Certara, Inc.CERT
Certara, Inc. Stock Compensation Disclosure
Equity-Based Compensation
The tax benefit related to compensation expense was $3,078, $5,051, and $3,797 for the years ended December 31, 2025, 2024, and 2023.
The Company’s equity-based compensation programs are intended to attract, retain and provide incentives for employees, officers and directors. The Company has the following stock-based compensation plans and programs.
Restricted Stock
The majority of the Company’s restricted stock awarded to its employees was originally issued on December 10, 2020 in exchange for the Class B Units of EQT, which was the former parent of the Company. Additionally, the Company granted replacement shares of restricted stock in connection with the 2021 Pinnacle acquisition, which had fully vested in 2024.
Share-based compensation for the restricted stock exchanged for the time-based Class B Units is recognized on a straight-line basis over the requisite service period of the award, which is generally five years. Share-based
compensation for the restricted stock exchanged for the performance-based Class B Units is recognized using the accelerated attribution approach. As of December 31, 2025, all of the Company’s restricted stock had fully vested, and no restricted stock remained outstanding.
A summary of the restricted stock activities as of and for the year ended December 31, 2025 is shown below:
SHARES | WEIGHTED-AVERAGE GRANT-DATE FAIR VALUE | ||||||||||
Non-vested restricted stock as of December 31, 2024 | 157,486 | $ | 22.94 | ||||||||
Granted | — | — | |||||||||
Vested | (157,486) | 22.94 | |||||||||
Forfeited | — | — | |||||||||
Non-vested restricted stock as of December 31, 2025 | — | $ | — | ||||||||
The Company did not authorize or issue any restricted stock during the year ended December 31, 2025. Equity-based compensation expense related to the restricted stock exchanged for performance-based Class B Units was $160, $668 and $801 for the years ended December 31, 2025, 2024 and 2023, respectively. As of December 31, 2025, all compensation expense related to the awards had been fully recognized.
Equity-based compensation expense related to the time-based restricted stock was $321, $928 and $1,313 for the years ended December 31, 2025, 2024 and 2023, respectively. As of December 31, 2025, all compensation expense related to the awards had been fully recognized.
2020 Incentive Plan
In order to align the Company’s equity compensation program with public company practices, the Company’s Board of Directors adopted and stockholders approved the 2020 Incentive Plan. The 2020 Incentive Plan allows for grants of non-qualified stock options, incentive stock options, restricted stock, restricted stock units (“RSUs”), and performance stock units (“PSUs”) to employees, directors, officers, and consultants or advisors of the Company. The 2020 Incentive Plan allows for 20,000,000 shares (the “plan share reserve”) of common stock to be issued. No more than the number of shares of common stock equal to the plan share reserve may be issued in the aggregate pursuant to the exercise of incentive stock options. The maximum number of shares of common stock granted during a single fiscal year to any non-employee director, taken together with any cash fees paid to such non-employee director during the fiscal year, may not exceed $1,000,000 in total value, except for certain awards made to a non-executive chair of our Board of Directors. At December 31, 2025, there were 10,668,660 shares reserved for future issuance.
The plan share reserve will be increased on the first day of each fiscal year beginning with the 2021 fiscal year and ending after the tenth anniversary of the effective date in an amount equal to the lesser of (i) the positive difference, if any, between (x) 4.0% of the outstanding common stock on the last day of the immediately preceding fiscal year and (y) the plan share reserve on the last day of the immediately preceding fiscal year and (ii) a lower number of shares of our common stock as determined by our board of directors.
Restricted Stock Units (“RSUs”)
RSUs represent the right to receive shares of the Company’s common stock at a specified date in the future. During the year ended December 31, 2025, the Company granted 2,243,111 RSUs under the 2020 Incentive Plan that generally vest over an average three-year period. The fair value of the RSUs is based on the fair value of the underlying shares on the date of grant.
A summary of the Company’s RSU activity is as follow:
UNITS | WEIGHTED-AVERAGE GRANT DATE FAIR VALUE | ||||||||||
Non-vested RSUs as of December 31, 2024 | 3,204,589 | $ | 19.61 | ||||||||
Granted* | 2,243,111 | 11.15 | |||||||||
Vested** | (1,493,798) | 19.73 | |||||||||
Forfeited | (533,340) | 16.88 | |||||||||
| Cancelled* | (62,381) | 11.69 | |||||||||
Non-vested RSUs as of December 31, 2025 | 3,358,181 | $ | 14.48 | ||||||||
* The majority of shares granted during 2025 were issued under the 2020 Incentive Plan. During the year ended December 31, 2025, the Company modified awards for recipients, resulting in 62,381 shares assumed to be granted, vested, and cancelled for accounting purposes.
** The number of the RSUs vested included 528,970 shares that were withheld on behalf of employees to satisfy the statutory tax withholding requirements.
The weighted-average grant date fair values per share of RSUs granted during 2025, 2024, and 2023 were $11.15, $17.62, and $23.35, respectively. The total fair value of RSUs vested during 2025, 2024, and 2023 were $29,473, $30,723, and $20,261, respectively.
Equity-based compensation expense related to the RSUs was $26,043, $31,582 and $26,734 for the years ended December 31, 2025, 2024, and 2023, respectively. At December 31, 2025, the total unrecognized equity-based compensation expense related to outstanding RSUs was $30,322, which is expected to be recognized over a weighted-average period of 20.8 months.
Performance Restricted Stock Units (“PSUs”)
PSUs are issued under the 2020 Incentive Plan and represent the right to receive shares of the Company’s common stock at a specified date in the future based on the satisfaction of various service conditions, market conditions, and the achievement of certain performance thresholds for individual PSU plans including year-over-year revenue growth, unlevered free cash flow growth, annual revenue, and annual EBITDA. The PSUs granted in 2023, 2024 and 2025 also contain market condition.
Equity-based compensation for the PSUs is recognized in accordance with ASC 718. Equity-based compensation cost for PSUs with performance conditions is recognized only to the extent a threshold is probable of being achieved and is recognized using the accelerated attribution approach. The Company will continue to assess the probability of each condition being achieved at each reporting period to determine whether and when to recognize compensation cost. PSUs granted in 2023 and 2024 also contain market condition. For PSUs that include a market condition and no other performance conditions, the effect of the market condition is reflected in the grant-date fair value of the award, and compensation cost attributable to the market condition is recognized regardless of whether the market condition is ultimately achieved, provided the requisite service is rendered.
A summary of the Company's PSU activity as of and for the year ended December 31, 2025 is as follows:
UNITS | WEIGHTED-AVERAGE GRANT DATE FAIR VALUE | ||||||||||
Non-vested PSUs as of December 31, 2024 | 645,377 | $ | 20.95 | ||||||||
Granted | 1,193,244 | 9.97 | |||||||||
Vested* | (211,236) | 13.46 | |||||||||
Forfeited | (232,059) | 10.96 | |||||||||
| Cancelled | (201,138) | 22.13 | |||||||||
Non-vested PSUs as of December 31, 2025 | 1,194,188 | $ | 13.05 | ||||||||
* The number of the PSUs vested included 18,846 shares that were withheld on behalf of employees to satisfy the statutory tax withholding requirements.
The weighted-average grant date fair values per share of PSUs granted during 2025, 2024, and 2023 were $9.97 and $18.98, and $27.00, respectively. The total fair values of PSUs vested were $2,843, $2,437, $5,269 during 2025, 2024 and 2023, respectively.
Equity-based compensation expense related to the PSUs was $6,555, $1,279, and $(1,531) for the years ended December 31, 2025, 2024, and 2023, respectively. At December 31, 2025, the total unrecognized equity-based compensation expense related to outstanding PSUs was $3,735, which is expected to be recognized over a weighted-average period of 17.8 months.
The grant date fair values for PSU 2023, 2024, and 2025 were determined based on Monte Carlo price model and the valuation assumptions noted in the following table.
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Expected dividend yield | — | — | — | ||||||||||||||
| Volatility | 50.9% - 52.5% | 52.2% - 54.7% | 61.4% - 61.9% | ||||||||||||||
| Expected term (years) | 2.33 - 2.86 | 1.78 - 2.78 | 2.54 - 2.74 | ||||||||||||||
| Risk-free interest rate | 3.51%- 3.91% | 4.36% - 4.64% | 3.89% - 4.29% | ||||||||||||||
Equity-based compensation expense
The following table summarizes the components of total equity-based compensation expense included in the consolidated statements of operations and comprehensive income (loss) for each period presented:
| YEAR ENDED DECEMBER 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| (In thousands) | |||||||||||||||||
| Cost of revenues | $ | 12,205 | $ | 13,323 | $ | 11,545 | |||||||||||
| Sales and marketing | 4,365 | 3,481 | 1,763 | ||||||||||||||
| Research and development | 3,779 | 5,233 | 6,316 | ||||||||||||||
| General and administrative expenses | 12,730 | 12,737 | 8,676 | ||||||||||||||
| Total | $ | 33,079 | $ | 34,774 | $ | 28,300 | |||||||||||
About Stock Compensation Disclosures
Stock-based compensation disclosures detail the equity awards granted to employees and executives — including stock options, restricted stock units (RSUs), and performance shares — along with the valuation methods and assumptions used to expense them. This section reveals the true cost of talent retention and the alignment between management incentives and shareholder interests.
Key signals: total unrecognized compensation expense and its expected recognition period signal future earnings headwinds from already-granted awards. For stock options, examine Black-Scholes assumptions — expected volatility, risk-free rate, and expected term — as understating any of these reduces reported compensation expense. Compare stock compensation expense as a percentage of revenue against peers to assess dilution cost. Watch vesting schedules for acceleration clauses tied to change-of-control events. Performance-based awards with undemanding targets may indicate weak governance. Add back stock compensation to operating cash flow to calculate a more conservative free cash flow figure.