Certara Inc

Previous wording

The following discussion summarizes the significant factors affecting the operating results, financial condition, liquidity, and cash flows of our Company as of and for the periods presented below. The following discussion and analysis should be read in conjunction with the unaudited condensed consolidated financial statements and the related notes thereto included elsewhere in this Quarterly Report and our 2023 Annual Report. The statements in this discussion regarding industry outlook, our expectations regarding our future performance, liquidity, and capital resources, and all other non-historical statements in this discussion are forward-looking statements and are based on the beliefs of our management, as well as assumptions made by, and information currently available to, our management. Actual results could differ materially from those discussed in or implied by forward-looking statements as a result of various factors, including those discussed below and elsewhere in this Quarterly Report, particularly in the sections “Special Note Regarding Forward-Looking Statements” and “Risk Factors” of this Quarterly Report.

Current wording

The following discussion summarizes the significant factors affecting the operating results, financial condition, liquidity, and cash flows of our Company as of and for the periods presented below. The following discussion and analysis should be read in conjunction with the unaudited condensed consolidated financial statements and the related notes thereto included elsewhere in this Quarterly Report and our 2023 Annual Report. The statements in this discussion regarding industry outlook, our expectations regarding our future performance, liquidity, and capital resources, and all other non-historical statements in this discussion are forward-looking statements and are based on the beliefs of our management, as well as assumptions made by, and information currently available to, our management. Actual results could differ materially from those discussed in or implied by forward-looking statements as a result of various factors, including those discussed below and elsewhere in this Quarterly Report, particularly in the section “Special Note Regarding Forward-Looking Statements” of this Quarterly Report.

Previous wording

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 the total cost. The pharmaceutical industry spends more than $260 billion annually on research and development (“R&D”). Generally, companies spend an average of $6.2 billion per US Food and Drug Administration ("FDA") approved drug. Our software and scientists incorporate modern advances in scientific understanding, drug development experience, data analysis, and artificial intelligence (“AI”) resulting in significant opportunities to decrease the cost and increase the odds of new drug approval and commercial success.

Current wording

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 the total cost. The pharmaceutical industry spends more than $260 billion annually on research and development (“R&D”). Generally, companies spend an average of $6.2 billion per US Food and Drug Administration ("FDA") approved drug according to "Analysis of pharma R&D productivity - a new perspective needed" on Drug Discovery Today. Our software and scientists incorporate modern advances in scientific understanding, drug development experience, data analysis, and artificial intelligence (“AI”) resulting in significant opportunities to decrease the cost and increase the odds of new drug approval and commercial success.

Previous wording

Management measures operating performance based on adjusted EBITDA defined for a particular period as net income (loss) excluding interest expense, provision (benefit) for income taxes, depreciation and amortization expense, intangible asset amortization, equity-based compensation expense, acquisition and integration 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) excluding, equity-based compensation expense, amortization of acquisition-related intangible assets, 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 divided by the weighted-average diluted common shares outstanding.

Current wording

Management measures operating performance based on adjusted EBITDA defined for a particular period as net income (loss) excluding interest expense, provision (benefit) for income taxes, depreciation and amortization expense, intangible asset amortization, equity-based compensation expense, goodwill impairments, change in fair value of contingent consideration, acquisition and integration 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) excluding, equity-based compensation expense, amortization of acquisition-related intangible assets, goodwill impairments, change in fair value of 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 divided by the weighted-average diluted common shares outstanding.

Previous wording

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

Current wording

The following table reconciles net loss to adjusted EBITDA:

Previous wording

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

Current wording

The following table reconciles net loss to adjusted net income:

Previous wording

(e)Represents costs associated with mergers and acquisitions and any retention bonuses pursuant to the acquisitions.

Current wording

(f)Represents costs associated with mergers and acquisitions and any retention bonuses pursuant to the acquisitions.

Previous wording

(f)Represents integration costs related to post-acquisition integration activities.

Current wording

(g)Represents integration costs related to post-acquisition integration activities.

Previous wording

(g)Represents costs associated with our public offerings that are not capitalized, as well as debt issuance costs that are not deferred or treated as a contra-liability directly deducted from the carrying value of the associated debt liability.

Current wording

(h)Represents costs associated with our public offerings that are not capitalized, as well as debt issuance costs that are not deferred or treated as a contra-liability directly deducted from the carrying value of the associated debt liability.

Previous wording

(h)Represents charges for severance provided to former executives.

Current wording

(i)Represents charges for severance provided to former executives.

Previous wording

(i)Represents expenses related to reorganization, including legal entity reorganization and lease abandonment costs associated with the evaluation of our office space footprint.

Current wording

(j)Represents expenses related to reorganization, including legal entity reorganization and lease abandonment costs associated with the evaluation of our office space footprint.

Previous wording

(j)Represents the gain or loss related to the disposal of fixed assets.

Current wording

(k)Represents the gain or loss related to the disposal of fixed assets.

Previous wording

(k)Represents recruiting and relocation expenses related to hiring senior executives.

Current wording

(l)Represents recruiting and relocation expenses related to hiring senior executives.

Previous wording

(l)Represents the income tax effect of the non-GAAP adjustments calculated using the applicable statutory rate by jurisdiction.

Current wording

(m)Represents the income tax effect of the non-GAAP adjustments calculated using the applicable statutory rate by jurisdiction.

Previous wording

(m)Represents potentially dilutive shares that were included from our GAAP diluted weighted average common shares outstanding.

Current wording

(n)Represents potentially dilutive shares that were included from our GAAP diluted weighted average common shares outstanding.

Previous wording

•Research and Development. R&D expense consist primarily of employee-related expenses, equity-based compensation, third-party consulting, allocated software costs, and tax credits. We plan to continue to invest in our R&D efforts to enhance and scale our software product offerings by development of new features and increased functionality.

Current wording

•Research and Development. R&D expense consist primarily of employee-related expenses, equity-based compensation, third-party consulting, software costs, and tax credits. We plan to continue to invest in our R&D efforts to enhance and scale our software product offerings by development of new features and increased functionality.

Previous wording

The total estimated consideration included a portion of contingent consideration that is payable over two years in cash, not to exceed $9.0 million. The fair value of the contingent consideration related to the revenue threshold was estimated to be $4.4 million as of the acquisition date. Future payments of contingent consideration are 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. During the six months ended June 30, 2024, the Company made payments of $1.8 million on contingent consideration. At June 30, 2024 the contingent consideration related to revenues was remeasured to zero, resulting in a negative fair value remeasurement and adjustment of $1.9 million and recorded in G&A on the accompanying condensed consolidated statement of operations and comprehensive income (loss).

Current wording

The total estimated consideration included a portion of contingent consideration that is payable over two years in cash, not to exceed $9.0 million. The fair value of the contingent consideration related to the revenue threshold was estimated to be $4.4 million as of the acquisition date. Future payments of contingent consideration are 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. During the nine months ended September 30, 2024, the Company made payments of $1.8 million on contingent consideration. At September 30, 2024 the contingent consideration related to revenues was remeasured to zero, resulting in a negative fair value remeasurement of $1.9 million and recorded in G&A on the accompanying condensed consolidated statement of operations and comprehensive income (loss).

Previous wording

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 payments of contingent consideration are 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. At June 30, 2024, the contingent consideration was remeasured to $4.7 million, resulting in a negative fair value adjustment of $0.7 million and recorded in G&A on the accompanying condensed consolidated statement of operations and comprehensive income (loss).

Current wording

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 payments of contingent consideration are 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. During the nine months ended September 30, 2024, the Company made payments of $4.7 million on contingent consideration. At September 30, 2024, the contingent consideration was remeasured to zero, resulting in a negative fair value adjustment of $0.7 million and recorded in G&A on the accompanying condensed consolidated statement of operations and comprehensive income (loss).

Previous wording

The results of operations of the acquired businesses and the fair value of the acquired assets and liabilities assumed are included in the Company’s consolidated financial statements with effect from the date of the acquisitions.

Current wording

The results of operations of the acquired businesses and the fair value of the acquired assets and liabilities assumed are included in the Company’s condensed consolidated financial statements with effect from the date of the acquisitions.

Previous wording

We have included the results of operations of acquired companies in our condensed consolidated results of operations from the date of their respective acquisitions, which impacts the comparability of our results of operations when comparing results for the three and six months ended June 30, 2024 to the three and six months ended June 30, 2023, respectively.

Current wording

We have included the results of operations of acquired companies in our condensed consolidated results of operations from the date of their respective acquisitions, which impacts the comparability of our results of operations when comparing results for the three and nine months ended September 30, 2024 to the three and nine months ended September 30, 2023, respectively.

Previous wording

Total revenues increased $9.2 million, or 5%, to $190.0 million for the six months ended June 30, 2024 as compared to the same period in 2023. The overall increase in revenues was primarily due to growth in our software product offerings from strong demand within existing customers, client expansions, and new customers.

Current wording

Total revenues increased $9.2 million, or 11%, to $94.8 million for the three months ended September 30, 2024 as compared to the same period in 2023. The overall revenue growth was primarily due to an increase in our technology-enabled services and software product offerings, driven by strong demand from existing customers, client expansions, new customers, and business acquisitions.

Previous wording

Software revenues increased $4.5 million, or 13%, to $38.2 million for the three months ended June 30, 2024 as compared to the same period in 2023, primarily driven by strong demand within existing customers and expanding relationships with customers.

Current wording

Software revenues increased $4.6 million, or 15%, to $35.9 million for the three months ended September 30, 2024 as compared to the same period in 2023, primarily driven by strong demand within existing customers and expanding relationships with customers, and business acquisitions.

Previous wording

Cost of revenues increased by $8.0 million, or 11%, to $79.1 million for the six months ended June 30, 2024 as compared to the same period in 2023. The increase was primarily due to a $4.4 million increase in employee-related costs resulting from billable headcount growth, a $1.7 million increase in stock-based compensation costs, a $1.6 million increase in intangible assets amortization, a $1.0 million increase in equipment and software expenses, and a $0.2 million decrease in capitalized cost in R&D, partially offset by a $1.1 million decrease in professional and consulting expenses.

Current wording

Cost of revenues increased $1.3 million, or 4%, to $37.2 million for the three months ended September 30, 2024 as compared to the same period in 2023. The increase was primarily due to a $1.1 million increase in employee-related costs resulting from billable headcount growth, a $0.7 million increase in intangible assets amortization, a $0.5 million increase in equipment and software expenses, and a $0.3 million decrease in capitalized cost in R&D, partially offset by a $1.1 million decrease in consulting and professional costs, and a $0.2 million decrease in travel related expense.

Previous wording

Sales and marketing expenses increased by $4.1 million, or 51%, to $12.2 million for the three months ended June 30, 2024 as compared to the same period in 2023. Sales and marketing expenses increased primarily due to a $1.6 million increase in employee-related costs mainly resulting from head count growth driven by acquisitions along with investment to build the commercial organization, a $1.1 million increase in commission expenses, a $0.5 million increase in stock-based compensation costs, a $0.5 million increase in marketing expenses, a $0.2 million increase in professional and consulting expenses, a $0.1 million increase in travel expense, and a $0.1 million increase in equipment and software expense.

Current wording

Sales and marketing expenses increased by $4.1 million, or 57%, to $11.3 million for the three months ended September 30, 2024 as compared to the same period in 2023. Sales and marketing expenses increased primarily due to a $1.8 million increase in employee-related costs mainly resulting from head count growth driven by acquisitions along with investment to build the commercial organization, a $1.1 million increase in commission expenses, a $0.5 million increase in stock-based compensation costs, a $0.3 million increase in marketing expenses, a $0.2 million increase in professional and consulting expenses, and a $0.1 increase in travel expense.

Previous wording

Research and development expenses increased by $1.2 million, or 15%, to $9.1 million for the three months ended June 30, 2024 as compared to the same period in 2023. The change in research and development expenses was primarily due to a $2.7 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 the equipment and software expense, and a $0.2 million increase in license expenses, partially offset by a $2.0 million increase in capitalized cost in R&D.

Current wording

Research and development expenses decreased by $0.7 million, or 8%, to $8.3 million for the three months ended September 30, 2024 as compared to the same period in 2023. The decrease in research and development expenses was primarily due to a $1.9 million increase in capitalized cost in R&D, a $0.6 million decrease in stock-based compensation costs, partially offset by a $1.5 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, and a $0.3 million increase in the equipment and software expense.

Previous wording

General and administrative expenses increased by $13.8 million, or 97%, to $28.1 million for the three months ended June 30, 2024 as compared to the same period in 2023. The increase in general and administrative expenses was primarily due to a $5.0 million increase in stock-based compensation costs, a $1.0 million increase in employee-related costs primarily resulting from head count growth, a $2.6 million increase in transaction expense primarily related to refinancing of a term loan and a revolving line of credit, a $2.3 million increase in reorganization expense, a $1.5 million increase related to remeasurement changes in the fair value of contingent consideration, an $0.8 million increase in provision for credit allowance, and a $0.7 million increase in professional and consulting expenses.

Current wording

General and administrative expenses decreased by $5.7 million, or 21%, to $22.0 million for the three months ended September 30, 2024 as compared to the same period in 2023. The decrease in general and administrative expenses was primarily due to a $6.3 million decrease related to remeasurement changes in the fair value of contingent consideration, a $0.6 million decrease in provision for credit allowance, a $0.6 million decrease in equipment & software expense, a $0.4 million decrease in stock-based compensation costs, and a $0.4 million decrease in lease abandonment expense, partially offset by a $1.6 million increase in employee-related costs primarily resulting from headcount growth and organizational restructure, and an $0.8 million increase in professional and consulting expenses.

Previous wording

Intangible asset amortization expense increased by $2.2 million, or 20%, to $12.7 million for the three months ended June 30, 2024 as compared to the same period in 2023. The increase in intangible asset amortization expense was primarily due to a $1.3 million increase in amortization in acquired intangible assets and a $0.9 million increase in amortization in capitalized software.

Current wording

Intangible asset amortization expense increased by $1.8 million, or 16%, to $13.0 million for the three months ended September 30, 2024 as compared to the same period in 2023. The increase in intangible asset amortization expense was primarily due to a $1.2 million increase in amortization in acquired intangible assets and a $0.6 million increase in amortization in capitalized software.

Previous wording

Depreciation and amortization expense increased $0.1 million, to $0.5 million for the three months ended June 30, 2024 as compared to the same period in 2023. The increase in depreciation and amortization expense was primarily due to a $0.1 million increase in depreciation expense for computer equipment.

Current wording

Depreciation and amortization expense increased $0.1 million, to $0.4 million for the three months ended September 30, 2024 as compared to the same period in 2023. The increase in depreciation and amortization expense was primarily due to a $0.1 million increase in depreciation expense for computer equipment.

Previous wording

Net other income increased by $1.3 million, to $2.4 million for the three months ended June 30, 2024 as compared to the same period in 2023. The increase in net other income was primarily due to a $1.0 million remeasurement gain related to the fluctuation of the foreign currency rate and a $0.3 million increase in interest income.

Current wording

Net other income decreased by $4.1 million, to $0.9 million for the three months ended September 30, 2024 as compared to the same period in 2023. The decrease in net other income was primarily due to a $3.7 million increase in expense from remeasurement related to the fluctuation of the foreign currency rate and a $0.3 million decrease in interest income.

Previous wording

Our income tax expense was $0.3 million, resulting in an effective income tax rate of (2)% for the three months ended June 30, 2024 as compared to an income tax expense of $3.7 million, or an effective income tax rate of 44%, for the same period in 2023. Our income tax expense for the three months ended June 30, 2024 and 2023 was primarily due to the tax effects of U.S. pre-tax income, 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 United Kingdom earnings, and discrete tax items.

Current wording

Our income tax benefit was $0.3 million, resulting in an effective income tax rate of 17% for the three months ended September 30, 2024 as compared to an income tax benefit of $4.6 million, or an effective income tax rate of 9%, for the same period in 2023. Our income tax expense for the three months ended September 30, 2024 and 2023 was primarily due to the tax effects of U.S. pre-tax income, 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.

Previous wording

Net loss was $17.3 million representing a $23.3 million change in net income for the six months ended June 30, 2024 as compared to a net income of $6.1 million for the same period of 2023. The decrease in net income was primarily due to a $32.0 million increase in operating expense, a $8.0 million increase in cost of revenue, partially offset by a $9.2 million increase in revenue, a $5.2 million decrease in tax expense, and a $2.4 million increase in total other income.

Current wording

Net loss was $1.4 million representing a $47.6 million change in net income for the three months ended September 30, 2024 as compared to a net loss of $49.0 million for the same period of 2023. The increase in net income was primarily due to a $47.4 million decrease in operating expense mainly related to a $47.0 million goodwill impairment charge recorded in the third quarter of 2023, a $9.2 million increase in revenue, and a $0.7 million decrease in interest expense, partially offset by a $4.1 million decrease in total other income, a $4.4 million decrease in tax benefit, and a $1.3 million increase in cost of revenue.

Previous wording

The following table summarizes our unaudited statements of operations data for the six months ended at June 30, 2024 and 2023:

Current wording

The following table summarizes our unaudited statements of operations data for the nine months ended at September 30, 2024 and 2023:

Previous wording

Total revenues increased $2.9 million, or 3%, to $93.3 million for the three months ended June 30, 2024 as compared to the same period in 2023. The overall increase in revenues was primarily due to growth in our software product offerings from strong demand within existing customers, client expansions, and new customers.

Current wording

Total revenues increased by $18.5 million, or 7%, to $284.8 million for the nine months ended September 30, 2024 as compared to the same period in 2023. The overall increase in revenues was primarily due to growth in our software product offerings, driven by strong demand from existing customers, client expansions, and new customers, as well as growth from our technology-enabled services and business acquisitions.

Previous wording

Software revenues increased $10.8 million, or 16%, to $77.5 million for the six months ended June 30, 2024 as compared to the same period in 2023, primarily driven by strong demand within existing customers and expanding relationships with customers.

Current wording

Software revenues increased $15.4 million, or 16%, to $113.4 million for the nine months ended September 30, 2024 as compared to the same period in 2023, primarily driven by strong demand within existing customers, client expansions, new customers, and growth from business acquisitions.

Previous wording

Services revenues decreased $1.6 million, or 3%, to $55.1 million for the three months ended June 30, 2024 as compared to the same period in 2023, primarily attributed to decrease in revenue from consulting services as compared to the same period in 2023.

Current wording

Services revenues increased $3.1 million, or 2% to $171.4 million for the nine months ended September 30, 2024 as compared to the same period in 2023, primarily attributed to increase in revenue from our technology-enabled services and business acquisitions.

Previous wording

Cost of revenues increased by $3.6 million, or 10%, to $39.8 million for the three months ended June 30, 2024 as compared to the same period in 2023. The increase was primarily due to a $2.5 million increase in employee-related costs resulting from billable headcount growth, an $0.8 million increase in intangible assets amortization, a $0.5 million increase in stock-based compensation costs, and a $0.5 million increase in equipment and software expenses, partially offset by a $0.8 million decrease in consulting and professional costs.

Current wording

Cost of revenues increased by $9.3 million, or 9%, to $116.3 million for the nine months ended September 30, 2024 as compared to the same period in 2023. The increase was primarily due to a $5.5 million increase in employee-related costs resulting from billable headcount growth, a $2.4 million increase in intangible assets amortization, a $1.8 million increase in stock-based compensation costs, a $1.5 million increase in equipment and software expenses, and a $0.5 million decrease in capitalized cost in R&D, partially offset by a $2.2 million decrease in professional and consulting expenses, and a $0.2 million decrease in cost related to license and service.

Previous wording

Sales and marketing expenses increased by $6.8 million, or 42%, to $22.9 million for the six months ended June 30, 2024 as compared to the same period in 2023. Sales and marketing expenses increased primarily due to a $2.6 million increase in employee-related costs mainly resulting from head count growth driven by acquisitions along with investment to build the commercial organization, a $1.8 million increase in commission expense, a $0.8 million increase in stock-based compensation costs, a $0.7 million increase in marketing expenses, a $0.4 million increase in travel expenses, a $0.3 million increase in professional and consulting expenses, and a $0.2 million increase in equipment and software expenses.

Current wording

Sales and marketing expenses increased by $10.9 million, or 47%, to $34.2 million for the nine months ended September 30, 2024 as compared to the same period in 2023. Sales and marketing expenses increased primarily due to a $4.3 million increase in employee-related costs mainly resulting from head count growth driven by acquisitions along with investment to build the commercial organization, a $2.9 million increase in commission expense, a $1.3 million increase in stock-based compensation costs, a $1.0 million increase in marketing expenses, a $0.6 million increase in professional and consulting expenses, a $0.5 million increase in travel expenses, and a $0.3 million increase in equipment and software expenses.

Previous wording

Research and development expenses increased by $3.9 million, or 23%, to $21.1 million for the six months ended June 30, 2024 as compared to the same period in 2023. The change in research and development expenses was primarily due to a $5.7 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 $0.4 million increase in the cost of licenses, a $0.4 million increase in equipment and software expense, partially offset by a $2.6 million increase in capitalized cost in R&D.

Current wording

Research and development expenses increased by $3.2 million, or 12%, to $29.3 million for the nine months ended September 30, 2024 as compared to the same period in 2023. The change in research and development expenses was primarily due to a $7.2 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 $0.7 million increase in equipment and software expenses, and a $0.5 million increase in the cost of licenses, partially offset by a $4.4 million increase in capitalized cost in R&D, a $0.5 million decrease in stock-based compensation costs, and a $0.4 million decrease in professional and consulting expenses.

Previous wording

General and administrative expenses increased by $17.0 million, or 50%, to $51.1 million for the six months ended June 30, 2024 as compared to the same period in 2023. The increase in general and administrative expenses was primarily due to a $2.1 million increase in employee-related costs primarily resulting from head count growth, a $4.1 million increase in stock-based compensation costs, a $3.1 million increase related to remeasurement changes in the fair value of contingent consideration, a $2.6 million increase in transaction expense primarily related to refinancing of our term loan and revolving line of credit, a $2.3 million increase in reorganization expense, a $1.0 million increase in provision for credit allowance, a $0.8 million increase in merger and acquisition expenses, a $0.6 million increase in professional and consulting expenses, and a $0.2 million increase in public company-related expenses.

Current wording

General and administrative expenses increased by $11.3 million, or 18%, to $73.1 million for the nine months ended September 30, 2024 as compared to the same period in 2023. The increase in general and administrative expenses was primarily due to a $6.1 million increase in in employee-related costs, mainly resulting from headcount growth and organizational restructuring, a $3.7 million increase in stock-based compensation costs, a $2.4 million increase in transaction expense primarily related to refinancing of our term loan and revolving line of credit, a $1.4 million increase in professional and consulting expenses, a $0.6 million increase in merger and acquisition expenses, a $0.3 million increase in provision for credit allowance, a $0.3 million increase in public company-related expense, and a $0.2 million increase in executive recruiting, partially offset by a $3.2 million decrease related to remeasurement changes in the fair value of contingent consideration, and a $0.5 million decrease in equipment and software expenses.

Previous wording

Intangible asset amortization expense increased by $4.2 million, or 20%, to $25.3 million for the six months ended June 30, 2024, as compared to the same period in 2023. The increase in intangible asset amortization expense was primarily due to a $2.5 million increase in amortization in acquired intangible assets and a $1.7 million increase in amortization in capitalized software.

Current wording

Intangible asset amortization expense increased by $6.0 million, or 19%, to $38.3 million for the nine months ended September 30, 2024, as compared to the same period in 2023. The increase in intangible asset amortization expense was primarily due to a $3.8 million increase in amortization in acquired intangible assets and a $2.2 million increase in amortization in capitalized software.

Previous wording

Depreciation and amortization expense increased $0.1 million, to $0.9 million for the six months ended June 30, 2024 as compared to the same period in 2023. The increase in depreciation and amortization expense was primarily due to an increase in depreciation expense for computer equipment.

Current wording

Depreciation and amortization expense increased $0.2 million, to $1.3 million for the nine months ended September 30, 2024 as compared to the same period in 2023. The increase in depreciation and amortization expense was primarily due to an increase in depreciation expense for computer equipment.