Yeah, I think we're at the top of the hour, so we'll kick it off. A big thank you to John Gallagher, CFO of Certara, for joining us today at the Stephens Investment Conference in Nashville.
Thanks, Jeff.
Appreciate the time, John, and we'll just jump right into the questions from there. If we could start by revisiting a key topic from Q3 on the difference in the demand environment between Tier 1 large pharma customers and other mid-size and small customer tiers. What do you see in Q3, and why will it persist or not going forward?
Right. Yeah, thank you, Jeff. Glad to be here today. Yeah, so Tier 3, so the Tier 3 customer category or biotech companies were a highlight in the quarter where we saw strong performance, particularly in biosim services, which were double-digit growers. We see that in thanks to the commercial team with a strong focus on working with the biotech companies that are best positioned from a funding perspective as well as a skill set perspective to do work with Certara. That was a good part of the results as we looked at the quarter and even on a year-to-date basis. Tier 3 has been a highlight that has partially been offsetting some weakness that we saw in the quarter on the Tier 1 customers. That is the large pharma customers.
What we're seeing there is some delays, some slowness in decision-making, some program or project delays, most pronounced in the regulatory business, but still also to a lesser extent, but also in the biosim services business. That was what we're seeing. We did see some of that weakness carry over into Q4, which prompted us to make some of the comments we made on the call. Through October, we saw some of that weakness continue. Although most recently, we have seen close rates improve a bit as we get deeper into November and we approach the end of the year.
Great. Maybe a quick follow-up there. Any comments to help inform investors on how we should think of booking seasonality and how we should think about the relative importance of November and December versus the rest of the year?
Yeah, so we typically see a strong Q4. In fact, we continue to expect Q4 to be one of our stronger quarters of the year and expect a sequential increase from Q3 bookings moving into Q4. That is what we have seen historically in the business. Because of some of the slower decision-making with the Tier 1 customers, we do not expect that seasonality to be quite as pronounced as we have seen in prior years. We do still expect to see a sequential increase in bookings from Q3 into Q4.
Excellent. That helps. A fairly tough comparable versus Q4 last year. I also want to dive into the pretty different demand environment that you've discussed for software versus services throughout the course of the year. What's driven that divergent behavior? More importantly, what needs to happen to turn around services bookings?
Yeah. Yeah, we have seen some divergence there, which is not totally uncommon. The services side of the business does tend to be a bit more volatile, and performance is sort of in line with some of the broader market conditions that we've seen. The software business is very sticky. That business across the customer tiers, once the software is in place, we have very high renewal rates, and customers tend to keep the software, and we do not see as much volatility in software performance. That is including this year. The organic software revenues for 2025 year-to-date have performed in line with our planned expectations. That kind of consistency is what you would expect from software revenue achievement and a little less volatility. Now, services, on the other hand, we do see more movement.
Remember, it takes about a couple of quarters for revenue to pull through from the time that we post a booking. We have seen from the time that we convert a booking, it takes a couple of quarters for that to turn to revenue. Overall market conditions and what we have seen in the behavior of our customers, most notably in Q3 when we looked at Tier 1 customers, is overall sentiment will drive a bit of volatility or a pullback or acceleration in better market conditions of the services bookings.
Yeah, that helps. Just thinking just beyond the customer types or software versus services, any other comments on your perception of the end market or how general end market conditions need to evolve to positively translate into pipeline bookings and then conversion of backlog into revenue for Certara? Maybe with this one, you could also hit on some of the, I think the commentary from CROs have been a little bit more positive and how we should think about the timing of the market turnaround for CROs versus seeing more of a quantitative impact for Certara from just having better sentiment from your biopharma customers.
Yeah, sure. A couple of things that are going really well, which is the overall pipeline or the sales funnel is full and intact. The pipeline itself is strong. That's notable. Our conversion of existing bookings to revenue, so really converting the backlog, has also been a bright spot. You saw that in the quarter when we delivered Q3 revenues and services were on plan at a period in time where bookings had seen some deceleration. Those are a couple of things that are working well. Now, the conversion of that pipeline to bookings is what we're calling out as one of the spots that we're keeping our eye on as we proceed through November and into December. Your question about what CRO commentary is versus what we're seeing.
We have seen that historically, Certara's performance, particularly in services, would come on a bit of a lag. Maybe it might be a one to two-quarter lag on where we see some increase or decrease in performance. The fact that there is a call for a better overall market backdrop is certainly going to be a positive to us in the future. That will become a tailwind. Our Certara achievement of bookings and revenue has tended to be on a bit of a lag. To the extent that we are seeing or we are hearing and we are seeing other companies talk about a recovery in the end markets, that is going to, overall, that is going to end up being a tailwind to Certara.
Excellent. Appreciate that. I want to hit on the intersection of demand and the regulatory environment. Has the regulatory environment impacted customer purchasing decisions this year? What has you excited or concerned around regulatory policy going forward? Is there a greater focus, you think, on implementing items like the non-animal methodologies of testing announced earlier this year? Is the focus more on what the next policy announcement to come is? Is it just kind of the incremental work that you guys have always pushed for of incremental use cases of biosimulation that kind of supersedes whatever leadership is at the FDA or what their current policy focus is?
Yeah, the regulatory backdrop has certainly been mixed this year. Because of some of the, at the FDA, at least, there's employment uncertainty. There have been fewer drugs approved year-to-date this year than what we saw last year. It is certainly indicative of some slowness within the FDA, given all the uncertainty that we've seen there. We think that shows up in our regulatory business and to some extent in our biosim services business. That's one aspect. On the other hand, though, of course, there was the directive by the FDA back in April on NAMs and moving away from animal testing. That certainly provided a tailwind to the business and the overall sentiment toward marketing or modeling, rather. Certara's market-leading position in modeling, it certainly is a good tailwind to the business.
What we're, I think what we're all waiting on at this point now is some further guidance in addition to what was said back in April that will further support that overall tailwind to the business in achieving a higher growth rate specifically related to moving away from animal testing. Of course, a couple of the bright spots for growth in Certara during this year, of course, has been Simcyp and Quantitative Systems Pharmacology or QSP business, both of which would be beneficiaries of further guidances from the FDA related to NAMs.
Got it. Got it. Appreciate that. Maybe transition a bit, talk a little bit more specifically about some elements of the software business. I want to start with the Certara Cloud and kind of broader platform strategy. Any milestones that you've hit so far in FY 2025 worth noting? How would you describe how the shift to this cloud and platform strategy is changing cross-sell for the business?
Yeah, so Certara Cloud, really good adoption this year. Remember, Certara Cloud is a single sign-on opportunity that as customers are renewing their software licenses, Phoenix being the highest volume one here. As Phoenix customers are renewing, they're being ported over to a single sign-on environment that's showing them not only the Phoenix product, but all of the other software products that Certara offers. The conversion to cloud as people renew has, we've been very pleased with the adoption. This comes at a time when we're launching new products too. Very importantly, this adoption of Certara Cloud to raise the awareness of the software products to increase the cross-sell opportunities is coming at a moment in time when we just launched three new software products to Certara IQ. I'm referring to Phoenix Cloud as well as Pinnacle Enterprise.
Excellent. Want to ask maybe a little bit more specifically on Phoenix, knowing that it's one of the most long-standing Certara products, really great market share. Anything specific you'd call out on retention trends on that product? Also any new capabilities that you'd call out that you think customers are particularly excited about that's driving customer behavior?
Yeah, we're excited about this launch. This is the cloud version of Phoenix. This is, as you pointed out, Jeff, this is a long-time high-volume product for the company. Predominantly today, it's a desktop version. Most of our customers are on a desktop version. The goal here is to get them onto this cloud version, which of course is hosted by Certara and allows us to put some of the features and functionality that you can't get on a desktop version into this cloud version. Think AI enablement for search and other enhancements within the product that we're able to put into the cloud environment that customers won't be able to get in the desktop version. We're very optimistic that that's going to be a good lure to bring customers over and begin a transition from the desktop version over to cloud.
Of course, we have some pricing power there. That is one of the key launches that we have just done recently that, as we look toward 2026, should be a good growth catalyst for software overall.
Follow up there. Any timeframe that investors should keep in mind on customers transitioning from that desktop version of Phoenix to the cloud version? Is the strategy just to make the cloud version kind of more and more compelling and in that way evolve the customer migration rather than setting some type of sunset date and forcing customers' hand?
That's exactly right. Yeah, it's the compelling nature of it. We think that the version that we have of Phoenix Cloud out there right now is going to be that kind of compelling. We're not going to put pressure on sunsetting the desktop version. We do think that the overall conversion from desktop to cloud will take some time. As customers renew, there's going to be significant opportunity to transition over. The goal there is to put the features and the functionality, including AI enablement, into that cloud version that'll really compel people to want to make that change more so than push them over due to a sunset.
Are there any revenue recognition headwinds to converting from the desktop to the cloud?
Inherently, we do recognize revenue all at once with the desktop version, which I think you understand based on the question. When we shift to cloud, it will become ratable. It will be a month over month or a quarter at a time of revenue recognition. That would typically present a headwind, but there are a couple of things with it why we really have not called that out. One is pricing. We are able to price for the cloud version at a higher rate than we are the desktop version, which helps to offset some of that headwind. Also, it is the cadence of the renewals. They are staggered throughout the year. We do not have any particular month or quarter where all of our customers are renewing.
Instead, we view this conversion would take certainly the course of the year, if not even into 2027, to convert customers over. For that reason, then it kind of smooths out what that headwind would otherwise be.
Okay. Thanks. That was my question. Excellent. With that, we'll move to Simcyp. Yeah, you had some efforts to have some kind of SimCip offshoot products like Simcyp Discovery, Simcyp that's more focused for biotech customers. So want to follow up on the momentum and success there. And then more broadly, any particular therapeutic areas, use cases that you'd call out driving continued adoption and momentum for the broader SimCip universe?
Could you define that product for us too?
Yeah. SimCip is what I would call our core biosimulation software. This is like, think of this as organ models to replicate how a molecule impacts the body or how the body impacts the molecule. It is one of the fastest growing products in Certara. This year too is no exception. We have seen really strong growth from SimCip during 2025. Jeff, as you pointed out, we have a number of modules that are seeking to expand the use cases or the user bases for SimCip. We are seeing good growth across each of those areas. Really happy with the growth in SimCip. We do not expect that to slow down as we approach next year.
Excellent. Excellent. Appreciate that. We'll move to Chemaxon, which you're over a year post-acquisition on that one. Maybe an update on what capabilities are kind of live and fully integrated now, what's been the customer response over the last year or so to Chemaxon, and maybe a broader growth outlook for preclinical solutions that might center around Chemaxon?
Yeah. The acquisition of Chemaxon has definitely proven to be a good one. They've performed on plan through this year. The integration has gone really well. In fact, we said we'd exit this year with Chemaxon having a margin in line with Certara's corporate average EBITDA margin. We're only, excuse me, in Q3, we're only 40 basis points away from that. We're well on track to be able to hit that target by the end of the year. On the revenue side, the organization's been performing on plan. I'd say that that was an aggressive plan. To be in line with expectations there, that means a few different things are happening.
One is we're able to take the Chemaxon product and introduce the Chemaxon portfolio of products to Certara, to the Certara customer base, which is a wider and broader customer base than Chemaxon had independently. Two, we've also been able to make significant progress in combining. We talked about the legacy Certara Discovery product was D360. Being able to combine D360 with Chemaxon is a compelling sales opportunity for us because what we had seen is that many customers were independently buying these two solutions. To combine them both together under Certara's leadership has also been a good opportunity for us. I'd say everything with Chemaxon is going on track. Whether it's the integration or whether it's the sales opportunities or even the combination of our products, everything's been going according to plan.
Any timeframe we should keep in mind for the kind of Chemaxon D360 broader preclinical platform combination?
Yeah. As I mentioned, we're making progress on it. It won't be inside of this year, but certainly can look to next year for that.
Great. I want to ask more broadly about net revenue retention trends. I think you've kind of generally been on plan this year, but a little bit off peak for what we've seen from the last several years. How should we think about go forward NRR trends exiting Q3? What's been the biggest driver of the NRR results year to date? I guess on a go forward basis between, I think, three big buckets between seed expansion, cross-sell, and the pricing lever.
Yeah. As you said, Jeff, the NRR is in line with plan, but it's at the lower end of the plan. As a reminder, the NRR is a product of our organic software revenue growth. On Q3, as an example, we grew organic software revenue 6%. How does that yield a 104 NRR? It's basically about 200 basis points of new biotechs that we're working with and bringing on, which is about consistent with what we usually do, 200-300 basis points of new biotechs coming on. Then 4% of the mixed bag of everything that you just described, Jeff, in the sense of a combination of price expansion and new business in there with existing customers. What we've seen is we raised price consistently in software, and we've continued to do so.
It does imply that we've had a little bit of headwind or reduction in seat licenses. We called out Phoenix before for some of that. As you think about that, that's a higher volume product. We've seen layoffs in pharma. It's not unusual to see some pullback in seat license in that kind of environment. In addition to, we believe there's some pent-up demand as we are just now launching the cloud version of Phoenix too. We think that's what's driving a piece of it. Overall, coming back to the NRR, it is coming in line with plan. It's driven by organic software revenue growth, which is coming in plan, but on the lower end of the plan.
Understood. Now, the software side of things, I certainly want to ask about AI as we do in every investor conversation, every company conversation that we have these days. You guys have certainly been kind of ahead of the game on artificial intelligence, probably one of the first companies on my coverage list fully embedding AI into one of your products. Since you embedded AI into more of your products, even more to come, maybe a broad update from you on kind of where you are in the progression through the product development roadmap with embedding AI and any framework, how investors should think about your monetization of AI.
Yeah. Yeah. I appreciate you bringing that up. We do like to think that we're ahead of the curve on that. We acquired Vyasa in 2022 and have been embedding AI into our various software offerings and creating new software offerings since that time. Where are we in the cycle? We've rolled out new products. CoAuthor is a great example of that. CoAuthor is an AI product that's generative AI for regulatory writing. We launched that last year. We're certainly seeing customer interest in being able to automate some of the regulatory writing. That was the first product offering that we have. Of course, just recently, we've launched Certara IQ, which is QSP software leveraging our AI technology as the foundation for developing software around QSP, what that's going to allow us to do.
Remember, QSP at Certara and anywhere actually is all service-based business today. We are the first to market with some software that seeks to automate and speed some of the processes that these subject matter experts are working on when they're working through QSP projects. That is the latest development. We are not done there. Where are we in the cycle? There is still more work to be done as far as embedding AI into the software. In fact, I mentioned earlier, one of the lures on the Phoenix Cloud version to lure customers over from the desktop is to embed some AI features into the modules of Phoenix as well.
We're continuing to do that work with each iteration of software, whether it's new software or an enhancement to our existing platforms, we're putting the AI technology and functionality in there that our customers are really going to appreciate as users.
In terms of monetization, is it adding new capabilities, including AI, and being able to garner pricing increases every year, or is it a step function of you're paying an additional fee to gain access to some of these AI capabilities?
Yeah, it's a little bit of both. And it's providing some efficiency inside of our organization as well. First of all, we have paying customers for AI. As I mentioned, we have the CoAuthor product out on the market since last year. Certara IQ just recently launched. We have paying customers for the software itself. We're also using it, as I mentioned, on Phoenix Cloud as an inducement to get off a desktop. Obviously, we're charging for that also because there is a price difference between the desktop version of Phoenix and the cloud version. That's another way that we monetize it. Importantly too, inside of the organization, using our own tools, we're able to get higher throughput on, say, as an example, software development. We were just able to launch three new software applications over the last quarter.
That is in part thanks to efficiencies that we are finding in software development, which we expect to continue into 2026.
Understood. Appreciate that. I want to transition to services more broadly, but maybe we'll start with just an AI follow-up there. Is part of the internal efficiencies from AI as your internal thought leaders in various parts of biosimulation being able to use these latest versions of your software to deliver deliverables or outcomes for clients at faster levels? How has it impacted overall services utilization and the larger potential there?
Yeah. Yeah, good question. Absolutely. A good case in point through the efficiencies that we find internally would be QSP. QSP is a services business that has been capacity constrained mainly because of the growth. The demand for QSP services has been very high, one of the highlights of growth during the course of 2025. Therefore, of course, that team is somewhat capacity constrained. With the introduction of Certara IQ, again, AI-enabled, it is allowing for us to be able to take on more projects than we otherwise would with the existing team. It is a good example of how we're finding efficiencies and able to do more work for our customers with the use of the AI tool.
Excellent. Just more broadly on services demand, any kind of sub-verticals or categories within services other than QSP that you'd call out as being areas with momentum in 2025? Is kind of more traditional biosim, has that been cannibalized at all by QSP? Maybe comments on the regulatory consulting bucket as well would be helpful.
Yeah. QSP is definitely a highlight in services, but more traditional PKPD type services work has also been growing pretty strongly. I would not say one is cannibalizing the other. I would say more so that we've seen the weakness in some pockets of services most pronounced in regulatory where I mentioned earlier that when you look at the FDA this year and some of the uncertainties, some of the employment reductions, they're approving fewer drugs, then that's certainly going to impact a business like the regulatory business, and we've seen that. Some of the positives are the QSP and sort of traditional biosim services related to PKPD, but then alternatively, we've seen some of that weakness in regulatory, which I called out earlier.
Understood. Continuing on the services side, part of the discussion earlier was that pipeline is strong, backlog is strong, pipeline to bookings conversion could be a little bit better, but again, backlog to revenue conversion has been solid. Maybe you could speak a little bit more about staffing, utilization, and just about the durability of the backlog to continue revenue visibility even when you see a little bit of volatility on services bookings.
Yeah. Yeah, that's an important point because, as I mentioned, Q3 was an example of the services team being highly utilized, achieving revenue expectations in an environment where bookings were decelerating, as we talked about. We expect that to be able to continue not only in Q4, but even into next year. That is why our revenue guidance for the remainder of 2025, we had narrowed the range there, but to a large extent had kept the bottom part of that range intact, mainly because we do have visibility to the backlog of services bookings that had already been put up and converting those bookings. The services team is working hard, and the utilization rate is high on converting existing bookings. We did that in Q3. It's going to continue to happen during Q4 and into next year.
Excellent. Maybe try to tie some of it together. How should we think about the intersection of software and services? As you add breadth and depth to the software portfolio, does that create greater opportunities for services engagement over time, or is it the alternative where customers are buying more software and then doing more themselves and having less of a need for your services?
Yeah, we see the two linked together very closely, especially when you're talking about biosimulation services and the subject matter experts that conduct that work on behalf of our customers. I think the increased adoption and prevalence of biosimulation software is going to bring with it an increased amount of subject matter expert warranted type services. We see there will always be a significant place for those expert services in Certara, even with the growth and the strategy we have around growing the software.
Understood. Makes sense. Maybe we'll transition over to the financials and really focus on the profitability of the organization. EBITDA margins are off peak, but kind of stable to improving, trending in the, I'd say, the right direction with a few different drivers. Year-to-date gross margins kind of at or near record levels. That's a clear positive. Q3 EBITDA margin up quarter over quarter. If we just try to be forward-looking from here, what could keep margins at the current range, or what are the different potential big-picture drivers that could elevate margins from here?
Yeah. Yeah, thanks, Jeff. So we've been happy with the ability this year to make the investments we said we were going to make in software. We rolled out three new software products this quarter. You see the expenses associated with those investments show up in the R&D line. R&D in Q3 grew 24%. We're making the investments that we said we were going to make, yet we're still achieving the highest end of our EBITDA margin guide on the year. We're doing that through very thoughtful and careful allocation of spend as well as high utilization by our services team. You commented on the gross margin. The gross margin's improving, one, because of software mix, but two, and very importantly, the utilization of the services team is very strong as we're converting bookings and backlog into revenue and hitting those revenue expectations.
On the sales and marketing line, as we mentioned at the tail end of last year, we feel like we built out the commercial team. We are still continuing to grow the sales and marketing line, but we are going to grow that more in line with the rate of sales. I think we have shown good discipline on G&A. We are watching the expenses on the line items, on each of the line items to ensure that we are not overspending. That is creating capacity within the margin expectations that we set out to make the investments and still hit the high end of profitability, which we know is important to shareholders.
Excellent. Just kind of on a go-forward basis, can you help us think through the balance between moving to the cloud and maybe that generating some cost of goods sold efficiencies versus areas of continued investment? It sounds like R&D is likely the focus, and so those two kind of go hand in hand.
That's right. Yeah. Moving into next year, we would anticipate continuing to make investments in R&D. We have seen that in 2025. We should expect that in 2026. I'll say that part of the efficiencies that we found in answer to your prior question also, part of the efficiencies that we found too have been just in using our own AI capabilities in streamlining and going to market more quickly with software development and new software products. That is something we're focused on as we move into next year also, how to make the investments that we're committed to making to drive that growth, but do them as efficiently as possible. AI will help enable that for us also.
If we think beyond this year, beyond next year, longer term, as you really get cloud software at scale, you get AI more fully deployed, is there a long-term model or framework that investors should have in mind as they think about where gross margins and EBITDA margins can ultimately go?
When we catalyze the growth that we're looking for from these investments, and we expect on a long, long-term basis that we would have double-digit growth in software and be able to obtain that in services as well. Once we reach that point, then naturally, I think we're going to continue to invest in the business. With the software business, you have to annually invest in the software product, and we're doing that now. We would continue that in the future, but with the expansion of the growth rate, then naturally, we would expect some of that to fall through the P&L, and I think we'd see some margin expansion. As the growth rate goes higher, then it's fair to assume that there's some margin expansion that's going to go along with it.
Understood. Maybe we'll transition over to capital deployment. I don't think there's a specific update today, but maybe you could give a quick reminder on what you've said before on the timing around a decision to divest the regulatory services business or not. Also, if you did divest that, what the implications would be for the financial profile of the company.
Yeah. Yeah. We said on the call a couple of weeks ago that we'd have a decision by the end of the year. Obviously, we're actively working toward drawing that to a conclusion, and you can expect an update from us before the end of the year, so over the next several weeks. When we think about capital deployment this year, for the first time, we opened up share buyback as an opportunity to return cash to shareholders. We've executed partially against the authorization that we had by the board earlier this year. Over our history, though, we've also been an acquisitive company. We've done, I'd say, a significant amount of M&A has also contributed to our growth over time. It's going to be a balance.
When it comes to having excess cash, then you should count on us to deploy it either toward M&A with strategically software being sort of first priority in mind there and balancing that against share repurchase, all depending on the backdrop of the overall environment that we're operating in.
Makes sense. On the M&A front, any general thoughts or lessons learned from the last few deals completed? You had a couple in the QSP space and then Chemaxon in the kind of preclinical or discovery space more recently. Even more broadly, why can Certara be a strong consolidator of software assets in the biosimulation space?
Yeah. We have been very pleased with the set of acquisitions that we've done over the last few years. Chemaxon, which we talked about already a bit during this call, then is on track. We think that that deal was done at a good valuation for what we have, something that's accretive to the top line and soon to be in line with our overall profitability expectations and got us strategically to expand our footprint into discovery. Really happy with that. The other one I'd highlight too is Applied BioMath. Back in 2023, we acquired Applied BioMath, which is a Quantitative Systems Pharmacology, so a QSP practice that combined with Certara's legacy QSP practice to have the largest QSP practice in the industry at the time. During 2024, we were integrating the two practices together.
Here we are in 2025 with QSP being one of the fastest growing areas of Certara and one of the fastest growing areas of biosimulation. That too was a deal that has paid off very well as far as accelerating growth by a combination of acquiring an asset and combining it with the existing footprint at Certara. We would continue, as I mentioned earlier, when it comes to M&A and cap deployment, we're focused on software. We think our track record of deals during the time that we've been public is certainly indicative that we're in a strong position to be a consolidator of software companies in this space.
It sounds like you've identified some areas that are under-penetrated within biosimulation. You found attractive assets, bought them at reasonable prices, and integrated. How do we think about the additional white space that's out there?
Yeah. As you just said, Jeff, one of the key tenets around our approach to M&A is valuation and what we're paying. We do look for unique opportunities. They often come in the form of partnerships that we've had with companies that we've already worked with to look for valuations that are going to allow us to pay a reasonable price for something that's going to be accretive to our growth very quickly. In our recent past, at least, our method to do that has been to look at organizations that we've already partnered with in a way where we can see some revenue synergies very quickly upon combining the companies.
Excellent. I have one more I can throw at you with. I think we have three minutes left, but maybe I'll offer up to the audience if there's anyone that wants to float a question.
I assume changes to the sales force either last year or maybe earlier this year. I assume your growth targets have fell well into the double digits in terms of longer-term aspirations. What does it take to get back there, and how has that change in the commercial team played out relative to what you thought it might do?
Yeah. The commercial team has performed. We built that out. We put investment. You saw investment in 2023 and 2024 in sales and marketing that was building out the commercial team. The team has done quite well. There are some bright spots. Even though we have seen some what we believe is market-driven weakness in some of the bookings, we have seen some really strong performance in other areas. The tier three or biotech companies would be an area I would highlight where the commercial team has worked with VCs as well as targeting biotechs that are well-funded and have the ability and desire to work with Certara. As a result of that, we have seen T3 biosim services growth in the double digits this last quarter. I think that is a testament to what is working well with the new commercial structure.
We'll throw one more your way. Mix of software and services and influx of AI. How are your customers looking at insourcing versus outsourcing to Certara on both the software and services side? Any insight into how they're using AI internally and how that is impacting some of their activity and purchasing decisions as it relates to biosimulation?
Yeah. We see AI as a competitive advantage and a tailwind to the Certara organization. One, for all the reasons we talked about, we're selling to customers AI products. We're using AI products inside the organization for efficiency. To the extent that customers are also using technology, we think that plays well into the overall narrative of using technology in the drug development process where this is an area where Certara is the market leader. We think that the convergence of various technologies and the utilization of these technologies, we think plays as an advantage to Certara overall.
Let it put words in your mouth, but it sounds like you have a first-mover advantage there that you can continue to execute on.
Yeah, exactly, Jeff. Exactly.
Excellent. That puts us at time.
All right. Thank you very much for having me.
Appreciate it.
Appreciate it.
All the help today, John.
Yeah, of course.