What changed in this filing

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Item 7. Management’s Discussion and Analysis

2026-02-26 compared with 2025-02-26 · 110 added, 138 removed, 452 unchanged (35% of the section changed)

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Executive Overview

We are a leading provider of biosimulation technology and solutions for using MIDD in the global biopharmaceutical industry.

Biosimulation and MIDD can increase the probability of success in bringing a new drug to market and decrease the costs of drug development.

In addition, MIDD strategies are increasingly utilized to help predict commercial success, a critical part of the drug development process as new products must be both approved by regulators and adopted by the market.

Our goal is to enable the life science industry to use data, modeling, and analytics to make better decisions during drug development and commercialization to increase productivity rates and vastly reduce development costs.

Drug development is necessarily a highly regulated process involving the collection of vast amounts of laboratory, clinical and evidence data, and there are many failures at every step along the way which add to total cost.

We are a global leader in biosimulation science, technology and consulting services for using Model-Informed Drug Development (“MIDD”) in the global biopharmaceutical and biotech industry.

MIDD is an approach that utilizes biological and statistical models derived from preclinical, clinical, and evidence data to inform decision-making in drug research and development, and commercialization.

Biosimulation is a critical component of MIDD that uses computer-aided mathematical simulation of biological processes and systems to understand the action of a drug in a human body or a population of humans.

Our goal is to enable the life science industry to use data, modeling, and analytics to make better decisions during drug research, development and commercialization to increase productivity rates and vastly reduce development costs.

On average, the pharmaceutical industry spends more than $290 billion annually on research and development(“R&D”).

Generally, companies spend an average of $6.2 billion per FDA-approved drug to develop one new medicine, including the cost of failures, according to “Analysis of pharma R&D productivity - a new perspective needed” on Drug Discovery Today.

Our software and scientists incorporate modern advances in scientific understanding, drug development experience, data analysis, and AI resulting in significant opportunities to decrease the cost and increase the odds of new drug approval and commercial success.

Our technology and scientists incorporate modern advances in scientific understanding, drug research and development experience, data analysis, and AI, resulting in significant opportunities to decrease the cost and increase the odds of new drug approval and commercial success.

Our approach to AI is grounded in our long-standing expertise in mechanistic and empirical modeling.

We deploy AI capabilities within validated scientific frameworks and expert-led workflows, rather than as standalone automated systems.

This expert-in-the-loop model allows us to leverage native AI capabilities in a manner that is consistent with regulatory expectations for transparency, reproducibility, and explainability.

Our proprietary biosimulation platforms are built on biology, chemistry, and pharmacology principles with proprietary mathematical algorithms that model how medicines and diseases behave in the body.

For over two decades, our scientists have developed and validated our biosimulation technology using data from scientific literature, laboratory research, preclinical and clinical studies.

To do this, we have developed solutions for the collection, standardization, validation, storage, and analysis of the preclinical and clinical data needed for MIDD.

These data solutions are used internally and by global life sciences companies.

The scientific principles underlying our work with customers in biosimulation and MIDD must be transparent and fully explainable during the regulatory process, so we have become experts at incorporating data and results into regulatory documents.

Our software and regulatory services streamline the creation of regulatory filings and speed regulatory data flow to maximize the chances of successful commercialization.

AI and machine learning technologies are being incorporated across our software and services portfolios providing opportunities to expand the number of data sources utilized, better predict outcomes, and streamline reporting.

For example, we are using machine learning to automate and speed the process of biosimulation, and we have created an AI application to aid creating regulatory documents from scientific analyses and clinical data.

We believe that AI predictive models will continue to enhance the accuracy and usefulness of biosimulation models and be utilized broadly across drug development.

We deliver software and technology-enabled services.

Our strategy is to create and apply validated software applications that can be used broadly in the life science industry.

We offer services, leveraging our technology, delivered by scientists with extensive drug development experience to aid our clients in applying biosimulation and MIDD to their specific projects.

To do this, we have developed scientifically based solutions for the collection, standardization, validation, storage, and analysis of the preclinical, clinical and evidence data needed for MIDD.

These data solutions are used internally and industry wide by life sciences companies.

The scientific principles underlying our work must be transparent and fully explainable during the regulatory process, so we have developed expertise in incorporating data, references and results into regulatory documents.

Our software and regulatory scientific services streamline the creation of regulatory filings and speed regulatory data flow to maximize the chances of successful commercialization.

Native AI and machine learning technologies are being incorporated across our technology and consulting services portfolios, providing opportunities to expand the number of data sources utilized, better predict outcomes, and streamline reporting.

For example, we are using machine learning to automate and speed the process of biosimulation, and we have created generative AI applications to aid in drafting regulatory documents from scientific analyses and clinical data.

We apply AI capabilities within established modeling environments and under the supervision of experienced scientists and regulatory experts.

Our modeling platforms, curated datasets, and regulatory experience position us to incorporate emerging AI techniques in a controlled and scientifically rigorous manner.

While AI can enhance productivity and insight generation, our solutions continue to rely on validated models and expert interpretation to support decision-making in regulated environments.

We leverage our validated software applications to deliver technology-enabled services.

Our services are delivered by scientists with extensive drug development experience who aid our customers in applying biosimulation and MIDD to their specific projects.

Since 2014, customers who leverage our solutions have received 90% or more of all new drug approvals by FDA.

We have worked with more than 2,600 life sciences companies and academic institutions and have collaborated on more than 10,000 customer projects in the last decade across a wide variety of therapeutic areas ranging from cancer and hematology to diabetes and hundreds of rare diseases.

Our software products are licensed by more than 94,000 users and are also used by 23 global drug regulatory agencies, including the FDA and Japanese PMDA.

Our software products are licensed by more than 160,000 users and are also used by 20 global drug regulatory agencies, including the FDA, the UK’s MHRA, Japan's PMDA, and China’s NMPA.

With continued innovation in and adoption of our biosimulation software, technology, and services, we believe more life science companies worldwide will leverage more of our end-to-end platform to reduce cost, accelerate speed to market, and ensure safety and efficacy of medicines for all patients.

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Our net retention rates measure the percentage of recurring revenue that is retained from existing software customers over a specific period of time, inclusive of price increases and expansion, excluding revenue from acquisitions occurred within the past 12 months.

The tables below summarizes our quarterly bookings and net software retention rate trends:

The tables below summarize our quarterly bookings and net software retention rate trends:

Q1 Q2 Q3 Q4 FULL YEAR

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Support for the use of biosimulation in discovery and development from regulatory bodies, such as the FDA and EMA, has been critical to its rapid adoption by the biopharmaceutical industry.

There has been a steady increase in the recognition by regulatory and academic institutions of the role that modeling and simulation can play in the biopharmaceutical development and approval process, as demonstrated by new regulations and guidance documents describing and encouraging the use of modeling and simulation in the biopharmaceutical discovery, development, testing, and approval process, which has directly led to an increase in the demand for our services.

which has directly led to an increase in the demand for our services.

Changes in government or regulatory policy, or a reversal in the trend toward increasing the acceptance of and reliance upon in silico data in the drug approval process, could decrease the demand for our products and services or lead regulatory authorities to cease use of, or recommend against the use of, our products and services.

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However, some changes in regulations, such as a relaxation in regulatory requirements or the introduction of streamlined or expedited approval procedures, or an increase in regulatory requirements that we have difficulty satisfying or that make our regulatory strategy services less competitive, could eliminate or substantially reduce the demand for our regulatory services.

Additionally, a new

government administration may lead to either stricter or more relaxed regulatory environments.

Currently, the new U.S.

federal administration shows signs of reforming the pharmaceutical industry, particularly focusing on drug pricing and accelerated drug approval.

These changes are expected to potentially have a significant impact on the biopharmaceutical industries, creating a mix of opportunities and challenges for us.

Additionally, changes in government leadership may also result in either stricter or more relaxed regulatory environments.

In the United States, recent executive actions and related government initiatives concerning prescription drug pricing, together with existing statutes and implementing guidance, may create additional uncertainty in pricing frameworks.

For example, government-led initiatives to expand direct-to-consumer discount mechanisms and other pricing programs could alter market dynamics and may indirectly affect customer research and development investment levels and priorities.

Furthermore, in the past year, there has been a general pullback of government support and funding for drug development, particularly for public sector and academic organizations, dependent on outside funding to develop early-stage research.

Any material decrease or delay in demand for our technologies or services, or regulatory restrictions or requirements placed on them, may have a material adverse effect on our business, results of operations and financial condition.

In addition to the external regulatory environment, internally, we initiated a review process in 2024 to evaluate the long-term strategic options for our regulatory services business.

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We believe that presentation of the GAAP and the non-GAAP metrics in this filing will aid investors in understanding our business.

Management measures operating performance based on adjusted EBITDA defined for a particular period as net income (loss) excluding interest expense, provision (benefit) for income taxes, depreciation and amortization expense, intangible asset amortization, equity-based compensation expense, goodwill impairment expense, acquisition and integration expense, and other items not indicative of our ongoing operating performance.

acquisition and integration expense, and other items not indicative of our ongoing operating performance.

Management also measures operating performance based on adjusted net income defined for a particular period as net income (loss) excluding equity-based compensation expense, amortization of acquisition-related intangible assets, acquisition and integration expense, and other items not indicative of our ongoing operating performance.

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Adjusted EBITDA, adjusted net income and adjusted diluted earnings per share have certain limitations in that they do not include the impact of certain expenses that are reflected in our consolidated statements of operations and comprehensive income (loss) that are necessary to run our business.

Other companies, including other companies in our industry, may not use

these measures and may calculate both differently than as presented, limiting the usefulness as a comparative measure.

The following table reconciles net income (loss) to adjusted EBITDA :

Other companies, including other companies in our industry, may not use these measures and may calculate both differently than as presented, limiting the usefulness as a comparative measure.

The following table reconciles net loss to adjusted EBITDA:

YEAR ENDED DECEMBER 31,

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Depreciation and amortization expense(a) 75,162 68,033 56,071

Intangible asset amortization(a) 66,039 54,519 50,739

Currency (gain) loss(a) (891) 2,344 638

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Executive recruiting expense(l) 661 646 631

First-year Sarbanes-Oxley implementation costs(m) — — 961

Litigation and settlement expense(m) 119 — —

Adjusted EBITDA $ 134,493 $ 122,046 $ 123,108

The following table reconciles net income (loss) to adjusted net income:

The following table reconciles net loss to adjusted net income:

YEAR ENDED DECEMBER 31,

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Executive recruiting expense(l) 661 646 631

First-year Sarbanes-Oxley implementation costs(m) — — 961

Litigation and settlement expense(m) 119 — —

Income tax expense impact of adjustments(n) (21,408) (28,220) (30,041)

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Executive recruiting expense(l) — — —

First-year Sarbanes-Oxley implementation costs(m) — — 0.01

Litigation and settlement expense(m) — — —

Income tax expense impact of adjustments(n) (0.13) (0.18) (0.19)

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(l) Represents recruiting and relocation expenses related to hiring senior executives.

(m) Represents the first-year Sarbanes-Oxley costs for accounting and consulting fees related to the Company's preparation to comply with Section 404 of the Sarbanes-Oxley Act, as well as implementation cost of adopting ASC 842.

(m) Represents expense related to a non-recurring employment litigation and settlement outside the normal course of business.

(n) Represents the income tax effect of the non-GAAP adjustments calculated using the applicable statutory rate by jurisdiction.

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• Acquisition revenue includes revenues from DIDB, Formedix, ABM, and Chemaxon.

• Acquisition revenues include revenues from Chemaxon for the first three quarters for the year ended December 31, 2025 and the fourth quarter for the year ended December 31, 2024.

Components of Results of Operations

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Intangible asset amortization consists primarily of amortization expense related to intangible assets recorded in connection with acquisitions and amortization of capitalized software development costs.

• Depreciation and Amortization Expense.

• Depreciation and Amortization.

Depreciation and amortization expense consists of depreciation of property and equipment and amortization of leasehold improvements.

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Below is an overview of the businesses we acquired in 2024 and 2023.

Integrated Nonclinical Development Solutions, Inc.

On January 3, 2022, we completed the acquisition of INDS for a total consideration of $8.0 million.

The business combination was not significant to our consolidated financial statements.

Based on the purchase price allocation, approximately $2.4 million, $1.0 million, $0.1 million, and $2.9 million of the purchase price was assigned to customer relationships, developed technology, non-compete agreements, and goodwill, respectively.

Vyasa Analytics, LLC (“Vyasa”)

On December 28, 2022, we completed the acquisition of Vyasa, a company that provides an AI-powered, scalable deep learning software and analytics platform for organizations within healthcare and life sciences, higher education and state and local governments for total consideration of $29.3 million.

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

Based on the Company’s purchase price allocation, approximately $11.4 million, $1.5 million, $0.1 million, $0.1 million and $16.6 million of the purchase price was assigned to developed technology, customer relationships, trademarks, non-compete agreements and goodwill, respectively.

The total estimated consideration includes a portion of contingent consideration that is payable over the next three years following the acquisition in a combination of 70% cash and 30% in shares of our common stock.

Future payments of contingent consideration are based on achieving certain eligible revenue thresholds for each of the twelve-month periods ended December 31, 2023, 2024, and 2025, respectively.

In December 2023, we modified the acquisition agreement and revised thresholds for eligible revenues.

The potential payments range from $0 to $60 million over the three-year period.

The fair value of the contingent consideration was estimated to be $19.8 million as of the acquisition date.

For the year ended December 31, 2024, the Company paid contingent consideration of $12.4 million, consisting of $8.6 million in cash and $3.7 million in Company stock.

At December 31, 2024 and 2023, the contingent consideration was remeasured to $43.9 million and $45.2 million, respectively, resulting in fair value adjustments of $11.0 million and $25.4 million, respectively.

These adjustments were recorded in G&A expenses on the accompanying consolidated statement of operations and comprehensive income (loss).

Drug Interaction Solutions, University of Washington ("DIDB")

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Based on our purchase price allocation, approximately $0.3 million, $5.6 million, $0.4 million, and $2.3 million of the purchase price was assigned to trademarks, database content/technology, customer relationships and goodwill, respectively.

The total estimated consideration included a portion of contingent consideration that is payable over the next two years following the acquisition in cash, not to exceed $2.0 million.

The total estimated consideration included a portion of contingent consideration that was payable over the next two years following the acquisition in cash, not to exceed $2.0 million.

The fair value of the contingent consideration was estimated to be $0.8 million as of the acquisition date.

At December 31, 2024 and 2023, the contingent consideration was remeasured to zero and $0.1 million, respectively, resulting in negative fair value adjustments of $0.1 million and $0.7 million, respectively, and recorded in G&A expenses on the accompanying consolidated statement of operations and comprehensive income (loss).

At December 31, 2024 and 2023, the contingent consideration was remeasured to zero and $0.1 million, respectively, resulting in negative fair value adjustments of $0.1 million and $0.7 million, respectively, and recorded in G&A expense on the accompanying consolidated statement of operations and comprehensive income (loss).

As of December 31, 2024, the Company no longer had any contingent consideration liabilities related to the DIDB business combination.

Formedix Limited ("Formedix")

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The fair value of the contingent consideration related to revenue threshold was estimated to be $4.4 million as of the acquisition date.

Future payments of contingent consideration are based on achieving certain eligible revenue targets for each of the twelve-month periods ended December 31, 2023 and 2024, respectively.

Payments of contingent consideration were based on achieving certain eligible revenue targets for each of the twelve-month periods ended December 31, 2023 and 2024, respectively.

Additionally, another portion of the contingent consideration is based on the resolution of certain tax contingencies.

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For the year ended December 31, 2024, the Company paid contingent consideration of $1.8 million.

At December 31, 2024 and 2023, the contingent consideration related to eligible revenue was remeasured to zero and $3.7 million, respectively, resulting in negative fair value adjustments of $1.9 million and $0.7 million, respectively, and recorded in G&A expenses on the accompanying consolidated statement of operations and comprehensive income (loss).

In addition, as of December 31, 2024, the contingent consideration related to tax contingencies was $0.5 million.

At December 31, 2024 and 2023, the contingent consideration related to eligible revenue was remeasured to zero and $3.7 million, respectively, resulting in a negative fair value adjustment of $1.9 million and $0.7 million, respectively, and recorded in G&A expenses on the accompanying consolidated statement of operations and comprehensive income (loss).

As of December 31, 2025, the Company no longer had any contingent consideration liabilities related to the Formedix business combination, except for the contingent consideration associated with tax contingencies, which amounted to $0.5 million.

Applied BioMath, LLC ("ABM")

On December 12, 2023, we completed the acquisition of ABM, an industry leader in providing model-informed drug discovery and development support to help accelerate and de-risk therapeutic research and development, for total estimated consideration of $36.6 million.

for total estimated consideration of $36.6 million.

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

Based on our preliminary purchase price allocation, approximately $4.6 million, $0.8 million, $13.7 million and $15.9 million of the purchase price was assigned to developed technology, non-compete agreements, customer relationships and goodwill, respectively.

Based on our purchase price allocation, approximately $4.6 million, $0.8 million, $13.7 million and $15.9 million of the purchase price was assigned to developed technology, non-compete agreements, customer relationships and goodwill, respectively.

The total estimated consideration includes a portion of contingent consideration that is payable over two years in cash, not to exceed $17.6 million.

Future payments of contingent consideration are based on achieving certain eligible revenue targets for each of the twelve-month periods ended December 31, 2023 and 2024, respectively.

Payments of contingent consideration were based on achieving certain eligible revenue targets for each of the twelve-month periods ended December 31, 2023 and 2024, respectively.

The fair value of the contingent consideration was estimated to be $5.4 million as of the acquisition date.

For the year ended December 31, 2024, the Company paid contingent consideration of $4.7 million.

At December 31, 2024 and 2023, the contingent consideration was remeasured to zero and $5.4 million, respectively, resulting in fair value adjustments of $(0.7) million and $23.0 thousand.

These adjustments were recorded in G&A expenses on the accompanying consolidated statement of operations and comprehensive income (loss).

At December 31, 2024 and 2023, the contingent consideration was remeasured to zero and $5.4 million, respectively, resulting in a fair value adjustment of $(0.7) million and $23 thousand, respectively.

The adjustment was recorded in G&A expenses on the accompanying consolidated statement of operations and comprehensive income (loss).

As of December 31, 2024, the Company no longer had any contingent consideration liabilities related to the ABM business combination.

The contingent considerations for all acquisitions were classified as liability and included in accrued expense and other long term liabilities on the Company’s consolidated balance sheet.

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Chemaxon, Kft.("Chemaxon")

On October 1, 2024, we completed the acquisition of 100% of the equity of Chemaxon, a software company that develops leading software products for chemical structure drawing, property prediction, search, and analysis, for a total cash consideration of $96.4 million.

Based on our purchase price allocation, approximately $2.9 million, $0.3 million, $11.0 million, $36.0 million, and $46.5 million of the purchase price was assigned to

trademark, non-compete agreement, customer relationships, developed technology, and goodwill, respectively.

Based on our purchase price allocation, approximately $2.9 million, $0.3 million, $11.0 million, $36.0 million, and $49.4 million of the purchase price was assigned to trademark, non-compete agreement, customer relationships, developed technology, and goodwill, respectively.

The results of Chemaxon have been included in our consolidated results of operations and comprehensive income (loss) since the date of acquisition.

The current purchase price allocation for Chemaxon is preliminary.

The primary areas of the preliminary purchase price allocation that are not yet finalized relate to the fair value of deferred taxes 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.

For more information about our acquisitions, see Note 4.

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General and administrative 85,380 94,221 95,385

Intangible asset amortization 51,599 43,973 41,429

Depreciation and amortization expense 56,556 53,593 45,525

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Interest expense (19,738) (21,520) (22,916)

Net other income (expenses) 6,067 8,547 4,007

Net other income 6,338 6,067 8,547

Total other expenses (13,400) (15,453) (14,369)

Income (loss) before income taxes 7,616 (17,184) (55,143)

Provision for income taxes (5,133) 214 4,024

Provision (benefit) for income taxes 9,211 (5,133) 214

Net income (loss) $ (1,595) $ (12,051) $ (55,357)

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Revenues increased by $33.7 million, or 9%, to $418.8 million for the year ended December 31, 2025, as compared to the same period in 2024.

The overall revenue growth was primarily due to an increase in our technology-enabled services and software product offerings, driven by growth from business acquisitions, which increased by $24.1 million, as well as strong demand from existing customers, expansion of relationships with existing customers and new customers.

The overall revenue growth was primarily due to an increase in our technology-enabled services and software product offerings, driven by strong demand from existing customers, expansion of relationships with existing customers and new customers, and growth from the Chemaxon acquisition.

Software revenue increased by $27.6 million, or 18%, to $183.3 million for the year ended December 31, 2025, as compared to the same period in 2024, primarily driven by strong demand within existing customers, and expansion of relationships with existing customers, and business acquisitions.

Revenue from acquisitions increased by $11.3 million.

Services revenue increased by $6.8 million, or 3%, to $229.5 million for the year ended December 31, 2024, as compared to the same period in 2023.

The growth in overall services revenue was primarily attributed to growth from business acquisitions, which increased by $12.8 million, as well as continued growth in technology-enabled services with both existing and new customers.

Services revenue increased by $6.1 million, or 3%, to $235.6 million for the year ended December 31, 2025, as compared to the same period in 2024, primarily attributed to continued growth in technology-enabled services with existing and new customers.

Cost of Revenues

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Cost of revenues increased by $6.6 million, or 4%, to $161.1 million for the year ended December 31, 2025, as compared to the same period in 2024.

The increase was primarily due to a $6.7 million increase in employee-related costs resulting primarily from billable headcount growth, a $3.9 million increase in intangible assets amortization, a $2.3 million increase in equipment and software expense, a $1.8 million increase in equity-based compensation cost, a $0.5 million decrease in capitalized software cost, and a $0.5 million increase in license expense, partially offset by a $2.3 million decrease in consulting and professional services cost resulting from the implementation of a cost reduction plan.

The increase was primarily due to a $4.2 million increase in intangible assets amortization, a $2.6 million increase in license and service expense, a $1.9 million increase in consulting and professional services cost, a $0.5 million increase related to executive recruiting expenses, and a $0.5 million increase in equipment and software expense, partially offset by a $2.0 million decrease in employee-related costs, and a $1.1 million decrease in equity-based compensation cost.

Sales and Marketing Expense

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Sales and marketing expense increased by $6.3 million, or 13%, to $53.7 million for the year ended December 31, 2025, as compared to the same period in 2024.

Sales and marketing expense increased primarily due to a $6.7 million increase in employee-related costs mainly resulting from headcount growth driven by acquisitions along with investment to build the commercial organization, a $4.2 million increase in commission expenses, a $1.7 million increase in equity-based compensation cost, a $1.0 million increase in marketing expense, a $0.6 million increase in consulting and professional services expense, a $0.6 million increase in travel related expense, and a $0.6 million increase in equipment and software expense.

Sales and marketing expense increased primarily due to a $5.4 million increase in employee-related costs mainly resulting from headcount growth driven by acquisitions along with investment to build the commercial organization, a $0.9 million increase in equity-based compensation cost, and a $0.3 million increase in equipment and software expense, partially offset by a $0.3 million decrease in consulting and professional services expense.

Research and Development Expense

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Research and development expense increased by $3.9 million, or 11%, to $41.0 million for the year ended December 31, 2025, as compared to the same period in 2024.

The increase in research and development expense was primarily due to a $9.6 million increase in employee-related costs, mainly resulting from headcount growth associated with investments in software development, including AI integration across our product portfolio, a $0.8 million increase in equipment and software expense, and a $0.4 million increase in the cost of licenses, partially offset by a $6.3 million increase in capitalized cost in R&D, a $1.1 million decrease in equity-based compensation cost, and a $0.4 million decrease in consulting and professional services expense.

The increase in research and development expense was primarily due to a $11.4 million increase in employee-related costs, mainly resulting from headcount growth associated with investments in software development, including AI integration across our product portfolio, and a $0.2 million increase in equipment and software expense, partially offset by a $5.6 million increase in capitalized cost in R&D, a $1.5 million decrease in equity-based compensation cost, and a $0.6 million decrease in the cost of licenses.

General and Administrative Expense

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% of total revenues 20 % 24 %

G&A expense decreased by $1.2 million, or (1)%, to $94.2 million for the year ended December 31, 2024, as compared to the same period in 2023.

The decrease in general and administrative expenses was primarily due to a $16.0 million decrease related to a change in the fair value of contingent considerations, a $1.2 million decrease in equipment and software related expenses, a $1.0 million decrease in business acquisition-related costs, and a $0.4 million decrease in lease abandonment expense, partially offset by a $7.1 million increase in employee-related costs, mainly resulting from headcount growth and organizational restructuring, a $4.1 million increase in equity-based compensation cost, a $2.4 million increase in transaction expense primarily related to refinancing of our term loan and revolving line of credit, a $1.1 million increase in professional and consulting costs, a $1.0 million increase in franchise and other miscellaneous business taxes, a $0.8 million increase in provision for credit allowance, a $0.5 million increase in public company expense, and a $0.5 million increase in facility lease-related expenses.

Intangible Asset Amortization Expense

YEAR ENDED DECEMBER 31, CHANGE

2024 2023 $ %

(in thousands)

Intangible asset amortization $ 51,599 $ 43,973 $ 7,626 17 %

% of total revenues 13 % 12 %

Intangible asset amortization expense increased by $7.6 million, or 17%, to $51.6 million for the year ended December 31, 2024, as compared to the same period in 2023.

The increase in intangible asset amortization was primarily due to a $4.7 million increase in amortization expense from acquired intangible assets and a $2.9 million increase in amortization expense from capitalized software.

Depreciation and Amortization Expense

General and administrative expense decreased by $8.8 million, or 9%, to $85.4 million for the year ended December 31, 2025, as compared to the same period in 2024.

The decrease in general and administrative expenses was primarily due to a $11.7 million decrease related to a remeasurement change in the fair value of contingent considerations, a $2.0 million decrease in lease abandonment expense, a $1.7 million decrease in transaction cost, a $0.7 million decrease in state and city business tax, a $0.6 million decrease in merger and acquisition cost, and a $0.5 million decrease in executive recruiting expense, partially offset by a $3.0 million increase in professional and consulting expense, a $2.8 million increase in employee-related costs, and a $2.3 million increase in equipment and software expense.

Depreciation and Amortization

YEAR ENDED DECEMBER 31, CHANGE

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Depreciation and amortization expense increased by $3.0 million, or 6%, to $56.6 million for the year ended December 31, 2025, as compared to the same period in 2024.

The increase was primarily due to an increase in depreciation expense related to computer equipment.

Goodwill Impairment Expense

YEAR ENDED DECEMBER 31, CHANGE

2024 2023 $ %

(in thousands)

Goodwill impairment expense $ — $ 46,984 $ (46,984) nm

There was no goodwill impairment charge for the year ended December 31, 2024.

Goodwill impairment expense was $47.0 million for the year ended December 31, 2023, primarily due to an impairment related to the legacy Regulatory and Writing reporting unit, as its carrying value exceeded its fair value.

The increase in depreciation and amortization expense was primarily due to a net $2.8 million increase in intangible assets amortization, which included a $5.2 million increase in amortization of capitalized software, partially offset by a $2.4 million decrease in amortization of acquired intangible assets.

In addition, depreciation expense for fixed assets increased $0.2 million, primarily due to a $0.4 million increase in depreciation of computer equipment, partially offset by a $0.2 million decrease in depreciation of furniture and fixture.

Interest Expense

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Interest expense decreased by $1.8 million, or 8%, to $19.7 million for the year ended December 31, 2025, as compared to the same period in 2024.

The decrease was primarily due to a $0.5 million decrease related with the amortization of debt issuance cost, a $0.5 million increase in gain from our interest swap hedge activities, and a $0.4 million decrease in interest expense from our floating rate term loan debt, primarily related to the base margin rate reduction from term loan refinancing.

Net Other Income (Expense)

The change in interest expense was primarily due to a $4.2 million decrease in interest from our floating rate term loan debt, primarily due to a decline in market interest rates and a reduced base margin rate resulting from the refinancing of the term loan, and a $0.5 million decrease related to

the amortization of debt issuance cost, partially offset by a $2.9 million decrease in gain from our interest swap hedge activities.

Net Other Income

YEAR ENDED DECEMBER 31, CHANGE

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(in thousands)

Net other income (expense) $ 6,067 $ 8,547 $ (2,480) (29) %

Net other income $ 6,338 $ 6,067 $ 271 4 %

% of total revenues 2 % 2 %

Net other income (expense) decreased by $2.5 million to $6.1 million for the year ended December 31, 2024 as compared to the same period in 2023.

The decrease in net other income (expense) was primarily due to a $1.7 million increase in remeasurement losses related to the fluctuation of foreign currency exchange rates, a $0.3 million increase in loss related to disposal fixed assets, and a $0.3 million decrease in interest income.

Provision for Income Taxes

Net other income increased by $0.3 million to $6.3 million for the year ended December 31, 2025 as compared to the same period in 2024.

The increase in net other income was primarily due to a $4.3 million increase in remeasurement gains related to the fluctuation of foreign currency exchange rates, and a $0.4 million increase in income related to disposal fixed assets, partially offset by a $3.3 million decrease in interest income, and a $1.1 million increase in other miscellaneous expense.

Provision (Benefit) for Income Taxes

YEAR ENDED DECEMBER 31, CHANGE

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Effective tax rate 120.9 % 29.9 %

Our income tax benefit was $5.1 million, resulting in an effective income tax rate of 29.9%, for the year ended December 31, 2024, as compared to an income tax expense of $0.2 million, or an effective income tax rate of (0.4)% for the year ended December 31, 2023.

Our income tax benefit for the year ended December 31, 2024 was primarily due to the impact of non-deductible items, the impact of valuation allowances recorded against certain tax attributes, and the relative mix of domestic and international earnings.

Net Income (Loss)

Our income tax expense was $9.2 million, resulting in an effective income tax rate of 120.9%, for the year ended December 31, 2025, as compared to an income tax benefit of $5.1 million, or an effective income tax rate of 29.9% for the year ended December 31, 2024.

Our income tax expense for the year ended December 31, 2025 was primarily due to the impact of non-deductible items, the impact of valuation allowances recorded against certain tax attributes, and the relative mix of domestic and international earnings.

YEAR ENDED DECEMBER 31, CHANGE

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(in thousands)

Net income (loss) $ (12,051) $ (55,357) $ 43,306 (78) %

Net loss $ (1,595) $ (12,051) $ 10,456 87 %

Net loss was $1.6 million, representing a $10.5 million increase in net income for the year ended December 31, 2025, as compared to the same period in 2024.

The increase in net income was primarily due to a $30.8 million increase in revenue, a $21.7 million decrease in operating expense, a $5.3 million decrease in tax expense, and a $1.4 million decrease in interest expense, partially offset by a $13.5 million increase in cost of revenue and a $2.5 million decrease in net other income.

The increase in net income was primarily due to a $33.7 million increase in revenue and a $2.1 million increase in net other income, partially offset by a $14.3 million increase in tax expense, a $6.6 million increase in cost of revenue, and a $4.3 million increase in operating expenses.

Liquidity and Capital Resources

We have consistently generated positive cash flow from operations, providing $80.5 million, $82.8 million, and $92.5 million as a source of funds each year for the years ended December 31, 2024, 2023, and 2022, respectively.

We have consistently generated positive cash flow from operations, providing $96.3 million, $80.5 million, and $82.8 million as a source of funds for the years ended December 31, 2025, 2024, and 2023, respectively.

Our additional sources of liquidity have included:

maintaining adequate balances of cash and cash equivalents, sale of common stock, and accessing our credit facilities and the revolving line of credit.

The following table provides a summary of the major sources of liquidity for periods ended December 31, 2024, 2023, and 2022.

The following table

provides a summary of the major sources of liquidity for the years ended December 31, 2025, 2024, and 2023.

and as of December 31, 2025, 2024, and 2023.

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(1) Represents the expected cash payments for interest on our long-term debt based on the amounts outstanding as of the end of each period and the interest rates applicable on such debt as of December 31, 2025.

On April 11, 2025, our Board of Directors approved a stock repurchase program authorizing the Company to repurchase up to $100.0 million of its common stock.

For the twelve months ended December 31, 2025, we repurchased 3,368,374 shares of our common stock for an aggregate purchase price and fees of $42.6 million under its authorized share repurchase program.

These repurchases resulted in an increase in treasury stock and reduced weighted-average diluted shares outstanding, As of December 31, 2025, approximately $57.4 million remained available under the Company's existing share repurchase authorization program.

We assess our liquidity in terms of our ability to generate adequate amounts of cash to meet current and future needs.

We believe our existing sources of liquidity will be sufficient to meet our working capital, capital expenditures, and contractual obligations for the foreseeable future.

Our expected primary uses on a short-term and long-term basis are for repayment of debt, interest payments, working capital, capital expenditures, geographic or service offering expansion, acquisitions, investments, and other general corporate purposes.

We believe we will meet short-term and long-term expected future cash requirements and obligations through a combination of cash flows from operating activities, available cash balances, and potential future equity or debt transactions.

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Net cash used in financing activities (63,986) (21,010) (9,447)

Effect due to foreign exchange rate changes on cash, cash equivalents, and restricted cash (2,856) 1,505 (4,279)

Net (decrease) increase in cash, cash equivalents and restricted cash $ (55,768) $ (4,737) $ 53,064

Effect of foreign exchange rate changes on cash and cash equivalents 4,426 (2,856) 1,505

Net increase (decrease) in cash and cash equivalents $ 10,209 $ (55,768) $ (4,737)

Cash paid for interest 19,133 22,737 19,089

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Net cash provided by operating activities for the year ended December 31, 2025 was $96.3 million, compared to $80.5 million for the year ended December 31, 2024.

The $2.3 million decrease in cash provided from operating activities was primarily driven by an increase in accounts receivable, and an increase in cash used for prepaid and other assets, partially offset by higher cash inflows from deferred revenues, a decrease in cash used for liability payments, and an increase in cash-adjusted net income.

The $15.9 million increase in cash provided from operating activities was primarily driven by cash-adjusted net income, the year-over-year impact of a significant prior-year increase in accounts receivable, decreased cash outflows to settle liabilities, and a decrease in cash used for prepaid and other assets, partially offset by reduced cash inflows from deferred revenue.

Investing Activities

Net cash used in investing activities for the year ended December 31, 2024 was approximately $112.4 million, an increase of $32.8 million, compared to $79.6 million in 2023.

The change in investing activities was primarily due to a $27.1 million increase in cash payments in connection with business acquisitions, and a $5.9 million increase in cash utilized in capitalized development costs.

Net cash used in investing activities for the year ended December 31, 2025 was approximately $26.6 million, a decrease of $85.8 million, compared to $112.4 million in 2024.

The change in investing activities was primarily due to a $91.3 million decrease in cash payments in connection with business acquisitions, partially offset by a $5.4 million increase in cash utilized in capitalized software development costs.

Financing Activities

During the year ended December 31, 2025, net cash used in financing activities was approximately $64.0 million, compared to $21.0 million in the same period of 2024.

The $11.6 million increase in cash used from financing activities was primarily due to a $15.2 million increase in cash payments for contingent consideration related to business acquisitions, and a $2.3 million increase in cash payments in connection with share awards vested and withheld for payroll tax, partially offset by a $5.1 million increase in cash proceeds net of debt issuance cost from refinancing of term loan debt, and a $0.8 million decrease in quarterly prepayments of term loan debt .

The $43.0 million increase in cash used in financing activities was primarily due to a $42.6 million increase in cash used in connection with repurchasing the Company's common stock, a $6.3 million decrease in cash inflow from debt refinancing activities, and a $0.7 million increase in prepayments on term loan debt, partially offset by a $3.5 million decrease in cash payments associated with share awards vested and withheld for payroll tax, a $1.9 million decrease in cash payments for contingent consideration related to business acquisitions, and a $1.2 million decrease in payment for debt refinancing fees.

Credit Facilities

We have been a party to a Credit Agreement since August 2017 that provides for a senior secured term loan and commitments under a revolving credit facility (as amended, the “Credit Agreement”).

On June 26, 2024, we entered into the Fifth Amendment to the Credit Agreement (the "Amendment"), which primarily (1) amended the principal amount of the term loan to $300.0 million and the maturity date to June 26, 2031;

and (2) extended the termination date associated with the $100.0 million revolving credit commitment to June 26, 2029.

The term loan under this Amendment has substantially the same terms as the existing term loans and revolving credit commitments.

As of December 31, 2024, we had $298.5 million of outstanding borrowings on the term loan, and $100.0 million of availability under the revolving credit facility under the Credit Agreement.

Borrowings under the Credit Agreement bear interest at a rate per annum equal to, at the election of the Borrowers, either (i) the Term SOFR rate, with a floor of 0.00% plus an applicable margin rate of 3.00% for the Term Loans and between 3.50% and 2.75% for loans under the Revolving Facility, depending on the applicable first lien leverage ratio or (ii) an Alternate Base Rate (“ABR”), with a floor of 1.00%, plus an applicable margin rate of 2.00% for the Term Loans or between 2.50% and 1.75% for loans under the Revolving Facility, depending on the applicable first lien leverage ratio.

We have been a party to the Credit Agreement since August 2017 that provides for a senior secured term loan (the “Term Loan”) and commitments under a revolving credit facility (the “Revolving Facility”).

The Credit Agreement has been amended several times.

Most recently, on October 16, 2025, we entered into the Sixth Amendment to the Credit Agreement.

As of December 31, 2025, the Term Loan had an aggregate principal amount of $296.3 million and a maturity date of June 26, 2031, and the Revolving Credit Facility had a borrowing capacity of $100.0 million and a maturity date of June 26, 2029.

We also maintain a $100.0 million revolving credit facility under the Credit Agreement, which matures on June 26, 2029.

As of December 31, 2025, we had $295.5 million of outstanding borrowings on the Term Loan and $100.0 million of availability under the Revolving Facility.

Borrowings under the Credit Agreement bear interest at a rate per annum equal to, at the election of the Borrowers, either (i) the Term Secured Overnight Financing Rate (“ SOFR”) rate, with a floor of 0.00% plus an applicable margin rate of 2.75% for the Term Loans and between 3.50% and 2.75% for loan under the Revolving Facility, depending on the applicable first lien leverage ratio, or (ii) an Alternate Base Rate (“ABR”), with a floor of 1.00%, plus an applicable margin rate of 1.75% for the Term Loan or between 2.50% and 1.75% for loan under the Revolving Facility, depending on the applicable first lien leverage ratio.

The ABR is determined as the greatest of (a) the prime rate, (b) the federal funds effective rate, plus 0.50%, and (c) the Term SOFR rate plus 1.00%.

Additionally, we are obligated to pay a commitment fee on the unused amount and other customary fees.

Additionally, the Company is obligated to pay a commitment fee of the unused amount and other customary fees.

All obligations under the Credit Agreement are unconditionally guaranteed by our wholly owned direct and indirect subsidiaries, subject to certain exceptions.

All obligations under the Credit Agreement, and the guarantees of those obligations, are secured on a first lien basis, subject to certain exceptions, by substantially all of our assets and the assets of the other guarantors.

As of December 31, 2024, we were in compliance with the covenants of the Credit Agreement.

We recorded an income tax benefit of $(5.1) million for the year ended December 31, 2024 and income tax expense of $0.2 million for the year ended December 31, 2023.

As of December 31, 2024, we had federal and state NOLs of approximately $6.2 million and $4.9 million, respectively, which are available to reduce future taxable income and expire between 2035 and 2036 and 2029 and 2040, respectively.

We had federal R&D tax credit carryforwards of approximately $0.3 million to offset future income taxes, which expire between 2027 and 2048.

As of December 31, 2025, we were in compliance with the covenants set forth in the Credit Agreement.

We recorded income tax expense of $9.2 million for the year ended December 31, 2025 and income tax benefit of $5.1 million for the year ended December 31, 2024.

As of December 31, 2025, we had federal and state NOLs of approximately $4.2 million and $3.5 million, respectively, which are available to reduce future taxable income, and some of which expire between 2035 and 2036 and 2030 and 2041, respectively.

We had federal and state R&D tax credit carryforwards of approximately $0.1 million and $0.02 million, respectively, to offset future income taxes, which expire between 2027 and 2040.

We also had foreign tax credits of approximately $14.6 million, which will start to expire in 2027.

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Management has determined that it is more likely than not that we will not realize the benefits of foreign tax credit carryforwards.

At the foreign subsidiaries, management has determined that it is more likely than not that we will not realize the benefits of certain NOL carryforwards.

At the foreign subsidiaries, management has determined

that it is more likely than not that we will not realize the benefits of certain NOL carryforwards.

As a result, a valuation allowance of $29.4 million is recorded at December 31, 2025.

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The application of an interim or the annual goodwill impairment test begins with the identification of reporting units, which requires judgment.

During 2024, the Company reorganized its Certara Drug Development Solutions reporting unit (“CDDS”), Software reporting unit (“Software”), and SimCyp reporting unit (“SimCyp”) for goodwill allocation and impairment testing purposes.

We determined that we have three reporting units as of October 1, 2024:

the Certara Data Science Software (“CDS”), the Certara Predictive Technologies reporting unit (“CPT”), and the Certara Drug Development Services reporting unit (“CDDS”), which are within a single operating segment of the Company.

We determined that we have three reporting units for goodwill allocation and impairment testing purposes - the Certara Data Science Software (“CDS”), the Certara Predictive Technologies reporting unit (“CPT”), and the Certara Drug Development Services reporting unit (“CDDS”), which are within a single operating segment of the Company.

The process of evaluating the potential impairment of goodwill is highly subjective and requires significant judgment.

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Our quantitative goodwill impairment test uses both the income approach and the market approach to estimate fair value.

The income approach is based on the

discounted cash flow method that discounts forecasted future cash flows expected to be generated which are based on the Company's estimates of financial performance including revenues, adjusted EBITDA, taxes, and working capital and capital asset requirements.

The income approach is based on the discounted cash flow method that discounts forecasted future cash flows expected to be generated which are based on the Company's estimates of financial performance including revenues, adjusted EBITDA, taxes, and working capital and capital asset requirements.

When performing our market approach, we rely specifically on the guideline public company method.

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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 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.

We recognize benefits for these uncertain tax positions in the period during which, based on all available evidence, we believe it is more likely than not (a likelihood of more than 50%) that the position will be sustained upon examination.

This process is inherently subjective since

it requires our assessment of the probability of future outcomes.

This process is inherently subjective since it requires our assessment of the probability of future outcomes.

We evaluate these uncertain tax positions on a quarterly basis, including consideration of changes in facts and circumstances.

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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-K

Item 7. Management’s Discussion and Analysis