CERT 10-K & 10-Q changes, risk factors and insider trading

There has been a steady level of 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 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. Nonetheless, significant changes in government or regulatory policy, levels of government or academic funding or program support, or a reversal in the level of adoption and reliance upon in silico data (trials, studies, or experiments conducted via computer or computer simulation) in the drug approval process, could result in thea decrease in demand for our products and services or lead regulatory authorities to cease use of, or to recommend against the use of, our products and services. These factors, in turn, could ultimately have a material adverse effect on our business, financial condition and results of operations.

We also work closely with the global academic community on research, publications, and training of the next generation of biopharmaceutical scientists. Our software products are used in many academic institutions, often free of charge, where students, including PhD candidates, are first exposed to the types of tools and models that we offer. Upon graduating, these students frequently become employed by biopharmaceutical companies, where they may continue to use our products and advocate for their continued use. If academic institutions decide to use competitive products, develop their own biosimulation products, or reduce their exposure to biosimulation tools in general, whether as a result of change in approach or lack of funding or institutional support, familiarity with our products by the future generations of pharmacometricians and clinical pharmacologists may be diminished, which could ultimately result in a reduction in demand for our products over time.

The market for our biosimulation products and related services for the biopharmaceutical industry is competitive and highly fragmented. In biosimulation software, we compete with other scientific software providers, technology companies, in-house development by biopharmaceutical companies, and certain open source solutions. In the technology-driven services market, we compete with specialized companies, in-house teams at biopharmaceutical companies, and academic and government institutions. In some standard biosimulation services, and in regulatory and market access, we also compete with clinical research organizations. Some of our competitors have longer operating histories in certain segments of our industry than we do and could have greater financial, technical, marketing, R&D and other resources, and can use such resources to develop or adapt products, services or technologies that are comparable, or superior to, or could render obsolete, the products, services and technologies we offer. Some of our competitors offer products and services directed at more specific markets than those we target, enabling these competitors to focus a greater proportion of their efforts and resources on those specific markets. Some competing products are developed and made available at lower cost by government organizations and academic institutions, and these entities may be able to devote substantial resources to product development. Some clinical research organizations or technology companies may decide to enter into or expand their offerings in the biosimulation area, whether through acquisition or internal development. We also face continued competition from open source software initiatives, in which developers provide software and intellectual property free of charge, such as R and PK-Sim software. In addition, some of our customers spend significant internal resources in order to develop their own solutions. Any material decrease in demand for our technologies or services may have a material adverse effect on our business, financial condition and results of operations.

Changes or delays in government regulation, executive action or administrative decision-making relating to the biopharmaceutical industry have decreased and could continue to decrease the need for some of the services we provide.

Governmental agencies throughout the world strictly regulate the biopharmaceutical development process. Our business involves assisting biopharmaceutical companies strategically and tactically to navigate the regulatory approval process. New or amended regulations could result in higher regulatory standards and potentially additional revenues for companies that service these industries. However, some changes in regulations, such as a relaxation in regulatory requirements orrequirements, 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, or governmental agency decisions not to review certain types of new drug applications, such as vaccines have reduced and could eliminate or substantially reduce the demand for our regulatory services. Regulatory developments that could potentially increase demand for our services could also be postponed or not fully implemented.

Also, over time, but also with relatively short notice, governmental agencies could make different decisions or change standards with respect to all of the foregoing within their administrative oversight functions and authorities. There continue to be business and operational variables across regions and changes in governments that may adopt different strategies and priorities in approaches to the regulation of the biopharmaceutical industry. TheFor biopharmaceutical industry may experience a changeexample, in the traditionalpast approachesyear, tothere has been a general pulling back of government support and funding for drug development, in particular 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.

Reduction in R&D spending by our customers for a variety of reasons, including due to lack of funding, as well as delays in the drug discovery and development process, have reduced and may continue to reduce demand for our products and services and negatively impact our results of operations and financial condition.

We provide biosimulation software platforms and services to the biopharmaceutical industry, including both private and public companies, as well as government and academic institutions. Because our products and services often depend on our customers’ R&D expenditures, our revenues may be materially negatively affected by any economic, competitive, regulatory, demand, or other market impact that decreases our customers’ financial performance, access to funds or their ability to raise capital, which may cause them to decrease or delay R&D spend. In such an event, our revenues may be reduced through increased downward pricing pressure, reduction in the scope of projects, delays or cancellations of ongoing projects, or our customers shifting away from using third parties for their modeling and simulation work. See “—Risks Related to our Business—Adverse global economic conditions could have a negative effect on our business, results of operations and financial condition and liquidity.” Our customers’ expenses and obligations could continue to increase as a result of the higher costs of developing more complex drugs and biologics and complying with more onerous government regulations. Furthermore, our customers may finance their R&D spending from both private and public sources, including the capital markets. As a result, our revenues and financial performance may be adversely impacted if our customers are unable to obtain sufficient capital on acceptable terms to finance their R&D spending. Government and university-based funding of scientific research can vary for a number of reasons, including general economic conditions, political priorities, changes in the number of students and other demographic changes.

Our customers’ revenue and/or profitability have declined and could continue to decline as a result of efforts by government and third-party payors to reduce the cost of healthcare.healthcare and limit government spending. Governments worldwide have increased efforts to expand healthcare coverage while at the same time curtailing and better controlling the increasing costs of healthcare. If cost-containment efforts or other measures substantially change existing insurance models and limit our customers’ profitability, our customers may decrease R&D spending, which could decrease the demand for our services and materially adversely affect our growth prospects.

Likewise, drug price controls are a topic subject to governmental intervention and regulation, and may vary by region, market and administration, and when applied have led to and could continue to lead to reduced R&D spending by pharmaceutical companies, with one assumption being that they may have less financial incentive to develop new drugs, particularly for niche or complex therapeutic areas. For example, in the United States, specific drug price control provisions, allowing for negotiation of certain categories of drug prices through government executive agencies, were included in the Inflation Reduction Act of 2022, and the extent of their application has had and may continue to have an economic impact on the incentive structure related to drug development R&D spending by our customers. Similarly, the imposition of most-favored-nation drug pricing in the U.S., reductions in Medicare and Medicaid spending, and the introduction of Medicaid work requirements under the One Big Beautiful Bill Act (“OBBBA”) have also had and may continue to have an economic impact on the incentive structure related to drug development R&D spending by our customers. In addition, industry trends, economic factors, regulatory developments, patent protection and political and other events and circumstances that decrease our customers’ R&D spending also affect us.

Our strategy also includes expanding into new markets, new geographies, and new areas within our existing markets, either organically or by acquiring other companies in these markets. If our strategies are not executed successfully, our products and services may not achieve market acceptance, penetration within our existing customers, or reach of new customers. We cannot guarantee that we will be able to identify new biosimulation or regulatory and market access technologies of interest to our customers,customers or develop or acquire them in a timely fashion. Even if we are able to identify and develop new technologies and biosimulation tools of interest, we may not be able to negotiate license agreements on acceptable terms, or at all. Some of our products, such as our QSP models, require significant time and investment to develop to a point where they can achieve market acceptance, and we may not be able to develop them at a rate that matches market demand. We may also face more significant pricing pressure as we expand geographically and our customer profile evolves. For example, smaller biotechnology companies, or companies based in countries that have less developed economies, may not be able to afford our products and services at our customary rates. If we are unable to develop, acquire and/or create demand for new services and products, our future business, results of operations and financial condition could be adversely affected.

In order to attract and retain personnel in a competitive marketplace, we believe that we must provide a competitive compensation package, and compensationpackage for our employees, which makes up our most significant fixed cost. Nonetheless, we may be unable to hire, train, retain, or motivate highly qualified personnel on acceptable terms or at all given the competition among numerous biopharmaceutical and technology companies for similar personnel.

The development, deployment and use of AI, particularly generative AI,AI and agentic AI systems that can take action autonomously, however, is still in its early stages and presents risks that could negatively impact our business. While we aim to develop and use AI responsibly and attempt to identify and mitigate ethical and legal issues presented by its use, we may be unsuccessful in identifying and resolving issues before they arise, and the usage of such technologies may not enhance our products or services, keep pace with our competitors or be beneficial to our business, including our efficiency and profitability.

Additionally, AI can pose risks from an intellectual property, confidential data leakage, data protection and privacy perspective, as well as raise ethical concerns, compliance issues, and security risks. The input of confidential information or trade secrets into AI systems may result in the loss of intellectual property, proprietary rights, or attorney-client privilege in such information or trade secrets. Despite training and risk management efforts, there is a possibility that employees might misuse AI, either intentionally or unintentionally, including by using authorized AI tools, applications or services, exposing us to risks including confidential data leakage and security vulnerabilities. The use of AI technologies for developing products or services may adversely affect or preclude our intellectual property rights in such products or services,services or may expose us to liability related to the infringement, misappropriation or other violation of third-party intellectual property. The use of AI technologies with personally identifiable information or protected health information may also result in legal liability. If we do not have sufficient rights to use the data or other material or content on which the AI tools we use rely, we also may incur liability through the violation of applicable laws and regulations, third-party intellectual property, data privacy, or other rights, or contracts to which we are a party.

Moreover, AI is subject to a dynamic and rapidly evolving legal and regulatory environment, which, without appropriate review, governance and risk management, could expose us to unforeseen legal or regulatory scrutiny and liabilities. The technologies underlying AI and its uses are subject to a variety of laws and regulations, including intellectual property, data privacy and security, consumer protection, competition, and equal opportunity laws, and are expected to be subject to increased regulation and new laws or new applications of existing laws and regulations. AI is the subject of ongoing review by various U.S. governmental and regulatory agencies, and various U.S. states and other foreign jurisdictions are applying, or are considering applying, their platform moderation, data privacy, and security laws and regulations to AI or are considering general legal frameworks for AI. In Europe, the EU’s Artificial Intelligence Act, which entered into force on August 1, 2024 and, with some exceptions, will begin to apply as of August 2, 2026, imposes significant obligations on providers and deployers of high-risk artificial intelligence systems, and encourages providers and deployers of artificial intelligence systems to account for EU ethical principles in their development and use of these systems. We may not be able to anticipate how to respond to these rapidly evolving frameworks, and wethe uncertainty surrounding evolving regulations may complicate new product development. We may need to expend resources to adjust our operations or offerings in certain jurisdictions if the legal frameworks are inconsistent across jurisdictions. Furthermore, because AI technology itself is highly complex and rapidly developing, it is not possible to predict all of the legal, operational, or technological risks that may arise relating to the use of AI. Our failure to adequately address legal risks relating to AI in our business could result in litigation regarding, among other things, intellectual property, privacy, employment, civil rights and other claims that could result in liability for our company, damage our reputation or otherwise materially harm our business.

Many of our contracts with customers also provide for services on a fixed-price or fee-for-service with a cap basis. Accordingly, we bear the financial risk if we initially underprice our contracts or otherwise overrun our cost estimates. In these situations, we attempt to revise the scope of activity from the contract specifications and negotiate contract modifications shifting the additional cost to the customer,customer but are not always successful. If we fail to adequately price our contracts or if we experience significant cost overruns (including direct and indirect costs such as pass-through costs), or if we are delayed in, or fail to, execute contract modifications with customers increasing the scope of activity, our results of operations could be materially adversely affected. From time to time, we have had to commit unanticipated resources to complete fixed-fee projects, resulting in lower margins and profitability on those projects. We might experience similar situations in the future, which could have a material adverse impact on our business, financial condition and results of operations.

We derive revenue from contracts with U.S. government entities, including the FDA and the Center for Disease Control and Prevention within the Department of Health and Human Services, as well as foreign governments. For example, our software products are licensed by 2320 global drug regulatory agencies, including the FDA, Health Canada, Japan’s PMDA, China’s NMPA and the UK’s MHRA. We have also accepted limited grant funds from governmental entities, whereby we are reimbursed for certain expenses incurred, subject to our compliance with the specific requirements of the applicable grant, including rigorous documentation requirements. We may enter into further contracts with the U.S. or foreign governments in the future or accept additional grant funds. Additionally, we may be subject to change in priorities and funding availability from these government agencies and organizations, even with short or no advance notice. Increasingly, government support and funding may change with new administrations, personnel or polices in effect from time to time, in the United States and globally. Under these more prevalent circumstances, with respect to these contract and revenue sources, we may operate with less certainty and shorter known time horizons on public sector commitments and contracts.

We have acquired multiple businesses and technologies in the past, and we regularly evaluate opportunities to acquire or invest in businesses, solutions or technologies that we believe could complement or expand our solutions, enhance our technical capabilities or otherwise offer growth opportunities as well as opportunities to streamline our existing business.business, Forincluding example,through inpotential November 2024, we announced that we have begun a review process to consider the long-term strategic options for our regulatory services business.divestitures. The pursuit of potential acquisitionsacquisitions, divestitures or other strategic transactions may divert the attention of management and cause us to incur various expenses in identifying, investigating and pursuing suitable opportunities, whether or not they are consummated.

For example, in 2023, we acquired Formedix Limited, which added a metadata repository and clinical data flow automation to our data platform, as well as Applied Biomath, a company focused on quantitative systems pharmacology (QSP) to expand and complement our existing QSP capabilities. Additionally, in 2024, we acquired Chemaxon, a leading provider of cheminformatics software to expand and complement our existing prediction and analytical capabilities in drug discovery. The planned integrations of theseour newly acquired businesses into our existing product offerings may be delayed or may not achieve the expected results.

A general slowdown in the global economy or in a particular region or industry, other unfavorable changes in economic conditions, such as inflation, higher interest rates, tightening of the credit markets, recession or slowing growth, uncertainty regarding tariffs, actual or potential changes in the research funding environment or an increase in trade tensions with U.S. trading partners could negatively impact our business, financial condition and liquidity. Macroeconomic weakness and uncertainty also make it more difficult for us to accurately forecast operating results and may make it more difficult to raise or refinance debt. Sustained uncertainty about, or worsening of, current global economic conditions and further escalation of trade tensions between the U.S. and its trading partners, especially China, could result in a global economic slowdown and long-term changes to global trade. Such events may also (i) cause our customers to reduce, delay or forgo R&D spending, (ii) result in customers sourcing products or services in-house or from other suppliers not subject to such restrictions or tariffs, (iii) lead to the insolvency or consolidation of key customers, particularly smaller biotech companies, (iv) result in customers preferring software to services, and/or (ivv) intensify pricing pressures. Any or all of these factorsfactors, particularly when combined with financial pressures on and uncertainty in the biopharmaceutical industry, could negatively affect demand for our products and our business, financial condition and results of operations. See “—Risks Related to our Industry—Reduction in R&D spending by our customers for a variety of reasons, including due to lack of funding, as well as delays in the drug discovery and development process, may reduce demand for our products and services and negatively impact our results of operations and financial condition.” Additionally, we are continuing to monitor the implications of any policy developments around potential research funding reductions. Macroeconomic weakness and uncertainty also make it more difficult for us to accurately forecast operating results and may make it more difficult to raise or refinance debt.

We operate on a global basis with offices or activities in the United States, Canada, France, Germany, the Netherlands, Poland, Switzerland, the United Kingdom, Australia, India, the Philippines, Japan, China, Hungary, and South Korea. In addition, we derive a significant portion of our total revenue from our operations in international markets. During the years ended December 31, 20242025 and 2023,2024, 28%31% and 27%,28%, respectively, of our revenues were transacted in foreign currencies, the majority of which included the British Pound Sterling, the Euro and Japanese Yen. Our international operations and sales subject us to a number of increased risks, including, among others:

•changes in tax laws or rulings in the United States or other foreign jurisdictions that may have an adverse impact on our effective tax raterate, such as the OBBA;

We maintain insurance coverage for protection against many risks of liability, including directors and officersofficers' liability, professional errors and omissions, breach of fiduciary duty, and cybersecurity risks. The extent of our insurance coverage is under regular review and is modified as we deem it necessary. Despite this insurance, it is possible that claims or liabilities against us may not have been fully insured, or our insurance carriers may contest coverage, which could have a material adverse impact on our business, financial position and results of operations. In addition, we may not be able to obtain any insurance coverage, or adequate insurance coverage on attractive terms, or at all, when our existing insurance coverage expires and the cost of obtaining such insurance coverage may materially increase.

The services we provide to biopharmaceutical companies and other customers are complex and subject to contractual requirements, regulatory standards and ethical considerations. For example, some of our services must adhere to the regulatory requirements of the FDA governing our activities relating to preclinical studies and clinical trials, including GLP and GCP. Additionally, we are subject to compliance with the FDA’s regulations set forth in part 11 of title 21 of the Code of Federal Regulations, which relates to the creation, modification, maintenance, archival, retrieval, transmittal or distribution of electronic records under records requirements in FDA regulations and submitted to the FDA. The FDA may also issue or finalize guidance documents that may have implications for our customers and our products, platforms, and services. For example, in September 2025, the FDA finalized its guidance on “E6(R3) Good Clinical Practice”, which seeks to provide a unified standard to facilitate the mutual acceptance of clinical trial data for International Council for Harmonisation member countries and regions by applicable regulatory authorities. We may be subject to inspection by regulatory authorities in connection with our customers’ marketing applications and other regulatory submissions. If we fail to perform our services in accordance with regulatory requirements, regulatory authorities may take action against us or our customers for failure to comply with applicable regulations governing the development and testing of therapeutic products. Regulatory authorities may also disqualify certain data or analyses from consideration in connection with applications for regulatory approvals, which would result in our customers not being able to rely on our services in connection with their regulatory submissions and may subject our customers to additional or repeat clinical trials and delays in the development and regulatory approval process. Mistakes in providing services to our customers, such as dosing models, could affect medical decisions for patients in clinical trials and create liability for personal injury. Such actions may include sanctions, such as warning or untitled letters, injunctions, or failure of such regulatory authorities to grant marketing approval of products, delay, suspension, or withdrawal of approvals, license revocation, loss of accreditation; product seizures or recalls; operational restrictions; or civil or criminal penalties or prosecutions, damages or fines. Customers may also bring claims against us for breach of our contractual obligations or errors in the outcomes of our products or services, may terminate their contracts with us and/or may choose not to award further work to us. Any such action could have a material adverse effect on our reputation, business, financial condition and results of operations.

Even though we do not order healthcare services or bill directly to Medicare, Medicaid or other third-party payors, as a result of contractual, statutory or regulatory requirements, we may be subject to healthcare fraud and abuse laws of both the federal government and the states in which we conduct our business. Because of the breadth of these lawslaws, ongoing legal and regulatory developments pertaining thereto, and the narrowness of available statutory and regulatory exceptions, it is possible that some of our business activities could be subject to challenge under one or more of such laws. If we or our operations are found to be in violation of any of the laws described above or any other governmental regulations that apply to us, we may be subject to penalties, including civil and criminal penalties, damages, fines, imprisonment and the curtailment or restructuring of our operations, any of which could have a material adverse effect on our business, financial condition and results of operations.

As of December 31, 2024,2025, we had federal and state NOLs of approximately $6.2$4.2 million and $4.9$3.5 million, respectively, which are available to reduce future taxable incomeincome, and some of which expire between 2035 and 2036 and 20292030 and 2040,2041, respectively. We had federal and state R&D tax credit carryforwards of approximately $0.3$0.1 million and $0.02 million, respectively, to offset future income taxes, which expire between 2027 and 2048.2040. We also had foreign tax credits of approximately $11$14.6 million, which will start to expire in 2027. These carryforwards that may be utilized in a future period may be subject to limitations based upon changes in the ownership of our stock in a future period. Additionally, we carried forward foreign NOLs of approximately $78.6$87.3 million which will start to expire in 2025,2026, foreign research and development credits of $0.3$0.2 million which expire in 2029, and Canadian investment tax credits of approximately $3.9$5.2 million which expire between 20322034 and 2042.2044. Our carryforwards are subject to review and possible adjustment by the appropriate taxing authorities.

We are a leadingglobal providerleader ofin biosimulation science, technology and solutionsconsulting 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 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,is a critical partcomponent of MIDD that uses computer-aided mathematical simulation of biological processes and systems to understand the action of a drug developmentin processa ashuman newbody productsor musta bepopulation bothof approved by regulators and adopted by the market.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.

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 whichthat add to total cost. On average, the pharmaceutical industry spends more than $270$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 softwaretechnology and scientists incorporate modern advances in scientific understanding, drug research and development experience, data analysis, and AIAI, resulting in significant opportunities to decrease the cost and increase the odds of new drug approval and commercial success.

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 scientifically based solutions for the collection, standardization, validation, storage, and analysis of the preclinicalpreclinical, clinical and clinicalevidence data needed for MIDD. These data solutions are used internally and industry wide 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 becomedeveloped expertsexpertise atin incorporating datadata, 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 softwaretechnology and consulting services portfoliosportfolios, 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 angenerative AI applicationapplications to aid creatingin drafting 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 deliverleverage our validated software andapplications to deliver technology-enabled services. Our strategyservices is to create and apply validated software applications that can be used broadly in the life science industry. We offer services, leveraging our technology,are delivered by scientists with extensive drug development experience towho aid our clientscustomers 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 2,4002,600 life sciences companies and academic institutions and have collaborated on more than 9,00010,000 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 94,000160,000 users and are also used by 2320 global drug regulatory agencies, including the FDAFDA, the UK’s MHRA, Japan's PMDA, and JapaneseChina’s PMDA.NMPA.

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

Governmental agencies throughout the world, but particularly in the United States where the majority of our customers are based, strictly regulate the biopharmaceutical development process. Our business involves helping biopharmaceutical companies strategically and tactically navigate the regulatory approval process. New or amended regulations are expected to result in higher regulatory standards and often additional revenues for companies that service these industries. 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.

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

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

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

Since 2013, we have successfully acquired 21 companies. Below is an overview of the businesses we acquired in 2024, 2023,2024 and 2022.2023.

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 iswas 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 expensesexpense 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.

The total estimated consideration included a portion of contingent consideration that is payable over two years following the acquisition in cash, not to exceed $9.0 million. The fair value of the contingent consideration related to revenue threshold was estimated to be $4.4 million as of the acquisition date. Future paymentsPayments of contingent consideration arewere 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. In total, the fair value of the contingent consideration was estimated to be $5.2 million as of the acquisition date.

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 a negative fair value adjustmentsadjustment 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, asAs of December 31, 2024,2025, the Company no longer had any contingent consideration liabilities related to the Formedix business combination, except for the contingent consideration relatedassociated towith tax contingenciescontingencies, waswhich amounted to $0.5 million.

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.

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 paymentsPayments of contingent consideration arewere 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 a fair value adjustmentsadjustment of $(0.7) million and $23.0$23 thousand.thousand, Theserespectively. adjustmentsThe wereadjustment 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.

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$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.

Revenues increased by $30.8$33.7 million, or 9%, to $385.1$418.8 million for the year ended December 31, 2024,2025, as compared to the same period in 2023.2024. 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.customers, and growth from the Chemaxon acquisition.

Software revenue increased by $24.0$27.6 million, or 18%, to $155.7$183.3 million for the year ended December 31, 2024,2025, as compared to the same period in 2023,2024, 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$6.1 million, or 3%, to $229.5$235.6 million for the year ended December 31, 2024,2025, as compared to the same period in 2023. The growth in overall services revenue was2024, 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.

Cost of revenues increased by $13.5$6.6 million, or 10%,4%, to $154.5$161.1 million for the year ended December 31, 2024,2025, as compared to the same period in 2023.2024. The increase was primarily due to a $6.7 million increase in employee-related costs resulting primarily from billable headcount growth, a $3.9$4.2 million increase in intangible assets amortization, a $2.3$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, 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$2.0 million decrease in consultingemployee-related costs, and professional services cost resulting from the implementation of a cost$1.1 reductionmillion plan.decrease in equity-based compensation cost.

Sales and marketing expense increased by $15.4$6.3 million, or 48%,13%, to $47.4$53.7 million for the year ended December 31, 2024,2025, as compared to the same period in 2023.2024. Sales and marketing expense increased primarily due to a $6.7$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 $4.2 million increase in commission expenses, a $1.7$0.9 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$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 increased by $2.9$3.9 million, or 9%,11%, to $37.1$41.0 million for the year ended December 31, 2024,2025, as compared to the same period in 2023.2024. The increase in research and development expense was primarily due to a $9.6$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 $0.8$0.2 million increase in equipment and software expense, and a $0.4 million increase in the cost of licenses, partially offset by a $6.3$5.6 million increase in capitalized cost in R&D, a $1.1$1.5 million decrease in equity-based compensation cost, and a $0.4$0.6 million decrease in consultingthe andcost professionalof services expense.licenses.

G&AGeneral and administrative expense decreased by $1.2$8.8 million, or (1)%,9%, to $94.2$85.4 million for the year ended December 31, 2024,2025, as compared to the same period in 2023.2024. The decrease in general and administrative expenses was primarily due to a $16.0$11.7 million decrease related to a remeasurement 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$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 $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$3.0 million increase in professional and consulting costs,expense, a $1.0$2.8 million increase in franchiseemployee-related costs, and other miscellaneous business taxes, a $0.8$2.3 million increase in provision for credit allowance, a $0.5 million increase in public company expense,equipment and asoftware $0.5 million increase in facility lease-related expenses.expense.

Depreciation and Amortization Expense

Interest expense decreased by $1.4$1.8 million, or (6)%,8%, to $21.5$19.7 million for the year ended December 31, 2024,2025, as compared to the same period in 2023.2024. The decreasechange in interest expense 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$4.2 million decrease in interest expense from our floating rate term loan debt, primarily relateddue to thea decline in market interest rates and a reduced base margin rate reductionresulting from the refinancing of the term loanloan, refinancing.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 (Expense)

Net other income (expense) decreasedincreased by $2.5$0.3 million to $6.1$6.3 million for the year ended December 31, 20242025 as compared to the same period in 2023.2024. The decreaseincrease in net other income (expense) was primarily due to a $1.7$4.3 million increase in remeasurement lossesgains related to the fluctuation of foreign currency exchange rates, and a $0.3$0.4 million increase in lossincome related to disposal fixed assets, andpartially offset by a $0.3$3.3 million decrease in interest income.income, and a $1.1 million increase in other miscellaneous expense.

Provision (Benefit) for Income Taxes

Our income tax benefitexpense was $5.1$9.2 million, resulting in an effective income tax rate of 29.9%,120.9%, for the year ended December 31, 2024,2025, as compared to an income tax expensebenefit of $0.2$5.1 million, or an effective income tax rate of (0.4)%29.9% for the year ended December 31, 2023.2024. Our income tax benefitexpense for the year ended December 31, 20242025 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)

Net loss was $12.1$1.6 million, representing a $43.3$10.5 million increase in net income for the year ended December 31, 2024,2025, as compared to the same period in 2023.2024. The increase in net income was primarily due to a $30.8$33.7 million increase in revenue, a $21.7 million decrease in operating expense, a $5.3 million decrease in tax expense,revenue and a $1.4$2.1 million decreaseincrease in interestnet expense,other income, partially offset by a $13.5$14.3 million increase in tax expense, a $6.6 million increase in cost of revenuerevenue, and a $2.5$4.3 million decreaseincrease in netoperating other income.expenses.

We have consistently generated positive cash flow from operations, providing $80.5$96.3 million, $82.8$80.5 million, and $92.5$82.8 million as a source of funds each year for the years ended December 31, 2025, 2024, 2023, and 2022,2023, 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 periodsthe years ended December 31, 2025, 2024, 2023, and 2022.2023. and as of December 31, 2025, 2024, 2023, and 2022.2023.

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, repurchases of our common stock, 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.

Our cash flows from operating activities primarily include net income (loss) adjusted for (i) non-cash items included in net income (loss), such as provisions for credit losses, depreciation and amortization, stock-based compensation, deferred taxes and other non-cash items and (ii) changes in the balances of operating assets and liabilities. Net cash provided by operating activities for the year ended December 31, 20242025 was $80.5$96.3 million, compared to $82.8$80.5 million for the year ended December 31, 2023.2024. The $2.3$15.9 million decreaseincrease in cash provided from operating activities was primarily driven by ancash-adjusted net income, the year-over-year impact of a significant prior-year increase in accounts receivable, decreased cash outflows to settle liabilities, and ana increasedecrease in cash used for prepaid and other assets, partially offset by higherreduced cash inflows from deferred revenues, a decrease in cash used for liability payments, and an increase in cash-adjusted net income.revenue.

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 that add to total cost. 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-a new perspective needed” on Drug Discovery Today. 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.

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.biosimulation.

The table below summarizes our quarterly bookings and net software retention rate trends from continuing operations:

Management measures operating performance based on adjusted EBITDA defined for a particular period as net income (loss) from continuing operations excluding interest expense, provision (benefit) for income taxes, depreciation and amortization expense, equity-based compensation expense, change in fair value of contingent consideration, acquisition 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) from continuing operations excluding equity-based compensation expense, amortization of acquisition-related intangible assets, change in contingent consideration, acquisition and integration expense, and other items not indicative of our ongoing operating performance. Further, management measures operating performance based on adjusted diluted earnings per share defined for a particular period as adjusted net income from continuing operations divided by the weighted-average diluted common shares outstanding.

Adjusted EBITDA, adjusted net income, and adjusted diluted earnings per share are non-GAAP measures and are presented for supplemental purposes only and should not be considered as an alternative or substitute to financial information presented in accordance with GAAP. 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 condensed consolidated statements of operations and comprehensive income (loss) that are necessary to run our business. Other companies, including those in our industry, may not use these measures and may calculate them differently than those presented, limiting the usefulness as a comparative measure.

The following table reconciles net income (loss) from continuing operations to Adjusted EBITDA:

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

The following table reconciles diluted earnings per share from continuing operations to adjusted diluted earnings per share:

Three Months Ended MarchJune 31,30, 2026 Versus Three Months Ended MarchJune 31,30, 2025

The following table summarizes our unaudited statements of operations data for the three months ended at MarchJune 31,30, 2026 and 2025:

Total revenues increased by $0.9 million, or 1%, to $106.9$93.3 million for the three months ended MarchJune 31,30, 2026 as compared to the same period in 2025. Overall revenue growth was primarily driven by our software product offerings, supported by strong demand from existing customers,customers and expansion of relationships with existing customers and new customers.

Software revenues increased by $3.4$2.1 million, or 7%,4%, to $49.7$48.8 million for the three months ended MarchJune 31,30, 2026 as compared to the same period in 2025, primarily driven by increased demand from existing customers,customers and expanded relationships with existing customers, and new customers.

Services revenues decreased by $2.4$1.2 million, or 4%,million to $57.2$44.5 million for the three months ended MarchJune 31,30, 2026 as compared to the same period in 2025, primarily due to lower revenue from a previously acquired business.2025.

Cost of revenues increased $0.1$0.8 million, or 0%,2%, to $41.6$35.1 million for the three months ended MarchJune 31,30, 2026 as compared to the same period in 2025,2025. The increase in cost of revenue was primarily due to a $1.0 million increase in employee-related costs and remaineda essentially$0.9 flatmillion compared with the same quarterincrease in theprofessional priorand year.consulting expense, partially offset by a $0.7 million decrease in stock-based compensation costs and a $0.4 million decrease in other miscellaneous expenses.

Sales and marketing expenses increased by $0.6$1.3 million, or 5%,10%, to $13.4$15.0 million for the three months ended MarchJune 31,30, 2026 as compared to the same period in 2025. Sales and marketing expenses increased primarily due to a $1.0 million increase in professional and consulting expense, a $0.3 million increase in employee-related costs, aand $0.2an aggregate $0.3 million increase in stock-basedtravel, compensation costs, a $0.2 million increase in marketing expense,marketing, and aequipment $0.2and millionsoftware increase in travel expense,expenses, partially offset by a $0.1million decrease in professional and consulting expense and a $0.1$0.3 million decrease in otherstock-based miscellaneouscompensation expense.costs.

Research and development expenses increased by $1.8$0.7 million, or 17%,8%, to $12.3$9.7 million for the three months ended MarchJune 31,30, 2026 as compared to the same period in 2025. The increase in research and development expenses was primarily due to a $2.2$0.6 million increase in employee-related costs mainly resulting from head count growth associated with investments in software development, including AI integration across our product portfolio, a $0.2 million increase in professional and consulting expense, a $0.2 million increase in miscellaneous expense, and a $0.1 million increase in stock-based compensation costs, partially offset by a $1.1 million increase in capitalized cost in R&D.costs.

General and administrative expenses increased by $9.7$5.2 million, or 49%,31%, to $29.4$21.9 million for the three months ended MarchJune 31,30, 2026 as compared to the same period in 2025. The increase in general and administrative expenses was primarily due to a $7.4$5.7 million increase inrelated to the remeasurement of the fair value of business acquisition contingent consideration expense, a $1.0 million increase in equipment and software expense, a $0.9 million increase in executive recruiting and retention expenses, a $0.8 million increase in lease abandonment expense,consideration, primarily due to the absence of a non-recurring gainfavorable change recognized in the prior year that reduced expenses in that period, anda $0.6 million increase in executive recruiting expenses, a $0.5 million increase in professionallease abandonment expense, and consultinga $0.3 million increase in equipment and software expense, partially offset by a $0.5$1.1 million decrease in mergerstock-based andcompensation acquisition expensecosts, and a $0.3$0.8 million aggregate decrease in license costs and facility leasefacility-lease related expenses.expense.

Depreciation and amortization expense increased by $0.6$1.3 million, or 4%,6%, to $14.6 million$23,235 for the threesix months ended MarchJune 31,30, 2026 as compared to the same period in 2025. The increase in depreciation and amortization expense was primarily due to a $0.8$0.6 million net increase in amortization of intangible assets, primarily related to a $0.9$0.7 million increase in amortization of capitalized software. In addition, depreciation expense for fixed assets decreasedincreased $0.2$0.6 million, primarily due to a $0.2$0.6 million decreaseincrease in depreciation of computer equipment.

Interest expense increased by $0.1$0.3 million, or 3%, to $4.9$9.9 million for the threesix months ended MarchJune 31,30, 2026, as compared to the same period in 2025. The change in interest expense was primarily due to a $0.9$1.8 million decrease in gain from our interest swap hedge activities, partially offset by a $0.7$1.4 million decrease in interest expense 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.

Net other income decreased by $0.4$3.1 million to $1.3$0.1 million for the threesix months ended MarchJune 31,30, 2026 as compared to the same period in 2025. The decrease in net other income was primarily due to a $0.5 million decrease in interest income, partially offset by a $0.1$2.2 million increase in gainloss from remeasurement related to the fluctuation of the foreign currency rate.rate and a $0.8 million decrease in interest income.

Our income tax expense was $0.8$1.6 million, resulting in an effective income tax rate of (10)% for the threesix months ended MarchJune 31,30, 2026 as compared to income tax benefitexpense of $0.2$2.6 million, or an effective income tax rate of (4)%,46%, for the same period in 2025. Our income tax expense for the threesix months ended MarchJune 31,30, 2026 and 2025 was primarily due to the tax effects of U.S. pre-tax income (loss), the relative mix of domestic and international earnings, the impact of non-deductible items, adjustments to the valuation allowances, the effects of tax elections made for U.K. earnings, and discrete tax items.

Net Income (Loss) from continuing operations

Net loss was $8.8$17.9 million, representing a $13.5$20.9 million decrease in net income for the threesix months ended MarchJune 31,30, 2026 as compared to a net income of $4.7$3.0 million for the same period of 2025. The decrease in net income was primarily due to a $12.7$20.5 million increase in operating expenses, a $1.0 million increase in tax expense, and a $0.6$3.5 million increase in total other expense, and a $0.8 million increase in expense of cost of revenue, partially offset by a $0.9$2.9 million increase in revenue.revenue and a $1.0 million decrease in tax expense.

We have consistently generated positive cash flow from operations, providing $11.7$15.6 million and $17.4$23.3 million from continuing operations as a source of funds for the threesix months ended MarchJune 31,30, 2026 and 2025, respectively. Our additional liquidity comes from several sources: maintaining adequate balances of cash and cash equivalents, issuing common stock, and accessing credit facilities and revolving lines of credit. The following table provides a summary of the major sources of liquidity for the three-six- and 12-month periods ended at MarchJune 31,30, 2026 and December 31, 20252025, respectively, and as of MarchJune 31,30, 2026 and December 31, 2025.

(a) Net cash from operating activities for the threesix months ended MarchJune 31,30, 2026 and twelve months ended December 31, 2025.

(b) Cash balances as of MarchJune 31,30, 2026 and December 31, 2025 included $78.9$50.7 million and $76.2 million in cash and cash equivalents, respectively, held outside of the United States.