What changed in this filing

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Item 1. Financial Statements

2022-05-05 compared with 2021-11-09 · 296 added, 278 removed, 248 unchanged (70% of the section changed)

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CONDENSED CONSOLIDATED BALANCE SHEETS

SEPTEMBER 30,

(IN THOUSANDS, EXCEPT PER SHARE AND SHARE DATA)

1 unchanged sentence

Cash and cash equivalents

Accounts receivable, net of allowance for doubtful accounts of $ 170 and $ 132 , respectively

Accounts receivable, net of allowance for credit losses of $ 296 and $ 262 , respectively

Restricted cash

3 unchanged sentences

Property and equipment, net

Long-term deposits

Operating lease right-of-use assets

Intangible assets, net of accumulated amortization of $ 181,138 and $ 169,329 , respectively

Other long-term assets

Deferred income taxes

Other long-term assets

Liabilities and stockholders’ equity

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Current portion of deferred revenue

Current portion of interest rate swap liability

Current portion of long-term debt

Current portion of capital lease obligations

Current operating lease liabilities

Other current liabilities

Total current liabilities

Long-term liabilities:

Capital lease obligations, net of current portion

Deferred revenue, net of current portion

Deferred income taxes

Long-term portion of interest rate swap liability

Operating lease liabilities, net of current portion

Long-term debt, net of current portion and debt discount

Other long-term liabilities

Non-current finance lease liabilities

Total liabilities

1 unchanged sentence

Stockholders' equity:

Preferred shares, $ 0.01 par value, 50,000,000 shares authorized, no shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively

Common shares, $ 0.01 par value, 600,000,000 shares authorized, 157,353,191 and 152,979,479 shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively

Preferred shares, $ 0.01 par value, 50,000,000 shares authorized, no shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively

Common shares, $ 0.01 par value, 600,000,000 shares authorized, 159,657,174 and 159,658,948 shares outstanding as of March 31, 2022 and December 31, 2021, respectively

Additional paid-in capital

1 unchanged sentence

Accumulated other comprehensive loss

Treasury stock at cost, 2,874 and 1,100 shares at March 31, 2022 and December 31, 2021, respectively

Total stockholders’ equity

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AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE

(LOSS) INCOME

THREE MONTHS ENDED SEPTEMBER 30,

NINE MONTHS ENDED SEPTEMBER 30,

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

THREE MONTHS ENDED MARCH 31,

(IN THOUSANDS, EXCEPT PER SHARE AND SHARE DATA)

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Total operating expenses

(Loss) income from operations

Income from operations

Other income (expenses):

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Total other expenses

(Loss) income before income taxes

(Benefit) provision of income taxes

Net (loss) income

Other comprehensive (loss) income:

Income before income taxes

Provision for income taxes

Other comprehensive loss:

Foreign currency translation adjustment

Change in fair value of interest rate swap, net of tax $( 16 ), $ 97 , $ 145 , and $( 488 )

Reclassification of fair value of interest rate swap, net of tax of $ 0 , $ 0 , $( 765 ), and $ 0

Total other comprehensive (loss) income

Comprehensive (loss) income

Net (loss) income per share attributable to common stockholders:

Change in fair value of interest rate swap, net of tax $ 60 and $ 161 , respectively

Total other comprehensive loss

Comprehensive loss

Net income per share attributable to common stockholders:

Weighted average common shares outstanding:

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EXCEPT SHARE DATA)

PAID-IN CAPITAL

Balance as of June 30, 2021

Equity compensation

Stock offerings

Restricted stock forfeiture

Restricted stock unit shares withheld for employee taxes

Change in fair value from interest rate swap, net of tax

Foreign currency translation adjustment

Balance as of September 30, 2021

Balance as of December 31, 2020

Equity compensation

Stock offerings

Shares issued for employee share-based compensation awards

Restricted stock forfeiture

Restricted stock unit shares withheld for employee taxes

Equity-based compensation awards

Change in fair value from interest rate swap, net of tax

Reclassification of fair value of interest rate swap, net of tax

Foreign currency translation adjustment

Balance as of September 30, 2021

Foreign currency translation adjustment, net of tax

Balance as of March 31, 2021

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

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PAID-IN CAPITAL

Balance as of June 30, 2020

Equity compensation

Repurchase of Parent Class B units

Capital contribution

Change in fair value of interest rate swap, net of tax

Foreign currency translation adjustment

Balance as of September 30, 2020

Balance as of December 31, 2021

Equity compensation

Repurchase of Parent Class B units

Capital contribution

Change in fair value of interest rate swap, net of tax

Foreign currency translation adjustment

Balance as of September 30, 2020

Equity-based compensation awards

Restricted stock withheld for tax liability

Change in fair value from interest rate swap, net of tax

Foreign currency translation adjustment, net of tax

Balance as of March 31, 2022

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

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

NINE MONTHS ENDED SEPTEMBER 30,

THREE MONTHS ENDED MARCH 31,

(IN THOUSANDS)

Cash flows from operating activities:

Net (loss) income

Adjustments to reconcile net (loss) income to net cash provided by operating activities:

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization of property and equipment

1 unchanged sentence

Amortization of debt issuance costs

Provision for doubtful accounts

(Recovery of) provision for credit losses

Loss on retirement of assets

Equity-based compensation expense

Unrealized loss on interest rate swap

Deferred income taxes

3 unchanged sentences

Accounts payable and other liabilities

Deferred revenues

Deferred revenue

Other current liabilities

Changes in operating lease assets and liabilities, net

Net cash provided by operating activities

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Cash flows from financing activities:

Capital contributions

Unit repurchase

Net proceeds from public offering of common stock

Proceeds from borrowings on long-term debt

Payments on long-term debt and capital lease obligations

Payments on long-term debt and finance lease obligations

Payments on financing component of interest rate swap

Proceeds from line of credit

Payment of taxes on shares withheld for employee taxes

Payment of debt issuance costs

Proceeds from borrowings from affiliate

Payments on line of credit

Net cash provided by (used in) financing activities

Net cash used in financing activities

Effect of foreign exchange rate changes on cash and cash equivalents, and restricted cash

Net increase in cash and cash equivalents, and restricted cash

Net (decrease) increase in cash and cash equivalents, and restricted cash

Cash and cash equivalents, and restricted cash, at beginning of period

5 unchanged sentences

Liabilities assumed in connection with business acquisition

Capital lease

Deferred offering costs, accrued but not paid

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

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Certara, Inc.

and its wholly owned subsidiaries (together, the “Company”) deliver software products and technology-enabled 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-enabled services help optimize, streamline, or even waive certain clinical trials to accelerate programs, reduce costs, and increase the probability of success.

The Company’s software and services for regulatory science and submissions and market access are underpinned by technologies such as natural language processing and Bayesian analytics.

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.

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There have been no changes other than what is discussed herein to the Company’s significant accounting policies as compared to the significant accounting policies described in Note 2 to the Company’s audited consolidated financial statements included in its Annual Report on Form 10-K for the year ended December 31, 2021.

These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes as of and for the year ended December 31, 2020.

These unaudited consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes as of and for the year ended December 31, 2021.

Basis of Presentation and Use of Estimates

We prepared our condensed consolidated financial statements in accordance with U.S.

generally accepted accounting principles (“U.S.

We have eliminated intercompany accounts and transactions.

We have also reclassified certain prior year amounts to conform to the current period presentation, which did not have a material impact on our consolidated financial condition or results of operations.

The preparation of condensed consolidated financial statements in conformity with U.S.

GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period.

Significant estimates include, among other estimates, the determination of fair values and useful lives of long-lived assets as well as intangible assets, goodwill, allowance for doubtful accounts receivable, recoverability of deferred tax assets, recognition of deferred revenue (including at the date of business combinations), value of interest rate swap agreements, determination of fair value of equity-based awards and assumptions used in testing for impairment of long-lived assets.

The preparation of condenesd consolidated financial statements in conformity with U.S.

generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period.

Significant estimates include, among other estimates, assumptions used in the allocation of the transaction price to separate performance obligations, estimates towards the measure of progress of completion on fixed-price service contracts, the determination of fair values and useful lives of long-lived assets as well as intangible assets, goodwill, allowance for credit losses for accounts receivable, recoverability of deferred tax assets, recognition of deferred revenue, value of interest rate swaps, determination of fair value of equity-based awards and assumptions used in testing for impairment of long-lived assets.

Actual results could differ from those estimates, and such differences may be material to the condensed consolidated financial statements.

The Company is an Emerging Growth Company, as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”).

Under the JOBS Act, Emerging Growth Companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until those standards apply to private companies.

The Company has elected to use this extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date that it (i) is no longer an Emerging Growth Company or (ii) it affirmatively and irrevocably opts out of the extended transition period provided in the JOBS Act.

As a result, these condensed consolidated financial statements may not be comparable to companies that comply with the new or revised accounting pronouncements as of public company effective dates.

The adoption dates discussed below reflect

this election.

As of June 30, 2021, the last business day of the Company’s second fiscal quarter, the Company had a public float above the threshold to be deemed to be a large accelerated filer.

In addition, the Company will have been a public company for at least 12 months subject to the reporting requirements of Section 13(a) or 15(d) of the Exchange Act at December 31, 2021.

Therefore, the Company expects to cease to be an Emerging Growth Company as of December 31, 2021.

As a result, as of December 31, 2021 the Company will no longer qualify for the extended tranition period for adoption of new or revised accounting standards discussed above, will be subject to shortened filing timelines, and required to include an attestation of the Company’s internal control over financial reporting by its independent auditors in its Annual Report on Form 10-K.

(b) Unaudited Interim Financial Statements

The accompanying condensed consolidated balance sheet as of September 30, 2021, the condensed consolidated statements of operations and comprehensive (loss) income for the three and nine months ended September 30, 2021 and 2020, the condensed consolidated statements of stockholders’ equity for the three and nine months ended September 30, 2021 and 2020, the condensed consolidated statements of cash flows for the nine months ended September 30, 2021 and 2020, and the related interim disclosures are unaudited.

The accompanying condensed consolidated balance sheet as of March 31, 2022, the condensed consolidated statements of operations and comprehensive loss for the three months ended March 31, 2022 and 2021, the condensed consolidated statements of stockholders’ equity for the three months ended March 31, 2022 and 2021, the condensed consolidated statements of cash flows for the three months ended March 31, 2022 and 2021, and the related interim disclosures are unaudited.

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S.

Certain information and note disclosures normally included in annual financial statements prepared in accordance with U.S.

GAAP have been condensed or omitted pursuant to those guidance.

These unaudited condensed consolidated financial statements include all adjustments necessary, consisting of only normal recurring adjustments, to fairly state the financial position and the results of the Company’s operations and cash flows for interim periods in accordance with U.S.

These unaudited condensed consolidated financial statements include all adjustments necessary to fairly state the financial position and the results of the Company’s operations and cash flows for interim periods in accordance with U.S.

Interim period results are not necessarily indicative of results of operations or cash flows for a full year or any subsequent interim period.

The accompanying condensed consolidated financial statements should be read in conjunction with the Company’s 2021 audited consolidated financial statements and notes thereto.

The information as of December 31, 2020 in the Company’s condensed consolidated balance sheet included herein is derived from the Company’s audited consolidated financial statements included in the 2020 Annual Report on Form 10-K.

Recently Adopted Accounting Pronouncements

In March 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-04, “Reference Rate Reform (Topic 848),” which contains practical expedients for reference rate reform related activities that impact debt, leases, derivatives and other contracts.

In January 2021, FASB issued ASU 2021-01, “Reference Rate Reform (Topic 848),” which clarifies that certain optional expedients and exceptions in Accounting Standards Codification ("ASC") Topic 848 for contract modifications and hedge accounting apply to derivatives that are affected by the discounting transition.

Guidance in these ASUs is optional and is effective as of March 12, 2020 through December 31, 2022.

The Company adopted the ASUs upon issuance and elected to apply the hedge accounting expedients related to probability and the assessments of effectiveness for future LIBOR-indexed cash flows to assume that the index upon which future hedged transactions will be based matches the index on the corresponding derivatives.

Application of these expedients preserves the presentation of derivatives consistent with past presentation.

The adoption of the ASUs did not have a material impact to the Company’s condensed consolidated financial statements.

In August 2018, the FASB issued ASU 2018-15, “Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract”, which included updated guidance on ASC 350-40, “Intangibles — Goodwill and Other — Internal-Use Software”.

The new guidance requires a customer in a cloud computing arrangement that is a service contract to follow the internal-use software guidance in ASC 350-40 to determine which implementation costs to capitalize as assets or expense as incurred.

ASU 2018-15 is effective for calendar-year public business entities in 2020.

For all other calendar-year entities, it is effective for annual periods beginning in 2021 and interim periods in 2022.

Early adoption is permitted.

The Company has adopted ASU 2018-15 during the year beginning January 1, 2020.

The adoption of ASU 2018-15 did not materially impact the condensed consolidated financial statements.

In August 2018, the FASB issued ASU 2018-13, “Changes to Disclosure Requirements for Fair Value Measurements (Topic 820)”, which improved the effectiveness of disclosure requirements for recurring and nonrecurring fair value measurements.

The standard removes, modifies, and adds certain disclosure requirements.

The amendments in this update are effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019.

Early adoption is permitted.

The Company has adopted ASU 2018-13 during the year beginning January 1, 2020.

The adoption of ASU 2018-13 did not materially impact the condensed 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 calculating income taxes in an interim period and to the recognition of deferred tax liabilities for outside basis differences for certain investments.

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 condensed consolidated financial statements.

The information as of December 31, 2021 in the Company’s condensed consolidated balance sheet included herein is derived from the Company’s audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021.

Accounting Pronouncements Not Yet Adopted

In February 2016, the FASB issued ASU 2016-02, “Leases”.

ASU 2016-02 establishes a right-of-use (“ROU”) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months.

Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement.

A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available.

In its April 2020 meeting, the FASB deferred the effective date for ASC 842 for private companies to fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022.

Upon losing EGC status as of December 31, 2021, the Company will adopt this guidance and is currently evaluating the impact of this ASU on its condensed consolidated financial statements.

In June 2016, the FASB issued ASU 2016-13, “Financial Instruments — Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments”.

ASU 2016-13 changes the impairment model for most financial assets and certain other instruments.

For trade and other receivables, held-to-maturity debt securities, loans, and other instruments, entities will be required to use a new forward-looking “expected loss” model that generally will result in the earlier recognition of allowances for losses.

The guidance also requires increased disclosures.

Per ASU 2019-10 issued in November 2019, ASU 2016-13 is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years for private companies.

Early adoption is permitted.

Upon losing EGC status as of December 31, 2021, the Company will adopt this guidance and is currently evaluating the impact of adopting this guidance on its condensed consolidated financial statements.

In January 2017, the FASB issued ASU 2017-04, “Intangibles — Goodwill and Other (Topic 350):

Simplifying the Accounting for Goodwill Impairment”.

ASU 2017-04 removes Step 2 of the goodwill impairment test, which requires a hypothetical purchase price allocation.

A goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value.

This standard will be effective for a private company (and thus, for those adopting exemption for Emerging Growth Companies) beginning in the first quarter of fiscal year 2022 and is required to be applied prospectively.

Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017.

(e) Principles of Consolidation

In November 2021, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2021-10, “Government Assistance (Topic 832):

Disclosures by Business Entities about Government Assistance”.

The ASU requires that entities increase disclosures about government assistance received relating to accounting policy, nature of the assistance, and the effect of the assistance on the financial statements.

The ASU is effective for annual periods beginning after December 15, 2021.

Early application of the ASU is permitted.

The Company is currently evaluating the impact of these amendments on its consolidated financial statements.

(d) Principles of Consolidation

The accompanying condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries.

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Cash equivalents include highly liquid investments with maturities of three months or less from the date purchased.

Restricted cash represents cash that is reserved to support a financing program.

The restricted cash balance was $ 1,108 , $ 1,909 , and $ 1,812 at September 30, 2021, December 31, 2020, and September 30, 2020, respectively.

Restricted cash represents cash that is reserved to support a financing program and unexpended restricted grant funds.

The restricted cash balance was $ 745 , $ 827 and $ 733 at March 31, 2022, December 31, 2021, and March 31, 2021, respectively.

The following table provides a reconciliation of cash and cash equivalents and restricted cash to the amounts presented in the condensed consolidated statements of cash flows:

SEPTEMBER 30,

Cash and cash equivalents

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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 has 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 condensed consolidated statements of comprehensive (loss) income in the second quarter of 2021.

Changes in the fair value of the interest rate swap recognized in interest expense excluding the relcassfication discussed previously for the nine months ended September 30, 2021 amounted to $ 638 .

On August 31, 2021, the Company entered an amendment to the interest rate swap agreement.

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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 condensed consolidated balance sheets and the changes in the fair value of the embedded at-the-market derivative is recognized in other comprehensive loss.

At September 30, 2021, the financing component is recorded in current portion of interest rate swap liability in the amount of $ 1,750 .

The fair value of the embedded at-the-market derivative is recognized in

the condensed consolidated balance sheets and the changes in the fair value of the embedded at-the-market derivative is recognized in other comprehensive loss.

At March 31, 2022, the financing component is recorded in current portion of interest rate swap liability in the amount of $ 439 .

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 condensed consolidated statements of cash flows.

At September 30, 2021, the Company recorded the fair value of the embedded at-the-market derivative in current portion of interest rate swap liability in the amount of $ 63 .

The following table sets forth the liability that is measured at fair value on a recurring basis by the levels in the fair value hierarchy at September 30, 2021:

Interest rate swap liability

The following table sets forth the liability that is measured at fair value on a recurring basis by the levels in the fair value hierarchy at December 31, 2020:

Interest rate swap liability

At March 31, 2022, the Company recorded the fair value of the embedded at-the-market derivative in current portion of interest rate swap assets in the amount of $ 181 .

The Company did not recognize any changes in the fair value of the interest rate swap in interest expense for the three months ended March 31, 2022.

The following table sets forth the assets that is measured at fair value on a recurring basis by the levels in the fair value hierarchy at March 31, 2022:

Interest rate swap asset

The following table sets forth the assets that were measured at fair value on a recurring and non-recurring basis by their levels in the fair value hierarchy at December 31, 2021:

Interest rate swap asset

For more information regarding fair value measurement and fair value hierarchy, see NOTE 2.

“Summary of Significant Accounting Policies” in the notes to the Consolidated Financial Statements in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021.

The net amount of deferred losses related to derivative instruments designated as cash flow hedges that is expected to be reclassified from accumulated other comprehensive loss into earnings over the next twelve months is insignificant.

Revenue Recognition ASC 606

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.

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.

For contracts with multiple performance obligations, the Company allocates the transaction price of the contract to each performance obligation on a relative standalone selling price basis.

The delivery of a particular type of software and each of the user licenses would be one performance obligation.

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.

The Company typically recognizes license revenue at a point in time upon delivering the applicable license.

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The revenue related to software training and software implementation performance will be recognized at the completion of the service.

The Company’s professional services offerings primarily include consulting services.

The service contracts are either time-and-materials, fixed fee or prepaid.

The revenues are generally recognized over time as the services are performed.

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.

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.

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 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.

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.

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.

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) on the condensed consolidated balance sheets.

Amounts are billed as work progresses in accordance with agreed-upon contractual terms, either at periodic intervals (e.g., quarterly or monthly) or upon achievement of contractual milestones.

Contract assets relate to the Company’s rights to consideration for performance obligations satisfied but not billed at the reporting date on contracts (i.e., unbilled revenue, a component of accounts receivable in the condensed consolidated balance sheets).

Contract assets are billed and transferred to customer accounts receivable when the rights become unconditional.

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The Company records the amounts collected in advance of the satisfaction of performance obligations, usually over time, as a contract liability or deferred revenue.

Invoice 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 condensed consolidated balance sheets.

The unsatisfied performance obligations as of September 30, 2021 were approximately $ 93,837 .

Invoiced amounts for non-cancelable services starting in future periods are included in contract assets and deferred revenue.

The unsatisfied performance obligations as of March 31, 2022 were approximately $ 101,246 .

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.

Sources and Timing of Revenue

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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:

THREE MONTHS ENDED SEPTEMBER 30,

NINE MONTHS ENDED SEPTEMBER 30,

THREE MONTHS ENDED MARCH 31,

Software licenses transferred at a point in time

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Basic earnings per common share is computed by dividing the net income that is attributable to common stockholders by the weighted-average number of common shares outstanding during the reporting period, without consideration for potentially dilutive securities.

The dilutive effect of potentially dilutive securities is excluded from basic earnings per share and is included in the calculation of diluted earnings per share.

The dilutive effect of potentially dilutive securities is excluded from basic earnings per share

and is included in the calculation of diluted earnings per share.

Restricted stock and restricted stock units granted by the Company are treated as potential common shares outstanding in computing diluted earnings per share.

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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.

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.

Although the spread of the virus seems to have subsided, the possibility of a resurgence due to a new strain is possible.

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.

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 our former controlling shareholders, an affiliate of EQT AB (“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 and certain other stockholders (“Institutional Investors”).

The registration rights agreement was amended and restated in connection with 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”).

It contains provisions that entitle EQT and the other Institutional Investors thereto to certain rights to have their securities registered by the Company under the Securities Act.

EQT is entitled to an unlimited number of “demand” registrations, subject to certain

EQT is entitled to an unlimited number of “demand” registrations, subject to certain limitations.

Every Institutional Investor that holds registration rights is 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 Institutional Investors relating to such registrations and indemnify them against certain liabilities which may arise under the 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;

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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 10,000,000 shares of the Company’s common stock, including an additional 1,500,000 shares of common stock pursuant to the full exercise of the underwriters’ option to purchase additional shares.

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.

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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 not offer any common stock

in this transaction and did not 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.

Concentrations of Credit Risk

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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 September 30, 2021 and December 31, 2020, the investments were bank deposits and overnight sweep accounts.

At March 31, 2022 and December 31, 2021, 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 September 30, 2021, there was one customer that accounted for more than 10% of the Company’s accounts receivable and no customer accounted for more than 10% of the Company’s revenues during the three and nine months presented for 2021.

No customers accounted for more than 10% of the Company’s accounts receivable or revenues as of December 31, 2020 or during the periods presented.

On March 2, 2021, the Company completed a transaction which qualified as a business combination.

The business combination was not material to our condensed consolidated financial statements.

Based on the Company’s preliminary purchase price allocation, approximately $ 1,200 , $ 100 and $ 1,100 of the purchase price was assigned to customer relationships, non-compete agreements and goodwill, respectively.

On June 7, 2021, the Company completed a transaction which qualified as a business combination.

The business combination was not material to our condensed consolidated financial statements.

Based on the Company’s preliminary purchase price allocation, approximately $ 7,400 and $ 4,700 of the purchase price was assigned to customer relationships and goodwill, respectively.

As of March 31, 2022 and December 31, 2021, no single customer accounted for more than 10% of the Company’s accounts receivable.

No customers accounted for more than 10% of the Company’s revenues during the three months ended March 31, 2022 and 2021.

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.

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 21, LLC (“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.

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:

Cash paid to sellers

Cash paid to others and escrow

Unregistered shares of Certara, Inc.

( 2,239,717 shares)

Total consideration

Assets acquired and liabilities assumed:

Cash and cash equivalents

Accounts receivable

Other current assets

Property and equipment

Deferred tax assets

Identifiable intangible assets:

Acquired software

Customer relationships

Long-term deposits

Current liabilities

Current portion of deferred revenue

Net assets acquired

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.

Integrated Nonclinical Development Solutions

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 a total consideration of $ 8,148 .

The business combination was not material to the Company’s condensed consolidated financial statements.

Based on the Company’s preliminary purchase price allocation, approximately $ 2,500 , $ 860 and $ 2,855 of the purchase price was assigned to customer relationships, acquired software and goodwill, respectively.

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 date during the measurement period.

Any adjustments to the preliminary purchase price allocation identified during the measurement period, which will not exceed one year from the acquisition date, will be accounted for prospectively.

The condensed consolidated financial statements include the operating results of each acquisition from the date of acquisition.

Pro forma results of operations and the revenue and net income subsequent to the acquisition date for the acquisitions completed nine months ended September 30, 2021 have not been presented because the effects of the acquisitions, individually and in the aggregate, were not material to our financial results.

Pro forma results of operations revenue and net income subsequent to the acquisition date for three months ended March 31, 2022 have not been presented because the effects of the acquisition was not material to our financial results.

Prepaid Expenses and Other Current Assets and Other Supplemental Assets Information

Prepaid expenses

Income tax receivable

Research and development tax credit receivable

Current portion of interest rate swap asset

Other current assets

Prepaid expenses and other current assets

Other long-term assets consisted of the following:

Long-term deposits

Deferred financing cost

Total other long-term assets

Long-Term Debt and Revolving Line of Credit

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subsidiaries and contain various financial and nonfinancial covenants.

As of September 30, 2021, available borrowings under the revolving lines of credits were $ 100,000 .

Available borrowings under the revolving lines of credits of $ 20,000 at December 31, 2020 were reduced by $ 120 standby letters of credit issued to a landlord in lieu of a security deposit in addition to any outstanding borrowings.

The Company was in compliance with all financial covenants as of September 30, 2021 and December 31, 2020.

As of March 31, 2022 and December 31, 2021, available borrowings under the revolving lines of credits were $ 100,000 .

Available borrowings under the revolving lines of credits as of March 31, 2022 and December 31, 2021 were reduced by $ 120 and $ 239 standby letters of credit issued to a landlord in lieu of a security deposit in addition to any outstanding borrowings.

The Company was in compliance with all financial covenants as of March 31 2022 and December 31, 2021.

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.

The effective interest rate was 3.68 % and 4.48 % for the nine months ended September 30, 2021 and the year ended December 31, 2020 for the term loan debt, respectively.

The effective interest rate was 3.64 % and 3.75 % for the three months ended March 31, 2022 and 2021 for the term loan debt, respectively.

As discussed previously, the Company entered into interest rate swap agreements to mitigate the interest risk.

Interest incurred on the Credit Agreement with respect to the term loan amounted to $ 2,773 , $ 8,444 , $ 2,974 , and $ 11,047 for the three and nine months ended September 30, 2021 and 2020, respectively.

Accrued interest payable on the Credit Agreement with respect to the term loan amounted to $ 30 and $ 32 at September 30, 2021 and December 31, 2020, respectively, and is included in accrued expenses.

Interest paid on the Credit Agreement with respect to the revolving line of credit was $ 93 and $ 457 for the nine months ended September 30, 2021 and 2020, respectively.

There was less than $ 1 accrued interest payable and no accrued interest payable on the revolving line of credit at September 30, 2021 and December 31, 2020.

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 15 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 $ 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 and $ 8,388 for the nine months ended September 30, 2021 and 2020, respectively.

Interest incurred on the Credit Agreement with respect to the term loan amounted to $ 2,737 and $ 2,854 for the three months ended March 31, 2022 and 2021, respectively.

Accrued interest payable on the Credit Agreement with respect to the term loan amounted to $ 33 and $ 30 at March 31, 2022 and December 31, 2021, respectively, and is included in accrued expenses.

Interest incurred on the Credit Agreement with respect to the revolving line of credit was $ 63 and $ 12 for the three months ended March 31, 2022 and 2021, respectively.

There was $ 1 and $ 66 accrued interest payable on the revolving line of credit at March 31, 2022 and December 31, 2021, respectively.

Long-term debt consists of the following:

SEPTEMBER 30,

Revolving line of credit

debt issuance costs

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Long-term debt, net of current portion and debt issuance costs

The principal amount of long-term debt outstanding as of September 30, 2021 matures in the following years:

The principal amount of long-term debt outstanding as of March 31, 2022 matures in the following years:

Remainder of 2022

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, 2020, the Company was required to make a mandatory prepayment on the term loan of approximately $ 1,527 on or before April 30, 2021.

The prepayment was included in the current portion of long-term debt on the condensed consolidated balance sheets.

For the year ended December 31, 2021, the Company was not required to make a mandatory

prepayment on the term loan.

For the 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.

Commitments and Contingencies

The Company leases certain office facilities and equipment under non-cancelable operating and capital leases with remaining terms from one to eight years .

The gross amounts of assets under capital leases were $ 1,498 and $ 1,501 at September 30, 2021 and December 31, 2020, respectively.

The total accumulated amortization associated with equipment under capital leases was $ 1,158 and $ 946 at September 30, 2021 and December 31, 2020, respectively.

amortization expense is included in depreciation expense.

Rent expense under the operating leases was $ 4,796 and $ 4,929 for the nine months ended September 30, 2021 and 2020, respectively.

Non-cancelable future minimum lease commitments as of September 30, 2021 are as follows:

The Company leases certain office facilities and equipment under non-cancelable operating and finance leases with remaining terms from one to six 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 condensed consolidated balance sheets.

With respect to operating lease liabilities, current lease liabilities and non-current operating lease liabilities are included in “Current operating lease liabilities” and "Operating lease liabilities, net of current portion”.

Current finance lease liabilities and non-current finance lease liabilities are included in "Other current liabilities"

and "Non-current finance lease liabilities"

in the condensed consolidated balance sheets.

At March 31, 2022, The weighted average remaining lease terms were 3.63 years and 0.83 year for operating and finance lease, respectively;

the weighted average discount rate were 4.08 % and 6.19 % for operating and finance lease, respectively.

For additional information on the Company's leases, see Note 14 to the Consolidated Financial Statements included in the 2021 Annual Report on Form 10-K.

The following table summarizes the lease-related assets and liabilities recorded in the consolidated balance sheets at March 31, 2022 and December 31, 2021:

Lease Position

Balance Sheet Classification

March 31, 2022

December 31, 2021

Operating lease assets

Operating lease right-of-use assets

Finance lease assets

Property and equipment, net

Total lease assets

Current operating lease liabilities

Other current liabilities

Operating lease liabilities, net of current portion

Non-current finance lease liabilities

Total lease liabilities

The following table summarizes by year the maturities of our minimum lease payments as of March 31, 2022.

Remainder of 2022

Non-cancelable future minimum lease payments

Less amount representing interest

Net non-cancelable future minimum lease payments

Current portion of net non-cancelable future minimum lease payments

Net long-term non-cancelable future minimum lease payments

Total future lease payments

imputed interest

Accrued Expenses and Other Supplemental Liabilities Information

Accrued expenses consist of the following:

Accrued compensation

Legal and professional accruals

Local sales and VAT taxes

Interest payable

Income taxes payable

Accrued business acquisition liabilities

Total accrued expenses

Other current liabilities consist of the following:

Current portion of interest rate swap liability

Current finance lease liabilities

Total other current liabilities

Equity-Based Compensation

Class B Incentive Units

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 vest 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 performance-based Class B Units also vested if the aggregate value attributable to the IPO equaled or exceeded an amount equivalent to the return on investment performance targets.

As of September 30, 2020, 6,328,153 Class B Units were issued and outstanding to Company employees.

The Company granted 1,357,404 units and recorded actual forfeitures of 377,626 units during the nine months ended September 30, 2020.

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 Company recorded compensation expense related to the Class B Units of $ 1,181 and $ 2,286 for the three and nine months ended September 30, 2020.

Restricted Stock

Effective as of December 10, 2020, 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 stock of the Company.

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.

The majority of the company’s restricted stock awarded to its employees were originally issued in December 2020 to exchange the Class B Profits Interest Unit (the “Class B Plan”) of EQT, former parent of the Company.

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.

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 is shown below:

In 2021, the Company granted 87,127 replacement shares of restricted stock 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 .

Non-vested restricted stock as of December 31, 2021

( 1,724,979 )

Non-vested restricted stock as of September 30, 2021

The Company did no t authorize or issue any restricted stock during the nine-month period ended September 30, 2021.

Equity-based compensation expense related to the restricted stock exchanged for Performance-based Class B Units was $ 3,120 and $ 10,144 for the three and nine months ended September 30, 2021, respectively.

At September 30, 2021, the total unrecognized equity-based compensation expense related to outstanding restricted stock recognized using the accelerated attribution approach was $ 14,072 , which is expected to be recognized over a weighted-average period of 26 months .

Equity-based compensation expense related to the restricted stock exchanged for Time-based Class B Units were $ 767 and $ 2,298 for the three and nine months ended September 30, 2021 respectively.

At September 30, 2021, the total unrecognized equity-based compensation expense related to outstanding restricted stock recognized using the straight-line attribution approach was $ 7,230 , which is expected to be recognized over a weighted-average period of 35.2 months.

Non-vested restricted stock as of March 31, 2022

The Company did no t authorize or issue any restricted stock during the three-month period ended March 31, 2022.

The number of the restricted stock vested includes 1,774 shares of common stock that were withheld on behalf of employees to satisfy the statutory tax withholding requirements.

Equity-based compensation expenses related to the restricted stock exchanged for Performance-based Class B Units were $ 2,120 and $ 4,041 for the three months ended March 31, 2022 and 2021, respectively.

At March 31, 2022, the total unrecognized equity-based compensation expense related to outstanding restricted stock recognized using the accelerated attribution approach was $ 9,518 , which is expected to be recognized over a weighted-average period of 23.4 months.

Equity-based compensation expenses related to the restricted stock exchanged for Time-based Class B Units were $ 766 and $ 777 for the three months ended March 31, 2022 and 2021, respectively.

At March 31, 2022, the total unrecognized equity-based compensation expense related to outstanding restricted stock recognized using the straight-line attribution approach was $ 5,628 , which is expected to be recognized over a weighted-average period of 31.2 months.

Equity-based employee compensation expense related to the time-based restricted stock for the Pinnacle acquisition was $ 292 for the three months ended March 31, 2022.

At March 31, 2022, the total unrecognized equity-based compensation expenses related to outstanding restricted stock recognized using the straight-line attribution approach was $ 2,178 , which is expected to be recognized over a weighted-average period of 23.8 months.

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.

Restricted Stock Units

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Non-vested RSUs as of December 31, 2021

Non-vested RSUs as of September 30, 2021

The number of RSUs vested includes 10,003 shares of common stock that were withheld on behalf of employees to satisfy the statutory tax withholding requirements.

Equity-based compensation expense related to the RSUs was $ 2,362 and $ 4,898 for three and nine months ended September 30, 2021, respectively.

At September 30, 2021, the total unrecognized equity-based compensation expense related to outstanding RSUs was $ 22,559 , which is expected to be recognized over a weighted-average period of 29.3 months.

Non-vested RSUs as of March 31, 2022

Equity-based compensation expenses related to the RSUs were $ 3,388 and $ 333 for three months ended March 31, 2022 and 2021, respectively.

At March 31, 2022, the total unrecognized equity-based compensation expense related to outstanding RSUs was $ 26,557 , which is expected to be recognized over a weighted-average period of 25.9 months.

Performance Stock Units

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The Company will continue to assess the probability of each condition being achieved at each reporting period to determine whether and when to recognize compensation cost.

The following table presents a summary of activity on the PSUs for the period ended September 30, 2021.

The following table presents a summary of activity on the PSUs for the period ended March 31, 2022.

A summary of the Company’s PSU activity is as follows:

Non-vested PSUs as of December 31, 2021

Non-vested PSUs as of September 30, 2021

Equity-based compensation expense related to the PSUs was $ 1,916 and $ 3,506 for the three and nine months ended September 30, 2021.

At September 30, 2021, the total unrecognized equity-based compensation expense related to outstanding PSUs was $ 6,982 , which is expected to be recognized over a weighted-average period of 19.5 months.

The following table summarizes the components of total equity-based compensation expense included in the condensed consolidated statements of operations and comprehensive (loss) income for each period presented:

THREE MONTHS ENDED SEPTEMBER 30,

NINE MONTHS ENDED SEPTEMBER 30,

Non-vested PSUs as of March 31, 2022

Equity-based compensation expense related to the PSUs was $ 947 for the three months ended March 31, 2022.

At March 31, 2022, the total unrecognized equity-based compensation expense related to outstanding PSUs was $ 4,382 , which is expected to be recognized over a weighted-average period of 17.3 months.

Under 2020 Incentive Plan, in April 2022, the Company issued performance stock units to certain employees to receive shares of the Company’s common stock at a specified date in the future 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.

Certain terms in this award were modified from 2021 award of performance stock units.

THREE MONTHS ENDED MARCH 31,

Cost of revenues

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General and administrative expenses

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.

As of March 31, 2022, 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.

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.

3 unchanged sentences

Since the Company operates in one operating segment, all required financial segment information can be found in the condensed consolidated financial statements.

The following table summarizes revenue by geographic area for the three and nine months ended September 30, 2021 and 2020:

The following table summarizes revenue by geographic area for the three months ended March 31, 2022 and 2021:

THREE MONTHS ENDED

NINE MONTHS ENDED

SEPTEMBER 30,

Revenue (1) :

4 unchanged sentences

The currently forecasted ETR may vary from the actual year-end due to the changes in these factors.

The Company's global ETR for the three and nine months ended September 30, 2021 and 2020 were 48 %, ( 11 )%, 22 %, and 48 %, respectively, including discrete tax items.

The current year decrease in the ETR was principally due to the combined effect of the discrete tax effect of certain prior period swap losses that are required to be excluded from the EAETR calculation and the overall increase in pre-tax loss.

The Company's global ETR for the three months ended March 31, 2022 and 2021 were 41 % and 33 %, respectively, including discrete tax items.

The current year increase in the ETR was principally due to the relative mix of domestic and international earnings.

Earnings per Share

Earnings per share is computed by dividing net income (loss) by the weighted-average common shares outstanding.

Basic earnings per common share is computed by dividing net income available to common shareholders by the weighted-

average number of common shares outstanding during the period.

Earnings per share is computed by dividing net income by the weighted-average common shares outstanding.

Basic earnings per common share is computed by dividing net income available to common shareholders by the weighted-average number of common shares outstanding during the period.

Diluted earnings per common share considers potentially dilutive securities outstanding during the period.

Basic and diluted earnings per share is computed by dividing net income by the weighted-average common shares outstanding:

THREE MONTHS ENDED SEPTEMBER 30,

NINE MONTHS ENDED SEPTEMBER 30,

Net income (loss) available to common shareholders

THREE MONTHS ENDED MARCH 31,

Net income available to common shareholders

Basic weighted average common shares outstanding

1 unchanged sentence

Diluted weighted average common shares outstanding

Earnings (loss) per share:

Subsequent Events

On October 1, 2021, the Company completed the acquisition of Pinnacle 21, LLC (“Pinnacle”), a company that develops advanced software for standards-based data management for regulatory submissions, for total consideration of $ 250,000 cash and 2,239,717 shares of restricted common stock of the Company.

We will complete the initial accounting for the acquisition of Pinnacle 21, LLC, including the allocation of purchase consideration, in the fourth quarter of 2021.

Earnings per share:

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements