Group 1 - Simulations Plus, Inc. (NASDAQ: SLP) is a specialized provider of biosimulation and predictive modeling software, establishing a distinctive position at the intersection of pharmaceutical research and advanced computational science [1] - The mission of Grassroots Trading focuses on providing objective and unbiased research, particularly on small- to mid-cap companies, while also identifying opportunities in larger companies [1]

Core Insights - Simulations Plus, Inc. (SLP) reported second-quarter fiscal 2025 adjusted earnings of 31 cents per share, a 3% decline year over year, but exceeded the Zacks Consensus Estimate of 25 cents per share [1] - Quarterly revenues increased by 23% year over year to $22.4 million, driven by growth in software and services segments, with significant contributions from flagship solutions [2][3] Revenue Breakdown - Software revenues, accounting for 60% of total revenues, rose 16% year over year to $13.5 million, supported by new customer acquisitions and increased sales to existing customers [4] - Services revenues, making up 40% of total revenues, improved by 34% to $8.9 million, although organic growth remained flat year over year [5] - The total value of services projects handled during the quarter was $203 million, with a 13% year-over-year increase in backlog, totaling $20.4 million [6] Operating Performance - Gross margin for the quarter was 59%, down from 72% in the prior-year quarter, with software segment gross margin at 81% and services gross margin at 25% [7][8] - Total operating expenses as a percentage of revenues were 46%, compared to 48% a year ago, with income from operations reported at $2.7 million [9] Financial Guidance - For fiscal 2025, SLP expects revenues between $90 million and $93 million, indicating a 28-33% increase from fiscal 2024 revenues, with the Pro-ficiency acquisition expected to contribute an additional $15-$18 million [12][13]

Revenue and Income - Revenue increased by $4.1 million, or 23%, to $22.4 million for the three months ended February 28, 2025, compared to $18.3 million for the same period in 2024[120] - Revenue increased by $8.6 million, or 26%, to $41.4 million for the six months ended February 28, 2025, compared to $32.8 million for the same period in 2024[133] - Net income decreased by $955,000, or 24%, to $3.1 million for the three months ended February 28, 2025, compared to $4.0 million for the same period in 2024[120] Costs and Expenses - Cost of revenue increased by $4.2 million, or 83%, for the three months ended February 28, 2025, primarily due to a $1.2 million or 92% increase in software-related costs and a $3.0 million or 80% increase in service-related costs[123] - Cost of revenue increased by $8.3 million, or 85%, for the six months ended February 28, 2025, primarily due to a $2.9 million or 123% increase in software-related costs[135] - Research and development costs increased by $0.8 million, or 38%, to $2.9 million for the three months ended February 28, 2025, primarily due to the acquisition of Pro-ficiency[126] - Research and development costs increased by $1.2 million, or 28%, to $5.5 million for the six months ended February 28, 2025, compared to $4.3 million for the same period in 2024[138] - Sales and marketing expenses increased by $1.8 million, or 91%, to $3.7 million for the three months ended February 28, 2025, reflecting strategic investments to enhance brand awareness[127] - Sales and marketing expenses rose by $2.6 million, or 67%, to $6.6 million for the six months ended February 28, 2025, reflecting a 4% increase as a percentage of revenue[139] - General and administrative expenses decreased by $1.0 million, or 17%, to $4.6 million for the three months ended February 28, 2025, due to a reorganization of internal structure[129] - General and administrative expenses decreased by $1.3 million, or 11%, to $9.9 million for the six months ended February 28, 2025, corresponding to an 11% decrease as a percentage of revenue[140] Profitability Metrics - Gross profit remained consistent at $13.1 million for the three months ended February 28, 2025, with a gross margin percentage of 59% compared to 72% for the same period in 2024[125] - Overall gross margin percentage was 56% for the six months ended February 28, 2025, compared to 70% for the same period in 2024[137] Cash Flow and Investments - Net cash provided by operating activities was $4.4 million for the six months ended February 28, 2025, compared to $6.0 million for the same period in 2024, reflecting a decrease of $1.6 million[150] - Net cash used in investing activities was $2.5 million for the six months ended February 28, 2025, significantly lower than $24.4 million for the same period in 2024[152] - Cash and cash equivalents totaled $11.0 million, with short-term investments of $10.4 million and working capital of $36.0 million as of February 28, 2025[147] Taxation - The provision for income taxes was $0.5 million for the six months ended February 28, 2025, with an effective tax rate decrease to 13% from 22% in the prior year[143] - The Company accounts for income taxes in accordance with ASC 740-10, recognizing deferred tax assets and liabilities for expected future tax consequences[174] - Deferred income taxes are recognized for tax consequences in future years based on differences between tax bases and financial reporting amounts[175] Acquisitions and Goodwill - The Company completed the acquisition of Pro-ficiency for an aggregate purchase price of $100 million in cash on June 11, 2024[156] - As of February 28, 2025, the entire balance of goodwill was attributed to four reporting units: CPP, QSP, ALI, and MC[171] - Business acquisitions are accounted for using the acquisition method, with goodwill recorded as the excess of purchase price over estimated fair values of net assets acquired[172] Stock-Based Compensation - Stock-based compensation costs for the three months ended February 28, 2025, were $1.6 million, consistent with the same period in 2024[176] - For the six months ended February 28, 2025, stock-based compensation costs were $3.3 million, compared to $2.9 million for the same period in 2024[176] Market Risk and Impairment - There has been no material change in the Company's exposure to market risk as of February 28, 2025[177] - No impairment losses were recorded for intangible assets during the three and six months ended February 28, 2025, and February 29, 2024[171] Other - Total other income was $0.9 million for the six months ended February 28, 2025, down from $2.3 million for the same period in 2024[141] - As of February 28, 2025, $30 million remains available for additional share repurchases under the authorized repurchase program[160] - Research and development costs are charged to expense as incurred until technological feasibility is established[173]

Earnings Call – Q2 - FY25 April 3, 2025 1 Safe Harbor Statement Except for historical information, the matters discussed in this presentation are forward-looking statements that involve risks and uncertainties. Words like "believe," "will", "can", "expect," "anticipate" and similar expressions (as well as other words or expressions referencing future events, conditions or circumstances) mean that these are our best estimates as of this writing, but there can be no assurances that expected or anticipated res ...

Financial Data and Key Metrics Changes - Total revenue increased by 23% year over year to $22.4 million, with a 5% organic growth excluding contributions from adaptive learning and insights and medical communication business units [7][18] - Diluted EPS was 15 cents, adjusted diluted EPS was 31 cents, and adjusted EBITDA was $6.6 million, or 29% of revenue [7][27] - Total gross margin for the quarter was 59%, down from 72% in the prior year, primarily due to increased costs of revenues [24][27] Business Line Data and Key Metrics Changes - Software revenue grew by 16% in the second quarter, representing 60% of total revenue, while services revenue increased by 34%, accounting for 40% of total revenue [18][24] - The quantitative systems pharmacology (QSP) business unit saw revenue surge by 89%, driven by a model license for atopic dermatitis [12][19] - Clinical pharmacology and pharmacometrics (CPP) business unit revenues grew by 9%, while physiologically-based pharmacokinetics (PBPK) software revenue grew by 1% [13][22] Market Data and Key Metrics Changes - The company ended the quarter with a backlog of $20.4 million, up 18% compared to the first quarter and up 13% year over year [17][24] - Renewal rates for software customers remained strong at 90% based on fees and 84% based on accounts [20][22] Company Strategy and Development Direction - The company is focused on ramping up its Alley and MC business units, expanding cross-selling opportunities, and targeting an adjusted EBITDA margin of 35% to 40% [33][30] - The management emphasized a disciplined approach to executing effectively in challenging environments while being prepared to capitalize on any increase in customer spending [10][29] Management's Comments on Operating Environment and Future Outlook - Management noted that the operating environment remains cautious, with customers taking a cost-conscious approach to spending [7][29] - The company reaffirmed its fiscal year 2025 guidance, expecting total revenue between $90 million to $93 million, with year-over-year growth of 28% to 33% [31][33] Other Important Information - The increase in total operating expenses was 46% of revenue compared to 48% last year, with R&D expenses at 10% of revenue [25][26] - The company ended the quarter with $21.4 million in cash and short-term investments, remaining well-capitalized with no debt [28] Q&A Session Summary Question: Can you talk about the software organic revenue growth and the fee renewal rate decline? - Management indicated that software organic growth was 8% excluding proficiency software contribution, and the renewal rate declined due to one large account renewal that occurred after the quarter [38][39] Question: How do you reconcile good software growth with clients being slow to start new projects? - Management explained that while clients are cautious with service budgets, they continue to invest in software infrastructure, leading to strong software performance [42][43] Question: What are your thoughts on tariffs affecting the biopharma sector? - Management acknowledged that while tariffs could impact global pharma businesses, the drug development approval process is primarily funded through fees, which mitigates some risks [47][48] Question: Can you provide more color on the services side and cross-selling opportunities? - Management noted that proficiency and medical communications had good contributions, with a focus on expanding existing client relationships through cross-selling [55][57] Question: How should we think about the timing of deliverables for the PBPK partnership? - Management indicated that the project extends over 12 months, with a six-month engagement process prior to the agreement [90] Question: How do you see the impact of FDA disruptions on biosimulation adoption? - Management stated that while FDA disruptions are distracting, they do not believe it will significantly slow down the adoption of biosimulation [81][82]

Core Insights - Simulations Plus (SLP) reported quarterly earnings of $0.31 per share, exceeding the Zacks Consensus Estimate of $0.25 per share, and up from $0.20 per share a year ago, representing a 24% earnings surprise [1] - The company achieved revenues of $22.43 million for the quarter ended February 2025, surpassing the Zacks Consensus Estimate by 3.11% and increasing from $18.31 million year-over-year [2] - Simulations Plus has outperformed consensus EPS estimates three times in the last four quarters and has also topped revenue estimates three times during the same period [2] Financial Performance - The company's earnings surprise of 24% indicates strong performance relative to expectations, while the previous quarter saw a slight miss with actual earnings of $0.17 compared to an expected $0.18, resulting in a -5.56% surprise [1][2] - The current consensus EPS estimate for the upcoming quarter is $0.34, with projected revenues of $24.97 million, and for the current fiscal year, the consensus EPS is $1.09 on revenues of $90.38 million [7] Market Position - Simulations Plus shares have declined approximately 11.2% since the beginning of the year, contrasting with the S&P 500's decline of -3.6% [3] - The Zacks Industry Rank places the Computer - Software sector in the top 28% of over 250 Zacks industries, indicating a favorable industry outlook [8] Future Outlook - The sustainability of the stock's price movement will largely depend on management's commentary during the earnings call and the trends in earnings estimate revisions [3][4] - The current estimate revisions trend for Simulations Plus is mixed, resulting in a Zacks Rank 3 (Hold), suggesting the stock is expected to perform in line with the market in the near future [6]

Revenue Growth - Total revenue increased by 23% year-over-year to $22.4 million, with software revenue growing by 16% to $13.5 million and services revenue increasing by 34% to $8.9 million[6] - The Quantitative Systems Pharmacology (QSP) business unit experienced significant growth of 89%, primarily due to a new model license in atopic dermatitis[4] - The company maintains its full-year revenue guidance of $90 million to $93 million, representing a growth of 28% to 33%[7] - Revenue for FY25 is projected to reach $70,013,000, up from $41,356,000 in FY24, indicating a growth of approximately 69.3%[24] - Software revenue for Q1 FY25 was $9,913,000, a significant increase from $7,589,000 in Q1 FY24, reflecting a growth of about 30.6%[24] Profitability Metrics - Adjusted EBITDA for the second quarter was $6.6 million, representing 29% of total revenue, compared to $7.1 million or 39% of total revenue in the previous year[6] - Adjusted EBITDA for FY25 is expected to be $20,257,000, compared to $11,071,000 in FY24, which is an increase of approximately 83.0%[26] - Net income for the second quarter was $3.1 million, with diluted EPS of $0.15, down from net income of $4.0 million and diluted EPS of $0.20 in the same quarter last year[6] - Net income for FY25 is projected at $9,954,000, up from $3,280,000 in FY24, representing a growth of about 203.5%[26] - Total adjusted net income for FY 2024 is projected to be $19.353 million, with a diluted EPS of $0.95[28] Backlog and Bookings - Services bookings contributed to a 13% year-over-year increase in backlog, which ended the quarter at $20.4 million[5] - The backlog for services as of Q1 FY25 was $20,379,000, compared to $17,254,000 in Q1 FY24, indicating an increase of about 12.3%[24] Asset and Liability Management - Total assets increased to $201,427,000 as of February 28, 2025, up from $196,639,000 on August 31, 2024, representing a growth of approximately 1.4%[22] - Total current assets rose to $46,717,000, compared to $39,341,000 in the previous period, marking an increase of about 18.5%[22] - Total liabilities decreased to $11,879,000 from $14,208,000, a reduction of about 16.5%[22] Operating Performance - The company reported a gross profit of $13.1 million, resulting in a gross margin of 59% for the second quarter[6] - Operating margin for Q2 FY25 is projected at 12.1%, up from 8.8% in FY24, reflecting an improvement of approximately 2.3 percentage points[24] Expenses and Adjustments - The company incurred $2.641 million in mergers & acquisitions expenses for FY 2024, with a significant portion occurring in Q3[28] - Amortization expenses totaled $5.163 million for FY 2024, with $2.059 million recorded in Q4[28] - Stock-based compensation for FY 2024 reached $5.940 million, with Q2 showing the highest expense at $1.665 million[28] - The company reported a total of $0.386 million in currency exchange losses for FY 2024[28] - The tax effect on adjustments for FY 2024 was a reduction of $2.320 million[28] Future Outlook - The company is well-positioned to maintain momentum in the second half of 2025 despite a constrained funding environment for biopharma customers[7] - The software revenue mix is expected to be between 55% and 60% for fiscal 2025[7] - The company expects continued growth in adjusted net income and EPS for FY 2025, with Q1 guidance indicating $3.280 million in net income[28]

Core Viewpoint - Simulations Plus, Inc (SLP) is expected to report its second-quarter fiscal 2025 results on April 3, 2025, with anticipated revenue growth and earnings increase compared to the previous year [1][2][3]. Financial Performance - The Zacks Consensus Estimate for fiscal second-quarter revenues is $21.76 million, reflecting an 18.8% growth from the same quarter last year [2]. - The consensus estimate for earnings is 25 cents per share, indicating a 25% increase from the prior-year level [3]. - In the last reported quarter, adjusted earnings were 17 cents per share, down 5.5% year over year, missing the Zacks Consensus Estimate of 18 cents per share [4]. Business Segments - Revenue from the software business unit is expected to show steady momentum, driven by the adoption of products like GastroPlus, MonolixSuite, and ADMet Predictor [5]. - The Adaptive Learning & Insights (ALI) and Medical Communications (MC) divisions generated $3.7 million in revenues during the first fiscal quarter, contributing positively to the company's growth prospects [6]. Market Position and Strategy - SLP is actively supporting the development of drugs approved by the FDA in 2024 and is expanding its business pipeline for the GastroPlus platform [7]. - Despite facing temporary challenges in services revenues due to client-driven data delays, strong bookings in the Clinical Pharmacology & Medical Communications units suggest potential revenue realization in the upcoming quarter [8]. Revenue Estimates - The Zacks Consensus Estimate for Software and Services revenues in the fiscal second quarter is $12.78 million and $9.03 million, respectively [9]. - The company remains optimistic about initial budget discussions with clients for 2025, indicating potential improvements in client spending despite concerns over soft client funding and budget cycles [9]. Earnings Prediction - The current model does not predict an earnings beat for SLP, with an Earnings ESP of 0.00% and a Zacks Rank of 4 (Sell) [10][11].

Earnings Performance - Simulations Plus reported Q1 fiscal 2025 adjusted earnings of 17 cents per share, a 5.6% YoY decline, missing the Zacks Consensus Estimate of 18 cents [1] - Quarterly revenues surged 31% YoY to $18.9 million, driven by higher Software segment revenues and the Pro-ficiency acquisition, surpassing the Zacks Consensus Estimate by 1.3% [2][3] - Organic revenue growth was 5% during the quarter [3] Revenue Breakdown - Software segment revenues (57% of total) rose 41% YoY to $10.7 million, driven by new customer wins and increased sales with existing customers [4] - GastroPlus, MonolixSuite, ADMET Predictor, ALI, and Others contributed 38%, 21%, 12%, 16%, and 13% respectively to total software revenues [4] - Services revenues (43%) improved 19% to $8.2 million, though organic revenues declined 9% due to client-driven data delays [8] Operational Metrics - Total operating expenses as a percentage of revenues decreased to 53% from 56% YoY [5] - Income from operations was $0.1 million compared to $1 million YoY [5] - Adjusted EBITDA margin increased to 24% from 23% in the prior-year quarter [5] Balance Sheet - Cash and short-term investments stood at $18.2 million as of Nov. 30, 2024, down from $20.3 million at the end of the prior-year period [6] Future Outlook - Simulations Plus expects revenues between $90 million and $93 million for fiscal 2025, indicating a 28-33% increase from fiscal 2024 [7] - The Pro-ficiency acquisition is expected to contribute an additional $15-$18 million to revenues [7] - The company anticipates the Software segment to account for 55-60% of total revenues, with adjusted EPS between $1.07 and $1.20 and adjusted EBITDA margin between 31% and 33% [7] Customer Metrics - The renewal rate for commercial customers was 83% (based on accounts) and 95% (based on fees), compared to 84% and 100% in the prior quarter [8] - Services backlog was $17.3 million at the end of the quarter, down 8.5% YoY due to cost-driven pullback by customers [9] Segment Performance - Quantitative Systems Pharmacology software and Clinical Pharmacology & Pharmacometrics business saw YoY declines of 14% and 6%, respectively [9] - Sales of the PBPK unit were down 9% YoY [9] Gross Margins - Gross margin for the quarter was 54%, down from 62% in the prior-year quarter [10] - Software segment gross margin was 75%, down from 87%, affected by higher costs related to the amortization of capitalized software development costs from the Pro-ficiency acquisition [10] - Services gross margin was 26%, down from 36%, due to lower organic segmental revenues [10] Industry Comparison - BlackBerry reported Q3 fiscal 2025 non-GAAP EPS of 2 cents, better than the estimated loss of 1 cent to EPS of 1 cent, with quarterly revenues of $162 million, down 7.4% YoY [13] - Ciena Corporation reported Q4 fiscal 2024 adjusted EPS of 54 cents, missing the Zacks Consensus Estimate of 66 cents, with quarterly revenues dipping 0.5% YoY to $1,124.1 million [14] - Guidewire Software reported Q1 fiscal 2025 non-GAAP EPS of 43 cents, surpassing the Zacks Consensus Estimate by 43.3%, with revenues of $262.9 million, up 27% YoY [15]

Revenue and Profitability - Revenue increased by $4.4 million, or 31%, to $18.9 million for the three months ended November 30, 2024, compared to $14.5 million for the same period in 2023[123] - Gross profit increased by $0.4 million, or 4%, to $10.2 million for the three months ended November 30, 2024, compared to $9.8 million for the same period in 2023[125] - Net income decreased by $1.7 million, or 89%, to $0.2 million for the three months ended November 30, 2024, compared to $1.9 million for the same period in 2023[125] Expenses - Research and development costs increased by $0.4 million, or 19%, to $2.6 million for the three months ended November 30, 2024, compared to $2.2 million for the same period in 2023[129] - Sales and marketing expenses increased by $0.9 million, or 43%, to $2.9 million for the three months ended November 30, 2024, compared to $2.0 million for the same period in 2023[130] - Stock-based compensation costs were $1.7 million for the three months ending November 30, 2024, compared to $1.3 million in 2023[166] Cash Flow and Investments - Net cash used in operating activities was $1.3 million for the three months ended November 30, 2024, compared to net cash provided of $0.2 million for the same period in 2023[138] - Net cash used in investing activities was $3.1 million for the three months ended November 30, 2024, compared to $16.9 million for the same period in 2023[141] - Cash, cash equivalents, and short-term investments totaled $18.2 million as of November 30, 2024[137] Acquisitions and Obligations - The Company acquired Pro-ficiency for an aggregate purchase price of $100 million in cash, with $1 million placed in escrow for post-closing adjustments[145] - The Company has a remaining obligation of up to $5.5 million related to the Immunetrics acquisition, expected to be paid in early 2025[148] - As of November 30, 2024, $30 million remains available for share repurchases under the authorized program, with no shares repurchased in the last three months[149] Tax and Financial Reporting - The effective tax rate increased to 24% for the three months ended November 30, 2024, compared to 19% for the same period in 2023[133] - There were no changes in internal controls over financial reporting that materially affected the Company's internal control during the most recent fiscal quarter[169] Software Development and Amortization - Capitalized computer software development costs were $0.7 million for the three months ended November 30, 2024, compared to $0.9 million for the same period in 2023[154] - Amortization of software development costs amounted to $0.8 million for the three months ended November 30, 2024, up from $0.4 million in 2023[155] Goodwill and Impairment - The Company performed goodwill impairment tests at the reporting unit level, with six reporting units identified as of November 30, 2024[159] - No impairment losses were recorded for intangible assets during the three months ended November 30, 2024 and 2023[161] Insurance and Coverage - The Company obtained a buyer's representation and warranty insurance policy providing up to $10 million in coverage for breaches related to the Pro-ficiency acquisition[147]