If you have to eat shit, don't nibble. Certara's new CEO Jon Resnick read the directions and followed them without flinching.

He's been on the job for 59 days. In that time he's spoken with dozens of customers, met over 100 employees, and immersed himself in the business to understand a question many have been asking: why the f*nch can't Certara grow at a reasonable rate given the opportunity in model-informed drug development (MIDD)?

His conclusion: Certara's biggest problem is Certara. In his synopsis, the business has made undisciplined investments, lacked a coherent strategy, and simply wasn't executing. Multiple customers confessed that their feedback was rarely heeded, and they wished Certara's experts would take the lead more often.

Yikes-a-roo.

It's not every day you hear a CEO thrash the business he just took over, let alone in a 17-minute monologue to open an earnings call. But Resnick also offered solutions to the inefficiencies. Implementing them will be the key focus for 2026:

• Focused corporate strategy. Resnick wants Certara to focus on customer needs, scientific rigor, disciplined investments, and doubling-down on MIDD.
• Put customers first. New processes are being implemented for deeper engagement with customers across the business and greater senior-level involvement in customer relationships.
• Internal discipline. Resnick said internal processes were sloppy or inadequate, which have sabotaged execution. He's implementing new communication channels, strategically raising pricing, and incentivizing a more open work culture across major departments.

The directness was refreshing. That might be a little easier when you're the new CEO and have a grace period to drive change, but Resnick also answered analyst questions during the Q&A session of the earnings call with candor. He just seems like someone who's oriented to a no-nonsense, no bullshit approach – my favorite kind.

Of course, now comes the hard part: executing.

Certara is allowing Resnick to make 2026 a transition year. Full-year revenue guidance expects just 0% to 4% growth, which is far below the 9% achieved last year and even further from historical growth rates. Investors can expect the stock price and valuation to reflect that for most of the year.

Although it might be a frustrating investment position in the near term, Resnick sees an opportunity for Certara to achieve sustainable annual growth of 15% or more.

By the Numbers

If Certara's self-meditation journey gradually pays off throughout the year, then that would mean margins are bottoming out. That's an odd thing to say when they're at records.

In 2025, gross margin hit a record 61.5%, up from 59.9% the prior year. Revenue growth was a sluggish 8.7%, but operating expenses grew by just 2%. Margin expansion and revenue growing faster than expenses is a great trend. The business reported meaningful improvements in operating income, net income, and operating cash flow as a result.

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Certara has struggled to outgrow operating expenses in recent years, so the potential to build upon last year's margin expansion is intriguing. Overhauling internal processes could yield benefits beyond boosting margins.

Resnick stated he thinks revenue growth can and should be more predictable. Rebuilding the organic growth engine would certainly help achieve that goal, while strategic price increases could play a supporting role. And maybe cutting off the fat from poorly-integrated acquisitions in the past will also enable more targeted acquisitions in the future.

The improvements could bolster Certara's already-strong cash generation. The business delivered full-year 2025 operating cash flow of $96.3 million. That was largely offset by $42.6 million in share buybacks (financing cash flow) and $24.8 million in capitalized software development costs (investing cash flow), but there's considerable operating leverage to unlock.

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There are signs customers are still dragging their feet. The regulatory services unit saw surprisingly strong interest in Q4 2025 after weighing on the business in recent years, while core biosimulation services and software struggled.

Bookings usually surge in the fourth quarter of every calendar year due to the timing of contract renewals and customer budget approvals. There was also some customer hesitation in Q3 that was likely pulled into Q4.

Nonetheless, services bookings hit a record $99.1 million, up 17% from $84.9 million in the year-ago period. Software bookings declined 6% in that span, but the figure reported for Q4 2024 was distorted by suddenly adding all of Chemaxon's bookings.

As we now know, the surge from Chemaxon didn't drive revenue at the expected conversion rate last year. Maybe some of those "phantom" bookings have rolled off. The downside is that these dynamics make it impossible to use software bookings to gauge the commercial traction of Certara IQ.

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Investors must set their expectations on the floor in 2026, but that makes sense if you think about how Certara got itself into this mess.

The most consistent growth driver over the years has been acquisitions – 21 of them. Turns out, that was probably masking some cracks internally, possibly because it's difficult to integrate so many acquisitions and teams and tools. Maybe that's only gobsmackingly apparent in 2026 because management is focusing all its bandwidth on fixing internal processes. No acquisitions last year or this year, baby.

And, so, no growth.

It also means recent trends in improving the revenue mix will slow in 2026. Certara is still expected to end the year with software revenue comprising 45.9% of total sales, up from 44.7% in 2025, 42.1% in 2024, and 38.2% in 2023.

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News Flow & Modeling Insights

(2026 model introduced.)

The current model assumes the following full-year 2026 operating metrics:

• Full-year 2026 revenue grows 1.9% to $426.999 million. The model expects gradual improvements throughout the year, with Q1 growth of -3%, Q2 growth of 1%, and 2H 2026 growth of 5%. Company guidance expects growth of 0% to 4%, representing a midpoint of $426.870 million, but this could be topped if internal processes drive improvements sooner than expected.
• Services revenue is flat at $235.544 million. This includes Q1 growth of -5% and Q2 growth of -1%, then 2H 2026 growth of 3%.
• Software revenue increases 4.5% to $191.454 million. This includes Q1 growth of 0%, Q2 growth of 3%, Q3 growth of 7%, and Q4 growth of 8%.
• The revenue mix reaches 45.9% software revenue at the end of 2026, which represents the smallest improvement in recent years. Software revenue ended at 44.7% in 2025, 42.1% in 2024, 38.2% in 2023, and 33.7% in 2022.
• Gross margin improves to 62.3%, up from 61.5% in 2025, 59.9% in 2024, and 60.2% in 2023.

Margin of Safety & Conviction

Certara is considered a Current Compounder position with the following Conviction rating.

• 1 = High
• 2 = Above Average
• 3 = Average
• 4 = Below Average

The estimated fair valuation based on my current model is below:

• Market close February 27: $7.08 per share
• Modeled Fair Valuation: $11.36 per share
• Allocation Range: Up to 10%

Certara reported 159.140 million shares outstanding as of February 17, 2026. The modeled fair valuation above assumes 160.731 million shares outstanding, which is equivalent to 1% dilution by the end of 2026.

Further Reading

• February 2026 press release announcing Q4 2026 operating results
• February 2026 regulatory filing (10-K) detailing Q4 2026 operating results
• February 2026 quarterly earnings preview for the Solt DB coverage ecosystem
• February 2026 research note analyzing the opportunity for Certara IQ, the company's quantitative systems pharmacology (QSP) software platform