Core Viewpoint - Wall Street anticipates a year-over-year increase in earnings for Simulations Plus (SLP) due to higher revenues, with a focus on how actual results compare to estimates impacting stock price [1][2] Earnings Expectations - Simulations Plus is expected to report quarterly earnings of $0.26 per share, reflecting a year-over-year increase of +36.8% [3] - Revenues are projected to be $19.5 million, which is a 5.2% increase from the same quarter last year [3] Estimate Revisions - The consensus EPS estimate has been revised down by 22.86% over the last 30 days, indicating a reassessment by analysts [4] - The Most Accurate Estimate for Simulations Plus is lower than the Zacks Consensus Estimate, resulting in an Earnings ESP of -19.23% [12] Earnings Surprise Prediction - The Zacks Earnings ESP model suggests that a positive or negative reading indicates the likely deviation of actual earnings from consensus estimates, with positive readings being more predictive of earnings beats [9][10] - Stocks with a positive Earnings ESP and a Zacks Rank of 1, 2, or 3 have historically produced positive surprises nearly 70% of the time [10] Historical Performance - In the last reported quarter, Simulations Plus exceeded expectations by delivering earnings of $0.31 per share against an expected $0.25, resulting in a surprise of +24.00% [13] - Over the past four quarters, the company has beaten consensus EPS estimates three times [14] Conclusion - Simulations Plus does not currently appear to be a strong candidate for an earnings beat, and investors should consider other factors when making decisions regarding the stock ahead of the earnings release [17]

Group 1 - Simulations Plus (SLP) share price dropped significantly after the company reported preliminary Q3 FY25 results that did not meet expectations [1] - The current weakness in Simulations Plus is attributed to soft biopharma market conditions and the company's relatively large services business [1] Group 2 - Narweena, an asset manager led by Richard Durant, focuses on identifying market dislocations due to misunderstandings of long-term business prospects [1] - Narweena aims to achieve excess risk-adjusted returns by targeting businesses with secular growth opportunities in markets with barriers to entry [1] - The research process at Narweena emphasizes company and industry fundamentals to uncover unique insights [1] Group 3 - Narweena has a high risk appetite and a long-term investment horizon, seeking deeply undervalued stocks, particularly in smaller cap markets [1] - The firm believes that an aging population with low growth and stagnating productivity will create new investment opportunities [1] - Many industries may face stagnation or secular decline, which could paradoxically enhance business performance due to reduced competition [1] Group 4 - The economic landscape is increasingly characterized by asset-light businesses, leading to a declining need for infrastructure investments [1] - A large pool of capital is pursuing a limited set of investment opportunities, resulting in rising asset prices and compressed risk premia over time [1]

Core Viewpoint - Simulations Plus Inc has significantly lowered its fiscal 2025 sales outlook, leading to a sharp decline in its stock price, reflecting market uncertainties and operational challenges [1][2]. Group 1: Sales Outlook and Financial Performance - The company expects third-quarter sales to be between $19 million and $20 million, which is below the consensus estimate of $22.78 million [1]. - The fiscal 2025 sales forecast has been revised down to $76 million-$80 million from a previous guidance of $90 million-$93 million, against a consensus of $90.26 million [1][5]. Group 2: Market Conditions and Operational Challenges - CEO Shawn O'Connor highlighted that market uncertainties regarding future funding, drug pricing, and potential tariffs are causing significant challenges for pharmaceutical and biotech clients, leading to budget cuts, project cancellations, and delays [2]. - The demand for services has been more sensitive to market volatility, resulting in performance below expectations, although the software segment remains resilient [3]. Group 3: Workforce and Restructuring - The company has reduced its workforce by approximately 23 employees, which is about 10% of its full-time staff, and expects to incur around $0.7 million in restructuring charges [4]. - The decision to cut guidance was unexpected and larger than anticipated, raising concerns about the impact on margins and the outlook for fiscal 2026 [5]. Group 4: Stock Performance - Following the announcement, Simulations Plus stock fell by 23.2%, trading at $20.30 [6].

Core Insights - Simulations Plus, Inc. (SLP) has announced preliminary revenue results for Q3 fiscal 2025, expecting revenues between $19 million and $20 million [1] - The full-year revenue guidance for fiscal 2025 has been revised to a range of $76 million to $80 million, down from the previous projection of $90 million to $93 million [2][8] Revenue and Financial Performance - The company anticipates third-quarter revenues to be between $19 million and $20 million [1] - Full-year fiscal 2025 revenues are now projected at $76 million to $80 million, a significant decrease from earlier estimates [2][8] Market Challenges - Management cited growing market uncertainties, including shifting drug pricing policies, potential tariff implications, and constrained funding, as headwinds affecting pharmaceutical and biotech clients [3] - These challenges have resulted in tighter budgets, project delays, and cancellations, particularly impacting the demand for services [3] Strategic Reorganization - In response to market challenges, Simulations Plus is transitioning to a functionally driven operating model from a business unit structure [4] - This strategic reorganization aims to enhance client engagement and improve sales and marketing effectiveness [4] - The change is part of a multi-year transformation strategy focused on streamlining operations and fostering collaboration [4] Future Outlook - The company believes the new structure will enhance operational efficiency and position it for long-term profitable growth [5] - Simulations Plus remains optimistic about the future of predictive analytics in biosimulation and clinical operations [5] Product Development - Recently, the company launched DILIsym 11, an advancement in its quantitative systems toxicology (QST) platform, aimed at improving drug safety and patient outcomes [6]

Core Insights - Simulations Plus, Inc. has launched DILIsym 11, enhancing its quantitative systems toxicology platform for improved drug-induced liver injury prediction, particularly with pediatric representation and an advanced T-cell model [1][2][3] Group 1: Product Enhancements - DILIsym 11 introduces significant enhancements, including pediatric modeling to assess liver toxicity risk in children, which is a notable advancement in predictive toxicology [3][5] - The new T-cell module offers deeper insights into CD8+ T-cell-mediated liver damage, alongside improved simulations for bile acid-related and cholestatic liver injuries [5][6] - The platform is recognized as a regulatory-grade simulation tool, having been reviewed by the FDA's DILI team, which underscores its clinical relevance [4][6] Group 2: Financial Performance - Simulations Plus reported a 23% year-over-year revenue increase to $22.4 million, driven by demand for its software and services, with contributions from the recently acquired Pro-ficiency business units [7][9] - The company anticipates revenues between $90 million and $93 million for fiscal 2025, reflecting a 28-33% increase from fiscal 2024, with Pro-ficiency expected to add $15-$18 million [9] Group 3: Market Context - Despite the positive performance of Simulations Plus, the broader biopharmaceutical sector faces financial challenges, impacting research and development investments [8] - The company is positioned to gain traction in the market as it continues to innovate in biosimulation and predictive modeling, which is critical for improving drug safety [6][8]

Group 1 - Simulations Plus, Inc. (NASDAQ: SLP) is a software company specializing in AI-based modeling and simulation tools aimed at accelerating pharmaceutical research for drug discovery and optimization [1] - The company utilizes pharmacology data to train its modeling systems, enhancing the efficiency of drug development processes [1]

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 ...