Certara Q3 2026 Earnings Call Transcript

Certara (NASDAQ:CERT) reported third-quarter financial results on Thursday. The transcript from the company’s third-quarter earnings call has been provided below.

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Summary

Certara reported Q3 2026 revenue of $94.9 million, a 4% increase year-over-year, driven by an 11% rise in software revenue, while services revenue decreased by 2%.

Adjusted EBITDA improved by 6% to $30.2 million, with a margin of 31.8%, reflecting better operational efficiency and cost control measures.

The company continues to embed AI into its offerings and has expanded cloud capabilities, with nearly 10% of Phoenix Cloud accounts moved to the cloud.

Certara has reorganized its business to align with customer buying patterns and has appointed Grant Peterson as Chief Product Officer to focus on portfolio investments.

The company is expanding its commercial outreach, particularly targeting biotech and mid-sized pharma, and sees growth opportunities in the APAC region.

Certara has a strong engagement with regulators globally, including the FDA, to advance New Approach Methodologies (NAMs) and biosimulation, potentially benefiting future regulatory decisions.

For 2026, Certara has narrowed its full-year revenue growth guidance to 2-3%, with a focus on achieving higher software revenue growth.

The company ended the quarter with $214.9 million in cash and cash equivalents, providing strong liquidity for strategic initiatives.

Full Transcript

OPERATOR

Good day and thank you for standing by. Welcome to the Certara third quarter 2026 earnings conference call. At this time all participants are in a listen-only mode. After the speaker’s presentation there will be a question-and-answer session. Please be advised that today’s conference is being recorded. I would now like to hand the conference over to Jayleen, investor relations at LifeSci. Please go ahead.

Jayleen (Investor Relations)

Good morning everyone. Thank you all for participating in today’s conference call. On the call from Certara we have John Resnick, Chief Executive Officer, and Saeed Muhammad, Chief Financial Officer. Earlier today, Certara released financial results for the quarter ending September 30, 2026. A 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 that include forward-looking statements and actual results may differ materially from those expressed or implied in the forward-looking statements. Please refer to Slide 2 in the accompanying presentation titled Third Quarter 2026 Financial Results for additional information which you can find on the Company’s investor relations website. In the 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 today, November 5, 2026. Certara disclaims any obligation, except as required by law, to update or revise any financial projections or forward-looking statements, whether because of new information, future events or otherwise. And with that I will turn the call over to John.

Faiz Mohammed (Chief Financial Officer)

Thank you, John. Before I review the quarter, a reminder that my comments are on a continuing operations basis. Results from the regulatory medical writing business, which we divested on May 8, are reported in discontinued operations, and our bookings results also exclude that business. As John said, the third quarter demonstrated meaningful progress against the priorities we set earlier this year. Revenue increased 4%, led by 11% growth in software, and adjusted EBITDA margin improved to 31.8%, up more than 370 basis points from the second quarter. The quarter reflects continuing momentum and the initial benefits of the operating actions we implemented in the first half.

Turning to the income statement, total revenue for the three months ended September 30, 2026 was $94.9 million, an increase of 4% year over year. Total bookings in the third quarter were $92.5 million, an increase of 4% from the prior year. Trailing 12-month bookings were $409.2 million, an increase of 2%. Software revenue was $48.8 million in the third quarter, an increase of 11% year over year, driven by strong retention and continued growth across our major portfolios. Trailing 12-month software bookings were $202.4 million, up 8% year over year. The results reinforce the underlying demand for our software portfolios.

Services revenue was $46.1 million in the third quarter, a decrease of 2% year over year. Trailing 12-month services bookings were $206.8 million, a decrease of 2% compared to the prior year, with a trailing 12-month book-to-bill of 1.15. As John discussed, the transition to our specialist-led services model will take time to translate fully into bookings and revenue. Our focus remains on strengthening commercial execution and converting the pipeline.

Turning to profitability, the third quarter cost of revenues were $31.4 million, down 6% from $33.4 million in the third quarter of 2025, despite revenue growth of 4%. The decrease in cost of revenues was primarily due to a $1.6 million decrease in equity-based compensation expense, a $0.4 million decrease in professional and consulting expenses, and a $0.3 million decrease in equipment and software expense, partially offset by a $0.5 million increase in employee-related costs.

Operating expenses for the third quarter of 2026 were $61.1 million compared to $58.1 million in the prior year period, an increase of $3.1 million. The increase was primarily driven by $4.8 million in reorganization, severance, and executive recruiting costs. Adjusted EBITDA for the third quarter of 2026 increased 6% to $30.2 million compared to $28.6 million in the prior year period. Adjusted EBITDA margin for the quarter was 31.8%, up from 31.5% in the prior year period and from 28.1% in the second quarter. The sequential improvement in margin reflects the operating actions we took earlier this year as well as continued discipline across the business. The improved cost structure provides additional flexibility to invest in AI, cloud solutions, and new product offerings while maintaining our focus on profitability.

Turning to earnings, GAAP net income and earnings per share are both impacted by non-recurring items. The third quarter net loss from continuing operations was $3.6 million compared to a net loss from continuing operations of $4.8 million in the prior year period. Income before income taxes improved by $2.7 million year over year. That improvement was partially offset by a $1.4 million change in income tax expense. We recorded a $2.4 million tax provision this quarter compared to a $1 million tax provision in the third quarter of 2025.

Adjusted net income for the third quarter of 2026 was $13.5 million compared to $13.8 million in the prior year period. Diluted loss per share from continuing operations was $0.02 compared to a loss of $0.03 in the third quarter of 2025. Adjusted diluted earnings per share for the third quarter of 2026 were $0.09 compared to $0.09 in the third quarter of 2025. Moving to the balance sheet, we ended the quarter with $214.9 million in cash and cash equivalents, up from $184.1 million at the end of the second quarter. The increase in cash primarily reflects $30.7 million of cash from continuing operations supported by strong collections and working capital timing and approximately $9 million of proceeds related to the divestiture. As of September 30, 2026, we had approximately $293 million outstanding on our term loan and $100 million available under our revolving credit facility.

Our liquidity remains strong and provides flexibility to support our strategic and capital allocation priorities. Turning to our revenue outlook, we are narrowing our 2026 full-year revenue growth range to 2% to 3%. We continue to expect software revenue growth to be above this range. For services, we continue to expect it to be at or below the low end of that range as we work to convert our pipeline into bookings and revenue. Turning to our margin outlook, our previously communicated full-year adjusted EBITDA margin outlook was 29% to 31%. Based on our performance through the first nine months of the year, we believe this remains an appropriate margin range for the fourth quarter. Our third quarter adjusted EBITDA margin of 31.8% reflects favorable software mix, continued expense discipline, and the savings now running through our cost base. We expect these benefits to support profitability in the fourth quarter while recognizing that quarterly margins may vary based on revenue mix and timing.

Finally, we are updating our full-year 2026 adjusted EPS to $0.31 to $0.34, reflecting greater visibility into our full-year performance. Fully diluted weighted average shares are expected to be in the range of 155 to 157 million, and we are modeling an effective tax rate in the range of 25% to 30%. Overall, the third quarter represented an important step forward. Software growth remained strong, adjusted EBITDA margin improved meaningfully, and the actions taken early this year are beginning to produce a more efficient operating model. We remain focused on maintaining this operating discipline, improving services execution, investing in our highest priority initiatives, and delivering value to our shareholders. With that, we will open up the call for questions.

Operator, can you please open the line?

OPERATOR

Thank you. We will now begin the question and answer session. If you’re dialed in and would like to ask a question, simply press star then the number one on your telephone keypad. Your first question comes from the line of Kevin Caliendo with UBS. Your line is now open.

Tucker Emerson (Analyst)

Hello, this is Tucker Emerson for Kevin. Can I first ask about, just can you parse out the improvement in software revenue and bookings between just demand environment improving and then the steps you’ve taken to enhance Certara’s offering? And was it the larger Tier 1 and 2 customers responsible for the software growth, or is it really the Tier 3 customers that have benefited from stronger biotech funding of late?

John

Hi Tucker, thanks for the question. So I think to start with, you know, I think like others, I think the end market looks strong. There’s, you know, I think seen across the industry. I think we’re seeing the same thing here. From a software standpoint, we saw a strong performance across customers across tiers and across products, so it’s tough to discern a specific trend in one way or another. So I think execution certainly is part of the story and if we look across businesses and across layers, I think we executed pretty well.

Tucker Emerson (Analyst)

Yeah. And then if I could follow up quickly, I think you previously targeted $10 million of cost savings. Can you talk about where Certara stands on that, and have you identified any further cost-saving opportunities?

John

Yeah, we didn’t give specific numbers this quarter. I think last quarter we talked about exceeding $12 or $13 million of run-rate cost savings. I think that has continued to grow. So, you know, we’ve done it. I think some of the margin improvement that you saw in Q3 is directly resultant, as a direct result of some of the actions that were taken particularly in May and June last year. I’d say just as a management philosophy and as an approach to this, this is not a, you know, this is not a one-off. We’re continuously looking at the organization for opportunities to, you know, to do things smarter, to do things simpler, to do things more efficiently, you know, as we invest in areas of higher growth. So it’s a continued and always area of focus.

Tucker Emerson (Analyst)

Understood, thank you.

John

Thanks, Tucker.

OPERATOR

Next question comes from the line of Michael Cherney with Lyric Partners. Your line is now open.

Dylan Finley (Analyst)

Thank you for taking the question. This is Dylan Finley on for Mike. Congrats on the quarter and really on the software growth inflection. You know, you called out 11% organic growth. Maybe if you could give us some context behind the inflection here, you know, drivers to the upside, you know, how ultimately do you see the sustainability of this type of double-digit growth?

John

So thanks for the question, Dylan. The nature of our business happens to be a little bit diverse. We have different types of software and different types of things. Some of them are ratable. Some of them are on-prem. So there’s always a little bit of bumpiness quarter to quarter in terms of timing of different elements. It’s never going to be kind of one-for-one smooth just given the mechanics that exist. We do believe, and I think we went to lengths in the opening statement to talk through what we saw as some of the expansion path and growth path on our existing products. We also increasingly, as we move into next year, will also see opportunities for new products for growth. So we think that this is pretty durable. It may bounce around from quarter to quarter. It may move just based on timing of some of these elements. I’m very focused on trends like trailing twelve months.

You referenced the 11% bookings number. I think I’ve historically cited also the 8% trailing twelve-month number. That was at the Q4 versus where we sit today. So I think those trends are good. It’ll bounce a little bit quarter to quarter just depending on the mix of assets and other things, but we’re seeing good execution. We believe we’ve got a good path to move things forward across the portfolio.

Dylan Finley (Analyst)

Thanks. And then just wanted to quickly hit on your APAC comments. Last quarter you talked to your first Simcyp win in China. This quarter you called out APAC again more broadly as an appealing opportunity. Is this taking the same toolkit and offerings you have here domestically and in EMEA, importing it over there? Is this a near-term opportunity that you think you can capitalize on, or is this more of a longer duration?

John

Yeah, no, it’s a good question. Look, if you look across our revenue mix, you can see that APAC footprint is not as large as the rest of the business, which is a little bit disconnected to some of the larger trends we see in R&D where we see a large amount of total spend shifting to the region. We believe there’s a number of our offerings which are incredibly relevant for Japanese, Chinese, and Korean companies who are looking to, you know, move into the United States.

We also think locally within markets there’s unique opportunities for our software and services. Some of it will be very consistent with things that we do today depending on the nature of the request; some of it will be slightly more tailored to local opportunities or meeting local budgets. So there’s a mix between the two. This is not a 2026 Q4 thing. The initiatives have already started. The teams are already out in Tokyo and Seoul and across China. We’re also ramping the team. It’s really going to be a ’27 growth impact. Thank you.

OPERATOR

Thank you. Next question comes from the line of Dave Windley with Jefferies. Your line is now open.

Dave Windley (Analyst)

Hi, good morning, John. In the years before you joined, the company made several acquisitions that skewed the mix a little bit more toward software, and in the prepared remarks I thought you made a comment that was very definitively integrating software and services and going to market with that combination. I wondered if we could kind of zoom out a little bit and hear your philosophical view about the relative importance of software and services in the portfolio and how you’re going to market with those two.

John

Yeah. Hey Dave, nice to hear from you. So look, I see the two, as we think about our future, incredibly complementary to what we do. I see opportunities for us to grow on both sides of the business, both improving and enhancing our existing products through new product launches. Throughout that connection layer that you referenced, I also spent some time today outlining some of the work that we do on the service side. We do phenomenal work and we have phenomenal people within this organization who help to really support clients in unique ways. So through a better execution model, I think there’s a lot more growth on that side of the business.

You’ll see this business kind of meet its customer where it needs. Customer has sophisticated clin pharm groups and is able to execute and wants to license our software. We’ll be there to meet and match that with top notch products that are used by power users and others within the organization to execute studies. For other customers who need support through incremental experts or program management, we’re also there to match them and work with them in this business.

I think the case studies that we referenced in here today really show that we’re at our best when the two come together and we’re able to work with our technology in partnership to solve those strategic issues. My expectation, as I signaled though, would be as long as you think of the business in those two segments, software will continue to outpace services as a growth layer. But there is a very nice flywheel effect and complementary elements of the way we can support clients across the two.

Dave Windley (Analyst)

That’s helpful, thank you. My second question, follow-up question, gets into your chief product officer hire announcement and the attempts to, or the goals to, move clients toward a portal engagement experience, ratable software, you know, kind of all the things that go along with that and what kind of a picture of the journey on that. How much have you gotten clients to move toward more of a cloud-based product engagement experience, and then the, you know, the CPO’s job to accelerate that.

John

So super excited to have Grant as part of the team. He’s got a very distinguished background really. I’d say he’s the right person at the right time given his unique experience, operational discipline, and his ability really to move quickly. What we’ve asked him to do really is twofold. One, help us optimize our existing portfolio, help us with our inline products, our current products, help get the most, optimize our roadmaps, optimize performance, really bring the customer voice deeply into it so that we can satisfy the unique needs and the expansion paths that are within that.

And two, we’d like to be a best—you mentioned inorganic path historically—we’d like to be a best-in-class product developer on our own with new products and other things. And so we have a number of plans that we’re looking at into ’27 and things under development. The ask for Grant is really to help the execution of that in the most impactful way we possibly can and the most cost-efficient and return-on-investment way that we possibly can. So that’s Grant’s role. I think as we look across the business—and I’m always reticent to give a number—the number in my mind, something a little bit north of 50% of our product portfolio is cloud versus on-prem today. It’s maybe slightly more than that. We obviously laid out a micro-integration path for Phoenix, which will take that number up pretty consistently over the next few years. And we also talked today about the integrated AI platform, which we’ve kind of talked about in the past a little bit.

We gave a little bit more specificity about how that will work in a complementary way with our current data and products. But this will allow clients to do, from their own frontier model with their preferred agents, we’ll be able to tap into our software and data in a consistent way. We view that in the near term less as a standalone platform or portal where they have to buy an incremental asset or integrate into a particular product, but as a lift to all of our products where they become more accessible, you can move data around in a more consistent way, and you can get more power out of what you’re doing.

So, you know, we’re pretty measured in terms of what you can do today in the near term, in the midterm against that. And our plans are getting clearer and clearer in terms of growth opportunities.

Dave Windley (Analyst)

Okay, great, thank you.

OPERATOR

Next question comes from the line of Brendan Smith with TD Cowen. Please go ahead.

Brendan Smith (Analyst)

Great. Thanks for taking the questions, guys. Congrats on the quarter. Maybe one more kind of on the revenue mix here. I know you mentioned some of the work you guys are doing kind of internally on your go-to-market strategy for services, but I think especially this quarter we’ve been seeing some evidence across the sector of pharma and biotech spending starting to recover pretty meaningfully, which seems like you’re seeing pretty clearly in software.

So I guess is there anything you’re hearing, even qualitatively, in conversations with customers to help us just understand the gap in their interest in software versus services right now? Is any of that maybe being driven in one way or another by kind of the customer adoption of AI/ML on their side, or just anything else that we should be aware of potentially kind of driving their relationship with the Certara platform?

John

Thanks, Brandon. No, I—look, I don’t think there’s any end market distinction. I mean, I’ve said it before and I’m very solution-oriented moving forward on this. I think our service performance is really a result of changes we made from a go-to-market standpoint and from an operational standpoint a couple years ago. We rectified and changed a number of those. We put the specialists back into market, we’ve changed our focus, we’ve changed our incentive.

That’s going to be the thing that’s going to drive this. The work that we do is outstanding. The demand for our work is incredibly high. We just need to have our teams out in front of the right people, having the right conversations in the right ways. That business will continue to progress and get stronger as we move forward. So I don’t see a structural difference between the demand between the two. It’s really our ability to go out and execute and our ability to go out and talk to the right clients about the right issues.

So no, I think that as these changes kind of bed in—we’re now in the second quarter of making those changes—we’ll start to see that translate into revenue growth on the service side as well.

Brendan Smith (Analyst)

Got it. Okay, thanks very much. And then maybe one actually on the NAMs work. I know you gave some good color there, John, on some of the stuff you guys have been doing there. Can you maybe just expand a bit more on some of the work you’ve been involved with regulators? I think you mentioned the pilot study now being live with FDA. I guess, is Certara involved with that pilot NAM study? And maybe even bigger picture, I guess if that’s successful, how do you guys think about the potentially incremental opportunity there just from a commercial revenue standpoint?

Any color on how we should be thinking about that. Thanks.

John

Yeah, I think one of the points we wanted to emphasize today was we’re actively involved around the world with regulators, both as kind of thought partners and as clients. And there’s been a lot of fantastic movement, as we’ve talked about before, in regulations expressing an interest in a number of NAM fronts—experimental, more diverse approaches. So we are working formally and informally with regulators and with clients directly on exploring how these use cases will be received by the regulators, how they’re interpreted.

And there’s kind of what I define or describe as a diffusion curve, where you initially kind of see that the science exists where you can start to develop new methods to do something. You get regulations out, you get a couple innovators who are trying to get proof of concept on that. Once those use cases get worked out and accepted by regulators, then you have the ability to drive greater acceptance and greater awareness across the industry. I’d say we’re kind of between phase two and phase three for a lot of those NAMs, where regulations are out, clients are starting to experiment, we’re partnering with them on those innovative use cases.

And when you start to get the impact of those use cases and the regulators around the world accepting that, then you’re going to start to see greater diffusion. So that’s where we are, and Certara is an active player on all fronts there.

Brendan Smith (Analyst)

Got it. Makes sense, guys,

John

Thanks. Thanks, Brandon.

OPERATOR

Next question comes from the line of Craig Hadenbach with Morgan Stanley. Please go ahead.

Katie Benorth (Analyst)

Hi everyone, Katie Benorth on for Craig. Just to double-click on AI, what tangible proof points can you point to on how it’s impacting your business today, and what does the roadmap look like?

John

Sure. Thanks, Katie, for the question. So a few fronts. As we kind of think about this, I think about it multi-dimensionally. If I go back to the January, February, March timeframe, the suite of initial questions that we got were really focused in on how does AI change your competitive positioning. I think we’ve worked carefully with you and with the market on understanding that both our software that’s deeply embedded on the regulator side, the scientific judgment, the regulatory use cases really creates a nice position for us to continue to grow and be sound as you kind of think about the underlying proposition of the position.

We’ve talked a lot around some of the operational acceleration we’ve got internally in terms of ability to drive processes more efficiently, to start to streamline some of the work steps for our service execution, the acceleration of our development timelines in terms of increasing functionality and increasing product value that we’re creating—we’ve seen pretty dramatic increases. I’ve shared a lot of those percentages and actual impact statements in the last earnings call.

Where we’re also talking today is about a go-forward strategy where we’re working hand in hand with clients early on from a lighthouse standpoint around some of these kind of broader AI initiatives that we think will be a lift to the overall portfolio in the next 12 to 18 to 24 months. We see progress against all dimensions.

Katie Benorth (Analyst)

Great, thanks, that’s helpful. And when you look at the two business unit segments, MIDD and ACE, what area are you seeing the strongest momentum today, and where do you see the greatest long-term upside? Thank you.

John

Look, I think the rationale behind cutting the business in the two: one, they’re both very strategic client issues. One, how do you run

John Resnick (Chief Executive Officer)

Trials differently? How do you adopt modeling? How do you bring it throughout your entire life cycle? Huge, huge TAM, huge opportunity for us. One that Certara has known extraordinarily well for, where we feel very good about opportunities long term. That organizational construct has really brought a lot of our resources together and it has us thinking much more strategically about external engagement, driving awareness, innovation. So it’s been a super helpful construct.

On the A side, it’s really around acceleration of data and acceleration of evidence. Again, another priority of regulators around the world and clients. How do you kind of streamline those processes to help move from data to evidence in a much quicker way? Another place that we’re naturally positioned, we have a number of products that are playing across that kind of data management and evidence continuum. In terms of growth in the quarter, I think we are seeing growth pretty fundamentally across all of them. As I mentioned on the software side and even true on the, all of our businesses are kind of moving forward at, you know, pretty consistently at a, at a, at a good pace. So, you know, hard, hard to choose between the two of them. One’s probably a larger addressable market than the other, but I think we’re on the right track strategically and operationally on both.

OPERATOR

Next question comes from the line of Matt Hewitt with Craig Hallum. Your line is now open.

Matt Hewitt (Analyst)

Good morning. Thanks for taking the questions. Maybe first up, just to follow up on Brendan’s question earlier regarding the advances on the regulatory side of things, do you see that as becoming maybe a 2017? It sounds like customers are looking at use cases now, but do you see that becoming more of a driver next year or do you think that it might take a little bit longer given that we’re still kind of working through some of the details?

John Resnick (Chief Executive Officer)

You know, when you think of NAMs, it’s not one. There’s lots of different things that are happening in market and different regulators are working at different paces on this and international bodies. So it’s kind of tough to answer. And it’s not just regulations, it’s also there are different rate and pace for different modalities and different approaches. So the overall diffusion curve will vary based on a number of factors. We do already see in 2016 a lot of work where clients are experimenting with different approaches and we’re leading on use cases. As you start to think about that, a bunch of these getting mature. It’ll take time, but we’re working on things in 26. We’ll continue to work on things in 27 and moving forward from there. Trying to characterize—I mean, there are dozens of different approaches with very different answers across modalities and therapeutic areas and questions and they’re all kind of moving at their own pace.

It’s good. I think it’s all net beneficial to us. We’re well positioned to sit at that intersect between what regulators are looking for and how clients are trying to adopt to some of those things. But it’s hard to give a general answer to it. They’re all going to kind of move at their own speed and pace.

Matt Hewitt (Analyst)

Understood. And then maybe a second question regarding the Phoenix cloud conversion. Where are you with that and how much of a headwind is it? Obviously when you go from on prem to hosted, you go to this ratable model, it creates a bit of a near term rev rec headwind and I’m just curious how much of an impact you’re seeing there and when do we kind of cross over and start to see the benefits of this? Thank you.

John Resnick (Chief Executive Officer)

Yeah, thanks for the question. I think we—I outlined today that we’ve now crossed or we’re approaching the 10% range for total customers, which was a little bit ahead of where we were expecting to get in the first year. You know, pleased with that progress. I think we have ambitious plans for next year for accelerating that. You’re exactly right. You know, it’s great for—it helps to accelerate bookings. It’s the right thing for us long term to be able to modernize the offering and to bring more value through the AI modules that we have.

There is going to be—there is a little bit of a revenue headwind that exists with it as you kind of start to do some of those conversions. I don’t have the exact number, but you’re right, the actual revenue growth is a little bit—sorry, we’re doing probably slightly better if you take into consideration the impact of the cloud conversion.

Matt Hewitt (Analyst)

Got it. Thank you.

OPERATOR

Next question comes from the line of Jared with William Blair. Please go ahead.

Christine (Analyst)

Good morning, it’s Christine on for Jared. Thanks for taking our questions. You mentioned you’d been implementing a pricing review as part of your strategic actions. Can you talk a bit more about this in terms of where you’re seeing potential pricing misalignment prior and any changes to your contracting structure where you contemplate?

John Resnick (Chief Executive Officer)

Sure, thanks for the question. Look, I think price is something that we’re spending a lot of time considering. We haven’t really done a lot to change anything on our pricing approach as a company. We have multiple different approaches in market today. So the work we’re doing is in really trying to understand how do we make our assets accessible, how do we try to make the value propositions clear to the extent that over time we’ll be migrating to multiple products being used?

How do we help incentivize and encourage clients to use our software together and also to move it earlier into the life cycle and across the entire life cycle. So when we say we’re strategically reviewing things, we’re really looking at this from a more client-centric way in terms of how do we optimize the juice on that side of things. Our focus on contracting has really been for simplification. You know, how do we kind of standardize terms, how do we standardize, you know, contracts across our clients, really, you know, improving operational effectiveness, making it easier to do business with us?

Christine (Analyst)

It makes sense. And while you’re not giving 2027 guidance, hoping you can help us think through the puts and takes for next year. Currently, the street is forecasting at a similar growth rate next year as your updated 2026 guidance, but wondering if, based on your backlog and visibility, if we should be more thinking of an acceleration and maybe if mid single digits is in reach.

John Resnick (Chief Executive Officer)

We’re going to hold off in terms of providing guidance until later in the year at this point. So I got no incremental updates to provide. I think you can draw conclusions from some of the improving software performance and other things of what we’re looking at, but I’m not at this point going to provide any further guidance.

Christine (Analyst)

Okay, thank you.

OPERATOR

Thank you very much. Next question comes from the line of Luke Surgot with Barclays, please go ahead.

Luke Surgot (Analyst)

Great. I just kind of wanted to dig in on the full year guide and you guys had such a big step up here in 3Q and then the guide implies kind of a step down there and from 4Q. Just wanted to see if there’s any pull forwards or any reason for the decel that’s implied in guide from a top line perspective.

John Resnick (Chief Executive Officer)

Yeah, look, I think we were just honestly being consistent. I think we’ve said the same thing all year and we’re staying within that same range in the quarter. Let’s see where things kind of net out. We’re doing an awful lot operationally to change the company. We’re doing an awful lot—new leaders and new approaches to do things. We’re just being measured in our approach to providing this. There’s no new news in that except for kind of raising the lower end of what we’re doing here.

There should be no news and we’re going to keep working hard to keep performing. But there’s no one-timer. There’s nothing exceptional. We’re just being really consistent with what we said, quarter to quarter to quarter.

Luke Surgot (Analyst)

Okay. And then from a follow up, a lot of noise—I guess like a lot of noise there from the medical writing takeout. But as we look at the gpa, the gross margin improvement you guys have done even ex that, we kind of calculate maybe like 150 plus basis points benefit from getting rid of the medical writing. But like still really significant step up there. If you guys can just talk about what you’ve been doing there to improve that side of the equation.

John Resnick (Chief Executive Officer)

From—yeah, I’m trying to—I’m not sure 100% sure how to back into the analysis that you did. I was just asking Faiz. Look, I think there’s a couple of things on margin we’re doing. One, I think in the quarter, obviously software at 11% is going to provide a better overall gross margin. Margins across the two are healthy, but software margins are even healthier. So to the extent that that’s running at 11%, you’re going to see some contributions there on the GM side.

And then if you go down, you drop down a line below that. We did do a major shift in employees, in RIF in May, in June, which went into place in July. I think you’re starting to see some of the, you know, some of the contributions from that playing out as well into EBITDA.

Luke Surgot (Analyst)

All right, great, thanks.

OPERATOR

Final question comes from the line of Sean Dutch with BMO. Your line is now open.

Chris Charlton (Analyst)

Hey, good morning, this is Chris Charlton on for Sean here. Thanks for taking our questions. Maybe going back to John’s comments on the targeted outreach approach with small and mid sized biotechs and the therapeutic or modality component of this. Can you just share some more detail on how the commercial approach differs between large pharma versus small biotechs and how this fits into the broader go to market realignment?

John Resnick (Chief Executive Officer)

Yeah, sure. So as part of our new commercial model, we’ve really rethought both who we’re selling to and how we’re selling. We have tremendous opportunity in market. We know that we’re not a huge company. So how do you allocate your resources in the most effective way to have the best conversations? What’s essential to us is really kind of finding those companies that are going to benefit the most from our offerings and our capabilities. What you’ll see us doing is focusing a little bit more on that mid segment and a little bit more on biotech segment.

They’re good clients with high need. Both our services and software offerings, we can be incredibly targeted. We know which products, which modalities are going to benefit most from mechanistic modeling. So we can be incredibly focused on those companies and have our scientific teams and our teams out engaging those groups. We still are working very closely with tier one clients. They’re the bedrock and foundation of our business. We have great existing relationships with them. We’re helping just to diversify in terms of building into that other segment. We can be, as we outline, incredibly targeted in how we pursue this and we can build differentiated relationships like the one that we talked about. The other thing we talked about on the commercial side was geography.

We do see a lot of upside putting more weighting on our team into Asia, Japan, Korea and China specifically, where if you look at our overall revenue, it’s a relatively small percentage relative to the market. So those customers—we also do see very good partnering relationships on the CDMO and CRO side. So we’re also dedicating teams on that. So our go to market model—you asked the question, how does the go to market model change? It’s a different touch on each of those different groups.

Their needs are a little bit different. We’re building teams internally that are capable of handling those relationships and engaging it. Essential for us that everybody on our team is out. You know, we’ve leaned out a lot of sales management and overhead from our organization and we’re really focused on content based engagement across all the different segments. All right,

OPERATOR

Thank you, this will conclude our Q and A session. I will pass it back to John Resnick for final comments.

John Resnick (Chief Executive Officer)

Thanks, everyone, for joining today. Appreciate the opportunity.

OPERATOR

Ladies and gentlemen, that concludes today’s call. Thank you all for joining. You may now disconnect.

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