Core Viewpoint - Johnson Fistel, PLLP is investigating potential claims on behalf of investors of Simulations Plus, Inc. regarding possible violations of federal securities laws, particularly related to alleged misrepresentations and omissions by the company and its executives [1] Company Background - Simulations Plus is a software company that serves the pharmaceutical, biotechnology, and chemical industries [3] - In June 2024, the company acquired Pro-ficiency Holdings, Inc., claiming this acquisition would double its total addressable market and serve as a key driver of growth [3] Recent Developments - On June 11, 2025, Simulations Plus announced disappointing preliminary results for Q3 2025, attributing the downturn to "market uncertainties," which led to a stock price drop of over 24%, from $26.44 to $20.05 per share [4] - On July 14, 2025, the company reported a $77.2 million charge related to prior acquisitions and subsequently dismissed its auditor, Grant Thornton LLP, due to unresolved issues with segment reporting and internal controls [4] - Following the auditor dismissal and acknowledgment of internal control issues, shares fell nearly 26%, from $17.47 to $12.97 per share [4]

Core Viewpoint - Rosen Law Firm is investigating potential securities claims on behalf of shareholders of Simulations Plus, Inc. due to allegations of materially misleading business information issued by the company [1]. Group 1: Company Performance - Simulations Plus reported sales of $20.4 million for the third quarter of 2025, which is a 10% year-over-year increase but fell short of the consensus estimate of $20.9 million [3]. - The company had previously released preliminary third-quarter sales figures in June, which were lower than expectations at $19 million to $20 million, compared to a consensus of $22.78 million [3]. - Following the release of the third-quarter earnings report, Simulations Plus stock experienced a decline of 25.75% on July 15, 2025 [3]. Group 2: Legal Action - Investors who purchased Simulations Plus securities may be entitled to compensation through a class action lawsuit being prepared by Rosen Law Firm, with no out-of-pocket fees or costs due to a contingency fee arrangement [2]. - Interested investors can join the prospective class action by submitting a form or contacting the law firm directly [2]. Group 3: Rosen Law Firm's Credentials - Rosen Law Firm has a strong track record in securities class actions, having achieved the largest securities class action settlement against a Chinese company at the time [4]. - The firm was ranked No. 1 by ISS Securities Class Action Services for the number of securities class action settlements in 2017 and has consistently ranked in the top 4 since 2013, recovering hundreds of millions of dollars for investors [4]. - In 2019, the firm secured over $438 million for investors, and its founding partner was recognized as a Titan of Plaintiffs' Bar by Law360 in 2020 [4].

Revenue Performance - Total revenues decreased by $0.5 million, or 3%, to $18.4 million for the three months ended November 30, 2025, compared to $18.9 million for the same period in 2024[126]. - Software-related revenue decreased by $1.8 million, or 17%, primarily due to a $1.4 million decline in revenue from Clinical Operations and a $0.4 million decline from Development[126]. - Service-related revenue increased by $1.3 million, or 16%, driven by organic growth of $0.8 million from Commercialization and $0.5 million from Development[126]. - The company generated revenue primarily from software licenses, consulting services, and customized software platforms for the pharmaceutical industry[151]. Profitability - Gross profit increased by $1.5 million, or 15%, to $10.9 million for the three months ended November 30, 2025, compared to $10.2 million for the same period in 2024[130]. - Net income increased by $470,000, or 228%, to $676,000 for the three months ended November 30, 2025, compared to $206,000 for the same period in 2024[125]. Expenses - Research and development costs increased by $1.3 million, or 51%, to $3.9 million for the three months ended November 30, 2025, reflecting higher investment in product and platform development[133]. - R&D spend as a percentage of revenue increased to 16% for the three months ended November 30, 2025, from 10% for the same period in 2024[134]. - Sales and marketing expenses increased by $0.3 million, or 12%, to $3.2 million for the three months ended November 30, 2025[135]. - General and administrative expenses decreased by $1.4 million, or 25%, to $4.0 million for the three months ended November 30, 2025[136]. - Stock-based compensation costs were $1.5 million for the three months ended November 30, 2025, compared to $1.7 million for the same period in 2024[168]. Cash Flow - Cash provided by operating activities improved by $5.5 million to $4.2 million for the three months ended November 30, 2025, compared to net cash used of $1.3 million for the same period in 2024[144]. - Net cash used in operating activities was $1.3 million for the three months ended November 30, 2024, primarily due to a $3.7 million increase in accounts receivable and a $4.1 million decrease in other liabilities[145]. - Net cash used in investing activities was $4.9 million for the three months ended November 30, 2025, including $5.5 million invested in short-term investments and $0.9 million in capitalized software development costs[146]. - Net cash used in investing activities was $3.1 million for the three months ended November 30, 2024, with $3.5 million invested in short-term investments and $0.6 million in capitalized software development costs[147]. Capital Expenditures - Capitalized computer software development costs were $0.9 million and $0.7 million for the three months ended November 30, 2025, and November 30, 2024, respectively[155]. - Amortization of software development costs amounted to $0.7 million for the three months ended November 30, 2025, compared to $0.8 million for the same period in 2024[156]. - The company incurred $0.2 million for investing in intangible assets and a net working capital settlement related to the Pro-ficiency acquisition[147]. Share Repurchase - As of November 30, 2025, $30 million remains available for additional share repurchases under the authorized repurchase program[149]. Impairment - No impairment losses were recorded during the three months ended November 30, 2025, and November 30, 2024[162].

Core Insights - Simulations Plus, Inc. (SLP) reported first-quarter fiscal 2026 adjusted earnings of 13 cents per share, missing the Zacks Consensus Estimate by 27.8% and down from 17 cents in the prior-year quarter [1][12] - Quarterly revenues decreased by 3% year over year to $18.4 million, with software revenue declining amid strong service momentum, although the top line exceeded the consensus mark by 2% [2][12] Revenue Breakdown - Software revenues, accounting for 48% of total revenues, fell 17% year over year to $8.9 million, primarily due to challenging market conditions and client consolidation [5][12] - Services revenues, which made up 52% of total revenues, increased by 16% to $9.5 million, driven by strong performance in the MedCom business [7][12] Client and Market Dynamics - SLP ended the quarter with 302 commercial clients, generating an average revenue of $97,000 per client and maintaining an 88% renewal rate [6] - Management expressed confidence in the remainder of fiscal 2026, citing strong bookings, annual software price increases, and improving funding conditions for biopharma clients [3][12] Financial Metrics - The gross margin for the quarter was 59%, up from 54% in the prior-year quarter, with software segment gross margin at 84% and services gross margin at 36% [8][9] - Adjusted EBITDA declined to $3.5 million from $4.5 million in the prior-year quarter, with an adjusted EBITDA margin of 19% compared to 24% previously [9][10] Guidance and Outlook - SLP reaffirmed its fiscal 2026 revenue guidance, expecting revenues between $79 million and $82 million, indicating a 0-4% increase from fiscal 2025 [14] - The company anticipates adjusted earnings per share to be between $1.03 and $1.10, with an adjusted EBITDA margin between 26% and 30% [14]

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Core Insights - Simulations Plus reported a 3% decline in total revenue to $18.4 million for fiscal Q1 2026, aligning with previous guidance [2][3] - The company maintained its fiscal 2026 revenue guidance of $79–82 million, with expected growth of 0–4% [4][17] Revenue Breakdown - Software revenue contributions were primarily from development products (81%), discovery products (15%), and clinical operations products (4%) [1] - Services revenue grew by 16%, while software revenue fell by 17%, resulting in a mix shift where services accounted for 52% of total revenue [5][10] Profitability Metrics - Adjusted EBITDA for the quarter was $3.5 million, with adjusted EPS at $0.13 [1][5] - Total gross margin improved to 59%, with software gross margin at 84% and services gross margin at 36% [13][14] Client Metrics - The company ended the quarter with 302 commercial clients, an average revenue per client of $97,000, and an 88% renewal rate [8] - The trailing 12-month average revenue per client was $147,000, with a renewal rate of 87% [8] Services Growth - The backlog for services rose by 18% to $20.4 million, driven by strong performance in medical communications [9][11] - Medical communications, stemming from the Pro-ficiency acquisition, represented 100% of commercialization services revenue [11] Future Outlook - Management anticipates stronger software performance in the second and third quarters due to seasonal renewals [18] - The company is focusing on building an integrated product ecosystem that leverages AI and regulatory-grade modeling [19][20]

Financial Data and Key Metrics Changes - Total revenue decreased by 3% to $18.4 million, with adjusted EBITDA at $3.5 million and adjusted EPS at $0.13, aligning with internal expectations [4][8] - Total gross margin improved to 59%, with software gross margin at 84% and services gross margin at 36%, compared to 54%, 75%, and 26% respectively in the prior period [10][11] - The company ended the quarter with $35.7 million in cash and short-term investments, maintaining a strong capital position with no debt [11] Business Line Data and Key Metrics Changes - Software revenue decreased by 17%, contributing 48% to total revenue, while services revenue increased by 16%, contributing 52% [8] - Discovery products accounted for 15% of software revenue, development products for 81%, and clinical ops products for 4% [8] - Services revenue from development, including biosimulation services, represented 71% of services revenue, while commercialization services accounted for 29% [9] Market Data and Key Metrics Changes - The company reported an 88% renewal rate for the quarter, with an average revenue per client of $97,000 [8] - The ending backlog for services increased by 18% to $20.4 million from $17.3 million last year, indicating a healthy pipeline of projects [9] Company Strategy and Development Direction - The company aims to advance towards an integrated product ecosystem combining validated science, cloud-scale performance, and AI-driven modeling [5][6] - Strategic acquisitions and ongoing investment in science are key to broadening the company's reach and impact in the market [13][14] Management's Comments on Operating Environment and Future Outlook - Management noted positive trends in the macro environment, including improved biotech funding and reduced tariff threats, which are expected to positively impact client budgets [4][16] - There is optimism regarding increased spending from clients, with a backlog of projects ready to be initiated [17] Other Important Information - The company maintains its guidance for fiscal year 2026, projecting total revenue between $79-$82 million and adjusted EBITDA margin between 26%-30% [11] - The company is focused on enhancing AI capabilities within its product offerings, which is expected to contribute to pricing flexibility and license renewals [62] Q&A Session Summary Question: Can you provide more details on the positive commentary regarding Most Favored Nations and lower tariff risks? - Management indicated that stabilization in pricing agreements and reduced tariff discussions have positively impacted client budget preparations, leading to increased contract activity [16][17] Question: What is the expected mix cadence for software in the remaining quarters? - Management confirmed no change in guidance for software service mix, with expectations for stronger performance in the second and third quarters due to seasonal renewals [24][25] Question: Did consolidation in large pharma impact software renewals in the first quarter? - Management noted that while consolidation is a headwind, there was no significant impact on the first quarter results, and the outlook remains stable [27][28] Question: How is the integration of AI going with the core platform? - Initial AI features have received favorable responses, and the company plans to monetize these advancements through pricing adjustments and new modules [62] Question: What is the outlook for commercialization services? - The medical communications segment, which is part of the Pro-ficiency acquisition, showed strong growth and is expected to continue performing well in fiscal year 2026 [52][54]

Financial Data and Key Metrics Changes - Total revenue decreased by 3% to $18.4 million, with adjusted EBITDA at $3.5 million and adjusted EPS at $0.13 [4][8] - Total gross margin improved to 59%, with software gross margin at 84% and services gross margin at 36%, compared to 54%, 75%, and 26% respectively in the prior period [10][11] - The company ended the quarter with $35.7 million in cash and short-term investments, remaining well-capitalized with no debt [11] Business Line Data and Key Metrics Changes - Software revenue decreased by 17%, contributing 48% to total revenue, while services revenue increased by 16%, contributing 52% [8] - Discovery products accounted for 15% of software revenue, development products for 81%, and clinical ops products for 4% [8] - Services revenue from development, including biosimulation services, represented 71% of services revenue, while commercialization services represented 29% [9] Market Data and Key Metrics Changes - The company reported an 88% renewal rate for the quarter, with an average revenue per client of $97,000 [8] - The ending backlog for services increased by 18% to $20.4 million from $17.3 million last year, indicating a healthy pipeline of services projects [9] Company Strategy and Development Direction - The company aims to advance towards an integrated product ecosystem combining validated science, cloud-scale performance, and AI-driven services [5][6] - Strategic acquisitions and ongoing investment in science are key to broadening the company's reach and impact in the market [13][14] Management's Comments on Operating Environment and Future Outlook - Management noted positive trends in the macro environment, including improved biotech funding and reduced tariff threats, which are expected to positively impact client budgets [4][16] - There is optimism regarding increased spending from clients, which is anticipated to lead to higher software activity following the uptick in services [4][17] Other Important Information - The company maintains its guidance for fiscal year 2026, projecting total revenue between $79-$82 million and adjusted EBITDA margin between 26%-30% [11] - The company is focused on enhancing its AI capabilities and integrating them into its product offerings, which is expected to provide pricing flexibility and improve client engagement [62] Q&A Session Summary Question: Can you provide more details on the positive commentary regarding Most Favored Nations and its impact on customer budgets? - Management indicated that stabilization in pricing agreements and reduced tariff risks are positively impacting client budget discussions, leading to increased proposals for next year [16][17] Question: What is the expected mix cadence for software in the remaining quarters? - Management confirmed no change in guidance for software service mix, with expectations for stronger performance in the second and third quarters due to seasonal renewals [24][25] Question: Did consolidation in large pharma impact software renewals in the first quarter? - Management noted that while consolidation is a headwind, there was no significant impact on the first quarter results, and the outlook remains stable [27][28] Question: How is the integration of AI features progressing? - Initial responses to AI features have been favorable, with plans for monetization through modules and new products in the future [62] Question: What is the outlook for the commercialization services growth? - Management reported strong performance in medical communications, which is expected to continue positively in fiscal year 2026 [52][54]

Financial Data and Key Metrics Changes - Total revenue decreased by 3% to $18.4 million, with adjusted EBITDA at $3.5 million and adjusted EPS at $0.13 [4][8] - Total gross margin improved to 59%, with software gross margin at 84% and services gross margin at 36%, compared to 54%, 75%, and 26% respectively in the prior period [10][11] - The company ended the quarter with $35.7 million in cash and short-term investments, maintaining a strong capital position with no debt [11] Business Line Data and Key Metrics Changes - Software revenue decreased by 17%, contributing 48% of total revenue, while services revenue increased by 16%, contributing 52% of total revenue [8] - Discovery products accounted for 15% of software revenue, development products for 81%, and clinical ops products for 4% [8] - Services revenue from development services represented 71% and commercialization services represented 29% of total services revenue [9] Market Data and Key Metrics Changes - The company reported an 88% renewal rate for the quarter, with an average revenue per client of $97,000 [8] - The ending backlog for services increased by 18% to $20.4 million from $17.3 million last year, indicating a healthy pipeline of services projects [9] Company Strategy and Development Direction - The company aims to advance towards an integrated product ecosystem combining validated science, cloud-scale performance, and AI-driven services [5][13] - Strategic acquisitions and ongoing investment in scientific engines are key to broadening the company's reach and impact in the market [13] Management's Comments on Operating Environment and Future Outlook - Management noted positive trends in the macro environment, including the stabilization of Most Favored Nation pricing agreements and an improving biotech funding environment [4] - There is optimism regarding increased client spending, which is expected to lead to higher software activity in the future [4][17] Other Important Information - The company maintains its fiscal year 2026 guidance for total revenue between $79-$82 million, with year-over-year revenue growth between 0-4% [11] - The company plans to hold an investor day on January 21st to provide more insights into its strategy and product roadmap [67] Q&A Session Summary Question: Can you provide more details on the positive commentary regarding Most Favored Nations and lower tariff risks? - Management indicated that stabilization in pricing agreements and reduced tariff threats are positively impacting client budgets, leading to increased proposals and contracts [16][17] Question: What is the expected mix cadence for software in the remaining quarters? - Management confirmed no change in guidance for software service mix, with expectations for stronger performance in the second and third quarters due to seasonal renewals [24][25] Question: Did consolidation in large pharma impact software renewals in the first quarter? - Management noted no significant impact from consolidation in the first quarter, with expectations that the current acquisition activity will not heavily affect renewals [26][28] Question: How is the integration of AI with the core platform progressing? - Initial AI features have received favorable responses, and the company is exploring monetization opportunities through new modules and pricing adjustments [62] Question: Is the growth in commercialization services mainly from Pro-ficiency? - Yes, the growth in commercialization services is attributed to the Pro-ficiency acquisition, particularly in medical communications [52][54]

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