, the Company has net operating loss carryforwards for federal income tax purposes of approximately $ 2,416 , the majority of which will expire if unused in years 2024 through 2040. The Company has net operating loss carryforwards for state income tax purposes of approximately $ 2,576 , which will expire if unused in years 2029 through 2039. The Company has foreign net operating loss carryforwards of $ 24,491 which will expire if unused starting in 2022. The Company has $ 1,475 of federal research and development credits that will expire if unused in years 2025 through 2041, $ 417 of California research and development credits with indefinite carryover period, and $ 406 of foreign research and development credits that will expire if unused starting in 2029. The Company has foreign tax credits of $ 15,054 that will expire if unused in years 2025 through 2031, and also Canadian investment tax credits of $ 3,809 which will expire if unused in years 2030 through 2039. 118 Table of Contents The Company has net operating losses and tax credits that are subject to limitation under Internal Revenue Code Section 382 and Section 383 due to changes in ownership. The Company has analyzed the realizability of these tax attributes carried forward and have recorded deferred tax assets for the attributes that meet the more likely than-not realizability threshold. Foreign undistributed earnings were considered permanently invested, therefore no provision for U.S. income taxes was accrued as of December 31, 2021 and 2020, with the exception of the withholding tax liability of $ 168 on the potential repatriation from Certara Canada Corporation. The Company assessed its uncertain tax positions and determined that a liability of $ 1,059 and $ 897 was required to be recorded for uncertain tax positions as of December 31, 2021 and 2020, respectively. Uncertain tax positions relate primarily to federal and state R&D credits. The Company's policy is to recognize interest and penalties as a component of the provision for income taxes. For December 31, 2021 and 2020, there were no interest or penalties recorded. The Company does not anticipate any significant changes to its uncertain tax positions during the next 12 months. A reconciliation of the beginning and ending balance of unrecognized tax benefits is as follows: ​ ​ ​ ​ ​ Balance at December 31, 2019 $ 690 Additions for tax positions related to the current year ​ 198 Additions for tax positions of prior years ​ 9 Balance at December 31, 2020 ​ 897 Additions for tax positions related to the current year ​ 156 Additions for tax positions of prior years ​ 6 Balance at December 31, 2021 ​ $ 1,059 ​ The uncertain tax positions, exclusive of interest and penalties, were $ 1,059 and $ 897 as of December 31, 2021 and December 31, 2020, respectively, which also represents potential tax benefits that if recognized, would impact the effective tax rate. U.S. federal income tax returns are generally subject to examination for a period of three years after the filing of the return. However, the Internal Revenue Service can audit the NOLs generated in respective years in the years that the NOLs are utilized. State income tax returns are generally subject to examination for a period of three to six years after the filing of the respective return. The state impact of any federal changes remains subject to examination by various states for a period of up to one year after formal notification to the states. Foreign income tax returns are generally subject to examination based on the tax laws of the respective jurisdictions. The Company is subject to tax on Global Intangible Low-Taxed Income (“GILTI”) and has elected to account for GILTI as a current period expense. ​ ​ 119 Table of Contents 17. Earnings per Share Basic and diluted earnings per share is computed by dividing net earnings by the weighted-average shares outstanding: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ YEAR ENDED ​ ​ DECEMBER 31, ​ ​ 2021 2020 2019 Numerator: ​ ​ ​ ​ Net loss ​ ​ $ ( 13,266 ) ​ $ ( 49,397 ) ​ $ ( 8,926 ) Denominator: ​ ​ ​ ​ Weighted average common shares outstanding, basic and diluted ​ ​ 149,842,668 ​ 133,247,212 ​ 132,407,786 Net loss per common share, basic and diluted ​ ​ $ ( 0.09 ) ​ $ ( 0.37 ) ​ $ ( 0.07 ) ​ The Company excluded the restricted stock and restricted stock units from the calculation of diluted earnings per share during the years ended December 31, 2021 and 2020 that could potentially dilute earnings per share in the future due to being in a net loss position. For the year ended December 31, 2021, the Company did not include 3,910,722 restricted shares and 1,288,724 shares of time-based restricted stock units, and 61,456 shares of performance based restricted stock units in the calculation. For the year ended December 31, 2020, the Company did not include 5,941,693 restricted shares and 30,052 shares of restricted time-based stock units in the calculation. During the year ended December 31, 2019, there was no potentially dilutive securities outstanding . ​ 18. Subsequent Events ​ On January 3, 2022, the Company completed the acquisition of Integrated Nonclinical Development Solutions, Inc. (“INDS”), a company that provides the SEND Explorer® software and drug development consulting, for total consideration of $ 7,078 . The Company will complete the initial accounting for the acquisition of INDS, including the allocation of purchase consideration, in the first quarter of 2022. ​ ​ ​ 120 Table of Contents Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure. None. ​