Certara (CERT) Q3 2026 earnings review
Certara software sales rise 11%, but consulting orders still fall
Certara's drug-simulation software accelerated while its consulting business kept shrinking. Software sales rose 11% from a year ago — the first double-digit rise in two years, chief executive Jon Resnick said — and first-half layoffs helped lift the Ebitda margin, excluding one-offs, by nearly 4 percentage points from last quarter to 32%. However, consulting orders fell 5%, and by our math the narrowed full-year plan points to total revenue growth slowing back to about 2.5% in the fourth quarter.
| Software revenue | $48.8M +11.4% from a year ago |
|---|---|
| Services bookings (new orders) | $45.6M -4.6% from a year ago |
| Ebitda margin, excluding one-offs | 31.8% +3.7 percentage points from last quarter |
| Full-year revenue growth outlook | 2%–3% narrowed from 0%–4% (middle unchanged) |
⚖️ Verdict: 🟢 Bullish
The story got better because the software recovery and the second-half margin rebound both showed up in the numbers. Software orders jumped 15% on a clean comparison, and first-half cost cuts offset the overhead left behind by May's medical-writing sale. One caution: the consulting turnaround has not started, and management trimmed the top end of its full-year profit per share outlook for a third straight quarter.
The question now is whether the 15% jump in software orders comes from existing drugmakers spending more or just the timing of contract renewals. If customers are expanding their licenses, the net retention rate in the upcoming quarterly filing will rebound from last quarter's 101.5% low; if it is just timing, retention will stay near 100%. The third-quarter 10-Q filing and fourth-quarter renewal season will settle it.
🐂 Bull Case
Software Sales and Orders Grew Over 10%
Certara sells computer-modeling software and consulting services that help drugmakers test medicines in virtual patients. “We delivered solid revenue and profit in the quarter, and software revenue grew 11% organically, our first double-digit quarter in two years,” chief executive Jon Resnick said. Because Certara bought software maker Chemaxon in October 2024, this quarter compares two periods that both include that business.
- Software revenue: $48.8 million, up 11.4% from a year ago
- Software bookings (new contract orders): $46.9 million, up 15.0% from a year ago
- Twelve-month software bookings: $202.4 million, up 8% from a year ago
New orders grew faster than recorded sales for a third straight quarter, so the recovery is building a backlog rather than draining one. That growth cleared the full-year software floor with one quarter left. What to watch: the software net retention rate, which measures spending by existing customers, in the quarterly filing. A reading above last quarter's 101.5% would show renewals are improving alongside new orders.
First-Half Cost Cuts Lifted Profit Margins
When the drug-modeling group sold its medical-writing unit in May, it was left with shared office and administrative expenses that pushed its second-quarter Ebitda margin, excluding one-offs, down to 28.1%. To offset those leftover costs, Resnick cut about 5% of the staff in May, aiming for $13 million in yearly savings. Interim finance chief Faiz Mohammed said the third quarter showed the early benefits of those first-half actions.
The Ebitda margin, excluding one-offs, rebounded to 31.8%, up 3.7 percentage points from the second quarter and 0.3 points from a year ago. Cost of revenues — the direct cost of delivering software and consulting — fell by 3.6 percentage points of revenue from a year ago to 33.1%, while sales and marketing dropped by 1.7 points. What to watch: fourth-quarter Ebitda margin against the 29% to 31% target. Holding above 30% would show the savings are outlasting new hiring.
🐻 Bear Case
Services Orders Shrank for a Fourth Quarter
Nearly half of Certara's revenue comes from consulting services, where scientists run drug simulations for pharmaceutical clients. Last quarter Resnick replaced the generalist sales setup with PhD specialists and hired a new commercial chief in August, pointing to a growing sales pipeline. Yet in the third quarter, consulting orders fell again, and the outlook still expects services revenue to stay flat or shrink “as the Company works to convert its pipeline into bookings and revenue.”
- Services bookings: $45.6 million, down 4.6% from a year ago
- Twelve-month services bookings: $206.8 million, down 2% from a year ago
- Services revenue: $46.1 million, down 2.1% from a year ago
Because the new commercial leader started in August, this quarter gives only an early reading on the sales overhaul. Still, orders have now dropped in three consecutive quarters of 2026, so the pipeline has not turned into signed contracts. What to watch: fourth-quarter services bookings, which is the biggest renewal period of the year. A fourth straight drop would show the specialist sales model is not fixing consulting demand.
Overhead Costs and Profit Cuts Offset Buyback Pause
While direct delivery costs fell, general and administrative expenses — executive pay, legal bills and office overhead — rose by 1.8 percentage points of revenue from a year ago to 28.4%. Certara spent $3.0 million on reorganization, $1.2 million on executive recruiting and $0.6 million on severance in the quarter, bringing nine-month restructuring and recruiting charges to $10.8 million. The biosimulation company excludes those charges from its Ebitda measure, but they still consume cash.
At the same time, management trimmed the top end of its full-year profit per share outlook, excluding one-offs, by two cents to $0.34, its third reduction this year. Certara also bought back no shares in the third quarter after spending $57.4 million in the first half and announcing a new $50 million buyback plan in August. What to watch: reorganization and recruiting charges in the fourth quarter. A drop toward zero would show the leadership and office overhaul is finally finished.
Risks this quarter didn't answer
Five standing concerns from earlier quarters received no new numbers in the third-quarter earnings release, either because they live in the quarterly filing or because management has not set a timeline.
- Customer retention in software: the net retention rate fell to a multi-year low of 101.5% last quarter; the third-quarter filing's key metrics table will show whether it stayed above 100%.
- AI product revenue and customer displacement: the release gave no sales figures or launch dates for the NVIDIA-backed AI tools that could either add revenue or replace consulting hours.
- Multi-year growth timetable: Resnick promised a multi-year framework later in 2026, and the fourth-quarter outlook will test whether he puts a date on double-digit total growth.
- Permanent finance chief and large-pharma budgets: Faiz Mohammed remains interim finance chief while executive recruiting fees continue, and the release gave no breakdown of orders from large drugmakers.
- Divestiture payouts: the quarterly filing will show any updates on the $15 million in escrow and up to $35 million in performance payouts from the medical-writing sale.
👓 Other Themes
Former DocuSign Tech Chief Hired to Lead Products
Certara named Grant Peterson chief product officer on November 2, adding to recent hires of a chief AI officer and a commercial chief. Peterson spent 12 years as chief technology officer at DocuSign and most recently unified product lines at software firm Conga. At the drug-simulation company, he will focus investment on “accelerating growth across existing and new products, guided by customer input and the broader technology ecosystem.” The release gave no update on regulatory rules or the NVIDIA partnership.
💲 Other KPIs
Cash from continuing operations jumped to $30.7 million in the third quarter from $15.6 million across the entire first half. After subtracting $8.2 million for equipment and software development, free cash flow reached $22.4 million, up 5.4% from a year ago by our math. That cash lifted the bank balance to $214.9 million and cut debt minus cash by $31.4 million to $76.3 million.
Deferred revenue — cash customers have paid upfront for software and services not yet delivered — edged down 1.8% from the second quarter to $78.6 million, and stands 1.2% above its level at the end of 2025. Because Certara bills more software renewals in the fourth and first quarters, upfront cash balances typically dip in the third quarter before rebuilding at year-end.
The share count used to calculate profit per share, excluding one-offs, fell 4.4% from a year ago to 153.6 million, and dropped 0.9% from the second quarter. First-half share buybacks of $57.4 million drove the reduction, which kept third-quarter profit per share steady at $0.09 even though profit excluding one-offs dipped 1.9% to $13.5 million.
🔮 Guidance
Held at the middle of the range. Certara narrowed its full-year sales growth plan to 2% to 3%, keeping the 2.5% middle point unchanged after three quarters of 2.5% growth. By our math, that leaves about 2.5% growth for the fourth quarter, down from 4.4% in the third quarter. Software sales are still set to beat that range, while consulting services will sit at or below 2%.
Unchanged. Management kept its 29% to 31% margin target and said the same range applies to the fourth quarter. After a 29.4% margin across the first nine months and 31.8% in the third quarter, hitting the 30% middle point in the fourth quarter represents a 1.8-point step-down from the third quarter.
Cut at the top end. Certara trimmed the upper bound by $0.02, lowering the middle of the range to $0.325 from $0.335. With $0.23 earned in the first nine months, the plan leaves $0.08 to $0.11 for the fourth quarter, in line with the third quarter's $0.09. It is the third cut this year: the middle of the range moved down $0.08 in Q1, $0.045 in Q2 and $0.01 in Q3.
Unchanged. The full-year average share count plan stays at 155 million to 157 million. Because the nine-month average already sits at 155.5 million and third-quarter shares were 153.6 million, the full-year average will land near the bottom of the range even without fourth-quarter buybacks.
Lowered. Certara now models a full-year tax rate of 25% to 30%, down from about 30% in its prior three outlooks, which gives a slight boost to after-tax profit.
❓ Key Questions
What was the software net retention rate in Q3?
Software orders rose 15%, but last quarter's net retention rate — which tracks whether existing customers spend more or less at renewal — dropped to a multi-year low of 101.5%. The quarterly filing will show whether renewals recovered or if new customers drove the jump.
Why did Certara buy back no shares in Q3?
The board approved a new $50 million buyback plan in August after spending $57.4 million in the first half, yet third-quarter repurchases dropped to zero while cash rose to $214.9 million. Investors need to know what triggers the new program.
When will the consulting pipeline turn into positive bookings?
Management cited a 27% larger consulting pipeline last quarter and hired a new commercial chief in August, but services orders still fell 5% in the third quarter. What conversion rate and timeline does the team see for the fourth quarter?
Why did the profit per share ceiling come down?
Certara hit its third-quarter Ebitda margin goal and lowered its expected tax rate to 25%–30%, yet trimmed the top end of its full-year profit per share outlook by two cents. Which below-the-line cost drove that reduction?