Certara, Inc. Price & Performance (CERT)

On the call from Sertar, we have William Fiery, Chief Executive Officer and John Gavar, Chief Earlier today, Sutar released financial results for the full year ended December 31, 2024. Copy of the press release is available on the company's website. Before we begin, I would like to remind you that management will make statements during this call includes forward looking statements and actual results may differ materially from those expressed or implied the forward looking statements. Please refer to Slide two in the accompanying materials for additional information.

Which you can find on the company's Investor Relations website.

In their remarks or responses to questions, management may mention some non GAAP financial measures, Reconciliations of these non GAAP financial measures to the most directly comparable GAAP measures are available in the recent earnings press release available on the company's website. Please refer to the reconciliation tables in the accompanying materials for additional information. This conference call contains time sensitive information and is accurate only as of the live broadcast [indiscernible] 02/26/2025. Zutar disclaims any obligation, except as required by law, to update or revise any financial projections forward looking statements whether because of new information, future events or otherwise. And with that, I will turn the call over to William.

Thank you, David.

Good afternoon, everyone. Thank you for joining CITAR's fourth quarter and full year 2024 earnings call. John and I will begin with prepared remarks and then we will take your questions.

We were pleased to finish the year with strong commercial as we delivered financial results consistent with the expectations we outlined in November. We finished 2024 with revenue of $3.85 $5,100,000 representing 9% reported growth versus 2023. CITAR's fourth quarter bookings of $144,500,000 represented 22% growth versus the prior year, driven by software bookings growth of 38% and services bookings growth of 12%. During the fourth quarter, we saw healthy software and Bio Simulation Services bookings performance from our Tier one and Tier three customers, as drug developers around the world continue to use BioSimulation to optimize their development processes. Additionally, our regulatory services business delivering solid bookings, which represented a return to growth. We are encouraged by our strong finish to the year, and are now squarely focused on executing our 2025 goals. At Certara Certara, we are enabling Model Informed Drug Development or MIDD the global biopharmaceutical industry MITD is an approach that uses biological and statistical models derived from preclinical and clinical data to inform decision making and drug discovery development and commercialization.

Bio simulation is a critical component of MyDV uses computer aided mathematical simulation of biological processes and systems to understand the action of a drug in a human body or in a population of humans. MIDD and Bio Simulation can increase the probability of success in bringing a new drug to market while also decreasing development costs. We accomplished this through our software platform, which includes four key pillars, [indiscernible] Phoenix PKPD software Pinnacle 21, which is a data standardization tool and Chemaxon are most recent acquisition, brings chemical property insights to the discovery phase of drug development. In 2024, our customers continue to exhibit cautious spending behavior in they grapple with funding constraints Medicare, drug price negotiations and geopolitical uncertainty. Our software business continued to grow through the challenging environment while demand for our services was less predictable, particularly in our regulatory service Decision making timelines were and continue to be elongated due to internal discussions with customers. During the fourth quarter, our team executed well to despite end market uncertainties driving software and services bookings that were slightly ahead of our [indiscernible] While we are pleased with our performance did not see any change in customer sentiment that suggests to us that our end markets are materially different heading into 2025.

As such, our guidance ranges assume that 2025 will be a similar year to 2024 for clinical R and D spending. Now, I'd like to take some time to discuss our progress over the past year and our vision for Certara in 2025 Certara. Throughout 2024, we took steps to enhance Certara's strategic position as a preferred partner to the global biopharmaceutical industry. In software, with three goals in mind: to expand the integration of generative artificial intelligence into existing products to accelerate the development of new products and product updates, and to begin the process of integrating Certara software into a unified platform. Another focus area was our commercial team, where we added senior level talent such as key account managers, as we seek to strengthen strategic relationships among our top customers. One successful example from this investment was the launch of our co author regulatory writing product. We began marketing Co Author during the second quarter of twenty twenty four and received positive initial feedback from early users. Our regulatory services team also uses Co Author to increase efficiency in their regulatory writing projects. We attribute the successful launch to our product development team and a calibrated sales and marketing effort.

Beyond internal investments, we focused on successfully integrating PharMEDics and Applied Biomass or ABM. Into the organization and we completed the acquisition of Chemaxon in October of twenty twenty four. During their first year under the Sitarra umbrella, ABM's team seamlessly integrated with the Citarra QSP team leading to a successful 2024 which included a project that was published in Nature Cancer. ProMedix brought complementary software products were quickly combined with our Pinnacle '21 offering receiving positive user feedback and bringing additional efficiencies to our customers. And more recently, Chemaxon has allowed us to enter the discovery bias simulation market at scale. Chemaxon brings a highly synergistic suite of software products, which can be leveraged alongside existing Certara software to bring cutting edge insights to drug discovery in candidate selection and lead optimization. We began to see the impact of these investments throughout the year as we expanded our customer base to over 2,400 life sciences companies as of December 31. With an annual contract value of more than $100,000 representing 11% growth over 2023. We also had 67 customers with an annual contract value of more than $1,000,000 which grew versus 63 customers in 2023. Our growth strategy is working.

Despite a turbulent market backdrop. Biopharma companies around the world are expanding their use of BioSimulation can be attributed to the investments and strategic initiatives at Certara Certara. Looking ahead to 2025, there is even more that can be done to best position Cytara for future growth. This year, we plan to make further investments in software to accelerate our product development initiatives. Our main priority will be the development of software products for the discovery and lead optimization phases Leveraging Chemaxon's existing capabilities alongside Certara Technologies and artificial intelligence.

Drug discovery represents a large addressable market [indiscernible] whereas Certara's products have historically been focused on the clinical stages. We believe that with our technology, we can develop products that will bring predictive analysis and insights into the discovery phase that will be unique and differentiated with the potential to significantly impact the success rate and associated costs of drug development. Software, including new models and features, QSP me property prediction. Outside of new product development, we will continue to focus on building an integrated software platform by elevating new products to the Satara Certara.

We are confident in our ability to execute our R and D and commercial goals because of our tremendous team. In 2024, we continue to prioritize hiring leading software developers, scientific subject matter experts and senior commercial talent. We ended the year with over 1,500 employees, including more than 400 with advanced degrees.

An example of our team's expertise was the recent inclusion of several esteemed colleagues in Stanford Elsevier's top 2% scientist ranking list. 12 members of our team were named the list in 2024, which includes the top and most cited researchers globally.

Suchar's researchers contributed to over 100 publications during the past year, showcasing the impact of BioSimulation strategies and execution on drug development and outlining the different application of technologies this streamline drug submission and approval processes. I am proud of the accomplishments of our team I'm looking forward to the continued success in 2025. Before wrapping up, I wanted to provide a brief update on the strategic review of our regulatory writing business.

Our internal review process has progressed nicely and we are continuing to evaluate potential outcomes and their impact on our go forward strategy. We have not made any decision that us will be not making any further comments regarding the review on this call.

We expect to reach a decision in the near term and we'll plan to share additional details soon as we have them. In summary, we had solid commercial execution across software and services, driving successful performance in the fourth quarter. Progress Certara has made over the past year was very important as we leverage organic investment and strategic transactions to enhance our competitive positioning. While our end markets remain subdued on a historical basis, the adoption of BioZy Simulation remains strong has been exemplified by the performance of our software business and the increasing number of customers using our technology at scale.

In 2025, we will continue to invest in software to expand the breadth of our offering.

I'm excited to continue to advance BioSimulation forward. Unlocking greater commercial opportunities and leaving us well positioned for growth in 2025 and beyond. With that, I will hand things over to John to discuss our financial results in more detail. Thank you, William. Hello, everyone. Before I walk through our financial results, and 2025 guidance, I wanted to highlight Slide 12 of our accompanying presentation which provides color on our organic revenue performance in the fourth quarter and for the full year. Total revenue for the three months ended 12/31/2024 was $100,400,000 representing year over year growth of 14% on a reported basis and on a constant currency basis. For the full year of 2024, total revenue was $385,100,000 and 8% on a constant currency basis. Total bookings in the fourth quarter were $144,500,000 which increased 22% from the prior year period on a reported basis Trailing twelve month bookings were $445,300,000 increasing 11% on a reported basis. Software revenue was $42,300,000 in the fourth quarter, which increased 26% over the prior year period on a reported basis and on a constant currency basis. Organic growth in the quarter was driven by BioSimulation's Software and Pinnacle '21. Additionally, Kumaxon contributed $6,600,000 to our reported revenue which came in ahead of our expectation.

Ratable and subscription revenue accounted for 63% of fourth quarter software revenues down from 68% in the prior year period. The decrease in subscription mix was driven by Kemaxon, which has a higher mix of term license software. For the full year, software revenue was 155 Ratable and subscription revenue accounted up from 62% in 2023. Software bookings were $59,700,000 in the fourth quarter, which increased 38% from the prior year period.

Fourth quarter bookings include $11,000,000 of Camaxon bookings. Trailing twelve month software bookings were $169,700,000 up 24% year over year.

The software net retention rate was 106% in the quarter and 108% on the year, which is consistent with our long term growth profile.

Looking at our software bookings performance by tier, we saw a very strong performance in both Tier one and Tier three customers in the fourth quarter and throughout the full year driven by continued adoption of our software. Now turning to services revenue. Which was $58,100,000 in the fourth quarter, up 7% versus the prior year period, on a reported basis and on a constant currency basis. Our services business has continued to recover following a period of cautious spending among our customers. For the full year, services revenue was $229,500,000 which grew 3% on a reported basis Services revenue in 2024 includes regulatory writing revenue of $54,700,000 which compares to $60,500,000 in 2023. Technology driven services bookings in the fourth quarter were $84,800,000 which increased 12% from the prior year period. Trailing twelve month services bookings were $275,600,000 up 4% as compared to the prior year. In the quarter, we saw double digit growth in biosimulation with growth across all three of our biopharma customer tiers. Bio simulation services bookings were strongest in Tier three growing in the low 20. For the full year, Bio Simulation Services bookings grew 13%. Regulatory writing bookings returned to growth in the fourth quarter up mid single digits versus the prior year period, driven by solid bookings in Tier one that were moderately off For the full year, regulatory bookings declined in the double digit.

Total cost of revenue for the fourth quarter of twenty twenty four was $38,300,000 an increase from $34,100,000 in the fourth quarter of twenty twenty three primarily due to higher employee related costs and an increase in capitalized software average. Total operating expenses for the fourth quarter of twenty twenty four were $56,100,000 a decrease from $62,400,000 in the fourth quarter of twenty twenty three primarily due to a $12,800,000 decrease in the change the fair value of a contingent consideration versus the prior year period. Which was offset by higher sales and marketing expense In 2024, we made investments in research and where we have seen good initial success.

As Bill discussed, we plan to continue investing in R and D in 2025 to drive new product development and further integrate our software. We expect growth in G and A and sales and marketing to moderate in 2020 Adjusted EBITDA in the fourth quarter of twenty twenty four was $33,500,000 an increase from $29,600,000 in the fourth quarter of twenty Adjusted EBITDA margin in the quarter was 33% in line with our expectations. As I discussed last quarter, we reprioritized some of our Alongside cost actions taken earlier in 2024, we delivered adjusted EBITDA of $122,000,000 for the full year, representing a margin of 32%. Wrapping up the income statement, net income for the fourth quarter of twenty twenty four was $6,600,000 compared to a net loss of $12,500,000 in the fourth quarter of twenty twenty three. Reported adjusted net income in the fourth quarter of twenty twenty four was $24,700,000 compared to $14,300,000 for the fourth quarter of twenty twenty three. Diluted earnings per share for the fourth quarter twenty twenty four was $0.04 compared to a loss of $0.08 per share in the fourth quarter of twenty twenty three. Adjusted diluted earnings per share for the fourth quarter of twenty twenty compared to $0.09 for the fourth quarter of last year.

Moving to the balance sheet.

We finished the quarter with $179,200,000 in cash and cash As of 12/31/2024, we had $295,400,000 of outstanding outstanding borrowings on our term loan and full availability under our revolving credit let me Now, I would like to walk you through our guidance methodology for full year 2025. As Bill discussed previously, our guidance assumes that end markets 2025 will be similar to what we observed in 2024. We are monitoring several developments in our markets, which have factored into our As we have discussed previously throughout 2024, some of our Tier three customers were slower to deploy capital than we anticipated which widened the gap between when a customer received funding and when our commercial team was able to close a deal. Among our Tier one customers, we saw varying levels of spending at and impending patent cliff which has resulted in modest impact for both our software and services businesses. Our guidance assumes these trends will continue through the end of this year. Factoring in these assumptions, we expect total revenue in the range of $415,000,000 to $425,000,000 representing growth of 8% to 10% compared with 2024. We expect ChemaXon to contribute revenue of $23,000,000 to $25,000,000 We expect adjusted EBITDA margins between 30% to 32%.

Similar to our guidance last year, we anticipate a higher EBITDA margin at the lower end of our revenue guidance and a lower EBITDA margin at the higher end of our revenue This will be driven by discretionary investments in research and development, which will be managed based on our commercial performance as the year progresses. We expect adjusted EPS in the range of $42,000,000 to [indiscernible] fully diluted shares in the range of $162,000,000 to $164,000,000 and a tax rate in the range of 25% to 30%. I will now turn the call back over to our CEO, William Ferry, for closing remarks.

Thank you, John.

To summarize our message today, we are in 2025. A lot to be excited about at Certara as we advance biosumulation. With our innovative technologies. Operator, can you please open the line for questions?

Certara.

Our first question will be coming from Jeff Garrow of Stephens Incorporated. Your line is open. [indiscernible] Good afternoon. Thanks for taking the questions. Maybe start off on the 2025 revenue guidance. And as the kind of typical question of what gets you to the low end or the high end of the range? And maybe further just help us understand the kind of balanced end market view up against a pretty strong Q4 bookings result on several fronts? Yes. Hi, Jeff. It's John. I'd start with the last part first. I mean, we were The performance to execution by the team. So as you know, we've been building the commercial team through the year and we were happy to see the execution in Q4. In the face of what remains pretty challenging end markets. So coming back to your question on what brings you what would bring us to the high end or the low end that also comes back to the end markets too. I think when we look at our Tier one customers, then we continue to see spending patterns that are impacted by layoffs at those firms portfolio prioritization, as well as them just looking at and taking longer on decision making for us to bring in new bookings.

So that's a dynamic that we've seen with Tier 1s in 2024. You saw that in the results in Q4, despite the execution and we expect that dynamic to continue in 2025. And then when you look at Tier 3s, similarly, it's we did see some progress last year on the funding environment for biotechs. But we are finding that the pull through or the decision making once the biotechs are funded has taken longer than what we've seen in the past. And so so when you take all that together then I think if if we see some improvement in those end markets, that would obviously push us for the higher end of the range. And if we saw some deterioration from where we were in 2024, then we'd be at the lower end. Understood. That helps. And maybe just to hit on the EBITDA side of the guidance, the profitability side, Maybe you could give us a little more commentary on what incremental R and D investments you're looking to make in 2025 and also help us further understand the investments in income exon whether that's related to building out the product more or just scalability or really a purely technology integration with your existing assets in the discovery space?

Yes. Thanks, Jeff. So yes, we're calling for the margin to be between 30% to 32% as you had said and observed. That does represent some additional investment And we've been talking about the investment necessary to continue the strong momentum we've seen with the software portfolio and as well as the investment in AI. And so what you're seeing in the margin is us continuing to make that investment and and making it in 2025. The other piece of it I'd say too, but it's It is a modest component. We brought on Chemaxon. We were thrilled to bring on the Chemaxon business starting in Q4. And we're going to be working on integration of Chemaxon throughout the year and we having Chemaxon at our margins, but obviously, this is just the beginning in Q4 and now into Q1 of twenty five. Understood. Thanks for taking the questions.

Our next question will be coming from Michael Cherny of Leerink Partners. Your line is open.

Hi, good afternoon. Thanks for taking the question. Maybe if I can just talk a little bit about the trajectory in the quarter and the outlook. I fully understand the dynamics you put in place relative to the tough market. I think we all see it. Very different data points, but the bookings came through strong in the quarter. Can you give a little bit more color, Bill, about what you're seeing from a wallet share perspective? You highlighted some of the large deals. But as you think through book Florence in the quarter and what's underlying guidance, how much of that do you think is you being able to garner a bigger piece of your customers wallet? Yes. Thanks for the question. I think there's an element of that in there. We have invested over the last couple of years in Several new products and a whole lot of of updates to products. Which have resulted in, I think, very positive feedback from customers in terms of the bookings and and additional additional sales that we got from them. And I think that's one of the reasons why we're emphasizing as we go into 2025, continue to invest particularly in the software suite There's tremendous opportunity for us in front of us around what we're doing in AI as well as continuing to invest in the invest in our core products like SIMSIP and in Pinnacle 21, which the investments we're making there are kind of taking us into into new parts of pharma where Maybe the word few models available or and we're all kind of opening them up as addressable to the company right now.

Like John said, I think a chunk of fourth quarter was good execution by the team, but it wasn't just in the fourth quarter. I mean some of this had to do with I think, some careful investment in in the products themselves that that have led to to taking a little bit more share like you're talking about. Thanks, Bill. And then I guess another kind of big picture question, but an important one As you think through the incoming new administration, obviously, we're all waiting see where the confirmations lie. But what do you see, at least based on public commentary, people's backgrounds as the opportunities and risks relative to the new administration coming in. [indiscernible] figured we would get questions like that since everybody's getting them. I think right now we are watching carefully. There are some potential opportunities as well as some potential risks in what's being discussed. But I think to be fair, you'd have to say that it's all pretty new and we're just kind of watching to see how things settle out before we make any pronouncements or plans around that.

Our next question will be coming from Max Smok of William Blair. Your line is open. Hi. It's Christine Ring on for Max. Thanks for taking our questions. So we noticed the tick down in your software net retention rate to the lowest we've seen in a little while while. I'm hoping you can speak to the drivers behind this and if there has been any change in your win rate. Just wondering if the downtick is a reflection of choppy large pharma demand And more broadly, if you can comment on the overall growth in leading demand indicator strength delta between large pharma and small biotech in 4Q and expectation for both cohorts in 2025?

Yes. Thanks for your question. So the net retention rate for for 4Q was $106,000,000 the full year was $108,000,000 So it was It was lower in Q4 than on a full year basis.

We do, to your point, we do attribute that to Tier one customer spending patterns. So when I was describing before on the guidance and sort of the upper end or the lower end of the guidance and [indiscernible] portfolio reprioritization, headcount reductions of all to some extent have have impacted renewals in our Phoenix product and then to a lesser extent in Pinnacle. So there is a dynamic there. Alternatively, on the Tier 3s, then we've seen strong performance on both software and biosimil services specifically on the Tier three customers.

Great. Thank you. That was really helpful commentary. Just digging a little bit more into 2025 and organic growth expectations. As I've been midpoint, if I think about $24,000,000 in total from Camaxa contribution this year, about three fourths of which is inorganic. That implies $18,000,000 in inorganic revenue this year. The midpoint of your guide then implies about like point 5% organic growth in 2025 versus around 2%. 2024. First, just wondering if this is the right to think about organic growth this year?

And you mentioned that you're expecting the environment to be the same this year. Versus last year. So how we should think about drivers behind the delta of around 2% in organic growth this year versus the midpoint of your guide calling for about 4% to 5%?

Yes. So I think to cut through it, the organic growth based on our guidance. So we said the guide was 8% to 10% reported growth. The organic underlying that would be 4% to 6%.

Okay, great. Thanks.

That's really helpful. And then so given that this 4% to 6% how do you think about the step up there and the drivers behind the step up in organic growth rate versus 2024 given your expectation for kind of a relatively stable demand environment?

Right. I think one of the key drivers there is underlying our assumption within services. Where we had a decline in regulatory in 2024, which we've laid out. And embedded within our guide is a REG business that's flat to low single digits.

Great. Thank you. That's all for us. Thanks for the help.

Thank you. Thank you.

Our next question will be coming from David Windley of Jefferies. Your line is open.

Hi, good afternoon. Thanks for taking my questions. I wanted to follow on the KonexON questions. Jean, would it be possible to quantify the margin differential or alternatively kind of how much margin in the guidance much margin drag from the Camaxon inorganic ad? How should we think about that?

Yes. So Dave, the way to think about that, so we stepped down off of 2024 by about 100 basis points. Approximately half of that is related to Chemaxon and the other half is related to incremental investments.

Okay. And then maybe more broadly on Comaxon, what's the competitive landscape And how is that perhaps different from your competitive position in PBPK and PKPD?

Yes. Thanks, David.

The discovery space is is pretty fragmented. So Chem Axon has a suite of tools that cover both the sign, make, test, analyze cycle and they also have a suite of chemical predictors And then they have some other tools that get into things like searching large databases for chemicals So those are embedded across the industry. And I guess they all have all have individual competitors, but there's not like a one not like a second Chem Axon out there really.

Okay. And then if I broaden out a little bit, I think if we go back to even say Pinnacle 21, one of, I think, the underpinnings or the kind of acquisition cases for these acquisitions is how can you build a portfolio that has some some kind of synergistic benefit in terms of helping the client to buy across your portfolio and of course your investment in cloud. But also in the case of Pinnacle twenty twenty one and maybe for Medix, helping the client to better manage its own data to make using simulation and MIDD more approachable, better enable those kinds of capabilities Do you is it possible to kind of see that evolving? Do you see those benefits showing up as your interacting with clients and kind of essentially helping to pioneer their more intensive use of of model informed drug development. Yes, that's a great question. So Been working on BioSimulation as you know for a while and we're known in this space, but we're known in in smaller we've been known for a long time in smaller groups within pharma. So I think plans and the news and the and the reality of creating an integrated platform where you can apply this across multiple stages of drug development starting in discovery has drawn a lot of attention.

Now we have still investment to make as we go forward to pull all of these tools together But as you pointed out, we've we've made a pretty good start with Sutara Cloud. And I think that's helping Our discussions at more senior levels of pharma And I think that's good I mean that's the basis of the plan as we intend to continue. So we've got great tools, but we want to take it from great tools to a great platform where you've integrated a whole process across [indiscernible] the development of a molecule from start to finish. And I think As we accomplish that, we'll add a lot more value and we'll capture a lot more value.

Right. And maybe a last question for me that leverages that answer is I think at this time last year, we were talking about investments in SG and A and R and D maybe talked about evolving to a cloud approach at that time. The first half was pressured more than the second half I think some investors probably thought that the kind of pressure on margin was weathered in the second half of twenty twenty four might be a reasonable step off point to think about your go forward margin and additional investment and additional margin pressure in '25 might come some surprise. How should we think about as you're evolving toward platform and adding capabilities and things like that? What is the duration of the what I might call excess investment before you think you get there?

So I think I think the way we think about this is that, Sitar Certara a is a quite profitable company and we've demonstrated we can run at a high profit margin. But there's a significant opportunity for growth here. And there's a good opportunity to put some of those profits back into into growing the software. And if we do that, I think we can our plan is to take the growth rate of the company up over the next few years. So it's it's hard to answer your question with like a decimal points of precision. Because some products are we've got a pipeline of price coming with have several new things coming out this year. We have some that are kind of slated as we go into 2026. And then then after we after 2026, we'll probably sit back and look around and see, hey, hey, how that go and did that lead us to other things we want to do or not, right? So I guess what I'm telling you is I've got a plan that runs runs out about two years right now. That's not a situation where I'm just going to pour money in for two years hope to get it out.

I mean, that's a pipeline of products starting basically now that will be a regular cadence coming out of upgrades and new features AI enabled features, things like that in our existing products. So we're going to we're expecting to see see revenues from them as we go along.

That's very helpful. Thank you.

Our next question will come from Constantine Debite of Citizen Securities. Your line is open.

Thanks. Just John, one more kind of modeling follow-up. Is there anything from a quarterly cadence standpoint that you'd call out in terms of headwinds or tailwinds that we should be mindful of in 2025? I guess, first, I'm thinking of [indiscernible] down from the pretty strong fourth quarter into the first quarter, the way software typically does. And I guess obviously, the ramp of margin for that asset throughout the year. But is there anything else that You think you'd like to highlight just in terms of quarterly progression?

I think, I mean, you've seen us historically be more second half weighted when you think about first half, second half. And I would expect that continues to be the case this year as we see The typical seasonality that that does play out for us in the fourth quarter. So in addition to what you said, Constantine, I'd just [indiscernible] to think about the first half, second half balance too.

Great. And then just on the regulatory services uptick and I apologize if I if I missed that. Can you just maybe expand a little bit on the rebound there and know you're kind of limited in what you can address with the process that's going on, but does that sort of uptick I know it's only one quarter, but maybe change how you're thinking about moving forward with that?

Well, I'll start with the performance piece. So we were pleased to see that the regulatory business returned to growth in both bookings and in revenue. In the fourth quarter. And obviously and a lot of that performance as we said in the prepared remarks too is coming from the Tier one customers. And then partially offset by some softness in Tier two and Tier three. So I think what that tells us is we still have good support from our large Tier one in And obviously, those bookings being a services business, those bookings are going to have an impact on revenue as we move into '25. So we were we were happy with with that bounce back coming off of Q1, Q2 and Q3.

Our next question will be coming from Andrew Moss of Bank of America.

Your line is open, Andrew. Great.

Thanks for taking my question.

So William, you've noted high expectations for co author in the year ahead and the potential to expand the offering. You provide any color on the co offer traction and how large the opportunity might be to expand the current AI offering? That's a good question. So we have multiple paying customers, which is which I think we view that product as being very much on track after just a couple of months on the market. We have a pretty good pipeline as well. So I think what we're finding that from a competitive standpoint we have a we put together a solid product and seems to be meeting the needs.

The product itself will expand over time. We're There's a whole lot of regulatory documents out there The first version addresses a piece of it and obviously like all software you keep new versions coming along which we're going to do this year as we add new features and do two document types particular to it. So So I think what we're looking at here is you can reduce the amount of time to create a new document by a lot maybe north of 60% in terms of at least a first draft. You can't really take all the humans out of a loop, obviously. People still have to read the it and edit it. But that takes a lot of the upfront cost out of getting a regulatory document in place. The product itself does more than just writing it's handling things like the data, the tables, the connectivity to other databases as well. So So it has it's more than just kind of applying Copilot or Chat GPT to regulatory writing. As far as how far it can go, we have expectations let's say, in the millions of dollars of revenue for this year, I won't get more specific than that about any one product, but it's a real product and it's going to be a significant revenue generator Where it goes in the long run it's always a little hard to tell because AI is moving so quickly and this product is moving so quickly.

So it's got a lot of opportunities as we take it forward after even where it is right now. Great. That's all for me. Thank you.

Our next question will be coming from Kyle Cruz of UBS. Your line is open, Kyle.

Thank you for taking the questions. I think you earlier said that you're expecting a low single digit to flat decline in regulatory services revenues this year. Could you maybe help us with the segment guidance? I believe that that piece of information almost implies around the high single digit growth rate organic for software business for the software business And maybe you could just provide more color on the organic growth guidance for each business line? Yes, sure. Let me clarify first on regulatory. We'll what I said for regulatory is that we expect the business in 2025 embedded in our guidance is flat to low single digits. Increase But to come back to your question on the component parts here, So we said the reported was 8% to 10% growth. I had mentioned earlier that the organic total company was 4% to 6% When you split that by software, and services, then you could see services would be low single digits. So think of it as 2% to 4%. Software, including Camaxon, would be 16% to 19% growth But the organic and to your point, Kyle, the organic software growth would be in a range of 6% to 8%.

So that is aligned with what you were saying earlier. Great. Thank you. And then maybe could you provide some color on your efforts to expand the SIMSIP software outside of the core consortium to other customers? Yes, we have multiple routes for delivering SIMSIP We have obviously, we have our core consortium, which is and it's going very, very strong. We also sell the software directly outside the consortium to a number of customers that's been growing And we have a group that uses SIMSIP Basically, we'll just do projects for people for customers that might be too small or not have the internal capabilities to do it. Which has also been a significant a significant grower over the last couple of years. [indiscernible] So I kind of think it was one We've got multiple customer segments and we've thought about different ways to deliver it. Now in addition, we're starting to interface SIMSIP in with our QSP software. And that's I think as we go forward, that's going to lead to additional opportunities to expand the the core base we've got there. QSP when we started this was primarily a consulting type business, but we've been investing heavily in the underlying modeling software with the idea that we've got a core advantage because we've already got a lot of the the underlying parts built from SIMSIP.

And so that's started to come out and there'll be additional additional investments in that as we go forward this year.

Great. Thank you.

And one moment for our next question. And our last question will be coming from Vikram Pirohit of Morgan Stanley. Your line is open. Hi. Thank you for taking our question. This is Parth on for Vikram.

Just you guys touched on investments you're making in AI and software. Could you provide us like your current view on and kind of which profile of assets could be interesting to fold in to the company at this point?

Yes. So we obviously we have the balance sheet to continue M and A. And we're constantly looking at opportunities there. We've been clear that we fit said we look towards software We are busy given the number of acquisitions we've done recently, but but we have the capacity to be able to to do additional tuck ins should we want to do that?

Thank you.

And this concludes today's conference call. Thank you