Earnings Call: Q1 - FY26 January 8, 2026 $0.03 Diluted EPS $18.4M Revenue 19% Adj. EBITDA Margin -3% Revenue Decline Current period Prior Year Comparison (1Q25) $0.13 Adj. Diluted EPS $18.9M Revenue $0.01 Diluted EPS 24% Adj. EBITDA Margin +31% $0.17 Revenue Growth Adj. Diluted EPS Trailing Twelve Months (TTM) Highlights ($3.20) Diluted EPS (1) $78.7M Revenue 27% Adj. EBITDA Margin +6% Revenue Growth Current period Prior Year Comparison (1Q25) $0.98 Adj. Diluted EPS $74.4M Revenue $0.40 Diluted EPS 29% Adj. ...

Revenue Performance - Total revenue decreased by 3% to $18.4 million compared to the first quarter of fiscal 2025[7] - Software revenue decreased by 17% to $8.9 million, representing 48% of total revenue, while services revenue increased by 16% to $9.5 million, representing 52% of total revenue[7] - The company reaffirmed its fiscal year 2026 revenue guidance of $79 million to $82 million, indicating a growth of 0% to 4%[5] Profitability Metrics - Gross profit was $10.9 million with a gross margin of 59%, up from $10.2 million and 54% in the previous year[7] - Net income increased to $0.7 million with diluted earnings per share of $0.03, compared to net income of $0.2 million and diluted EPS of $0.01 in the prior year[7] - Adjusted EBITDA was $3.5 million, representing 19% of total revenue, down from $4.5 million or 24% of total revenue in the same quarter last year[7] - Adjusted net income for the three months ended November 30, 2025, was $2,588,000, down from $3,446,000 in the same period of 2024, a decrease of approximately 25%[27] Earnings Per Share - Diluted EPS increased to $0.03 for the three months ended November 30, 2025, compared to $0.01 in the prior year, marking a 200% increase[27] - Adjusted diluted EPS guidance for fiscal year 2026 is set between $1.03 and $1.10[5] - Adjusted diluted EPS decreased to $0.13 for the three months ended November 30, 2025, from $0.17 in the same period of 2024, a decline of about 24%[27] Asset Management - The company reported an increase in total current assets to $58.1 million from $51.5 million, driven by higher accounts receivable and short-term investments[23] Market Outlook - The company is optimistic about favorable market dynamics and strong bookings in both software and services, which may enhance client spending levels[4] - Simulations Plus plans to present its new product vision and AI solutions during the Virtual Investor Day on January 21, 2026[9] Expense Management - The company incurred $10,000 in mergers and acquisitions expenses for the three months ended November 30, 2025, down from $255,000 in the prior year, a reduction of approximately 96%[27] - Stock-based compensation was $1,465,000 for the three months ended November 30, 2025, slightly lower than $1,589,000 in the same period of 2024, a decrease of about 8%[27] - Amortization expenses decreased to $1,259,000 for the three months ended November 30, 2025, compared to $2,130,000 in the prior year, a decline of approximately 41%[27] Shareholder Information - The diluted weighted-average common shares outstanding were 20,220 for the three months ended November 30, 2025, slightly down from 20,266 in the prior year[27]

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Group 1 - Simulations Plus, Inc. (NASDAQ:SLP) is recognized as a leading healthcare AI stock, particularly due to its alignment with the FDA's new regulatory guidance on nonclinical safety studies for monoclonal antibodies [1][2] - The FDA's draft guidance emphasizes a shift from extensive animal testing to a focus on mechanistic understanding, pharmacokinetics data, and integrated weight-of-evidence assessments [1] - Simulations Plus has stated that its existing platforms support the FDA's new approaches and plans to enhance its capabilities for monoclonal antibodies and related areas through ongoing investments [2] Group 2 - Citizens maintained a Market Perform rating on Simulations Plus, indicating that the stock is fairly valued at present, despite the company's strengths [3] - Analysts from Citizens noted modest growth expectations for fiscal years 2026 and 2027, which keeps the stock's valuation in check and prevents it from being perceived as undervalued [4] - The firm did not change its fiscal year 2026 revenue and EBITDA estimates, indicating stability in the company's outlook following recent developments [4] Group 3 - Simulations Plus develops advanced modeling and simulation software for drug discovery and development, integrating AI and machine learning to enhance pharmacokinetics, quantitative systems pharmacology, and clinical trial design [5]

Core Viewpoint - Simulations Plus (SLP) has been upgraded to a Zacks Rank 1 (Strong Buy) due to an upward trend in earnings estimates, which is a significant factor influencing stock prices [1][3]. Earnings Estimates and Stock Price Movement - The Zacks rating system is based on the consensus measure of EPS estimates from sell-side analysts, reflecting the company's changing earnings picture [1][2]. - A strong correlation exists between changes in earnings estimates and near-term stock price movements, with institutional investors playing a role in this relationship [4][5]. Company Performance and Investor Sentiment - The rising earnings estimates for Simulations Plus indicate an improvement in the company's underlying business, which is expected to drive stock appreciation [5][10]. - Over the past three months, the Zacks Consensus Estimate for Simulations Plus has increased by 14%, with expected earnings of $0.98 per share for the fiscal year ending August 2026, unchanged from the previous year [8]. Zacks Rank System - The Zacks Rank system classifies stocks into five groups based on earnings estimates, with Zacks Rank 1 stocks historically generating an average annual return of +25% since 1988 [7]. - Only the top 5% of Zacks-covered stocks receive a "Strong Buy" rating, indicating superior earnings estimate revisions and potential for market-beating returns [9][10].

Company Overview - Simulations Plus, Inc. is a global leader in model-informed and AI-accelerated drug development, focusing on enhancing biopharma innovation through advanced software and consulting solutions [4]. Event Announcement - The company will host a virtual Investor Day on January 21, 2026, providing an in-depth look at its long-term strategy, product roadmap, and financial outlook, along with a Q&A session with the executive leadership team [2][7]. Industry Context - Biopharma companies are increasingly prioritizing predictability, transparency, and scientific rigor in drug development, and Simulations Plus aims to support these needs through its unified strategy [3]. Strategic Vision - The event will showcase Simulations Plus' vision for an integrated, AI-enabled modeling ecosystem that spans discovery, development, clinical operations, and commercialization [3]. Agenda Highlights - The agenda will include updates on the industry environment, the company's unified product and technology strategy, advances in scientific services supporting client workflows, and financial priorities and outlook [7].

Core Viewpoint - Simulations Plus, Inc. will report its first quarter fiscal 2026 financial results on January 8, 2026, after market close, indicating ongoing transparency and communication with investors [1] Company Announcement - The company is a global leader in model-informed and AI-accelerated drug development, emphasizing its role in advancing biopharma innovation [1] - A conference call will be held on the same day at 5:00 p.m. Eastern Time to discuss the financial results, allowing investment professionals and current stakeholders to engage directly with management [1]

Industry Overview - The Zacks Computer Software industry is poised for solid growth as global businesses accelerate digital transformation efforts, with cloud migration and Software-as-a-Service (SaaS) models providing recurring revenue visibility for vendors [1][2] - The global software market is projected to grow at a CAGR of 11.3% from 2025 to 2030, reaching approximately $1,397.31 billion [2] - The industry is characterized by companies providing software applications related to AI, cloud computing, cybersecurity, and various enterprise solutions [4] Trends Influencing the Industry - Higher spending on AI and cloud computing is expected, with businesses adopting hybrid and multi-cloud environments for flexibility and scalability [5][6] - The demand for AI-powered software tools for automation, personalization, and predictive analytics is increasing, indicating a shift towards generative AI as a defining force in software evolution [6] - Cybersecurity software demand is rising due to the need for securing cloud platforms amid increasing cyberattacks [8] Economic Context - Global macroeconomic conditions and supply-chain dynamics present challenges, with inflation potentially affecting spending across small and medium-sized businesses [9] - Worldwide IT spending is projected to reach $6.08 trillion in 2026, reflecting a 9.8% increase from 2025 levels, with software and services spending expected to rise by 15.2% in 2026 [7] Industry Performance - The Zacks Computer Software industry has underperformed compared to the broader Zacks Computer and Technology sector and the S&P 500 Index over the past year, gaining only 3.3% compared to 16.3% and 26.9% respectively [12] - The industry is currently trading at a forward 12-month P/E ratio of 29.28X, higher than the S&P 500's 23.59X and the sector's 29.03X [15] Company Highlights - **Simulations Plus (SLP)**: Reported a 6% year-over-year revenue decline to $17.5 million in Q4 fiscal 2025, but full-year revenues grew 13% to $79.2 million. Management expects low single-digit revenue growth for fiscal 2026 [19][20][21] - **Synopsys (SNPS)**: Anticipates revenues between $7.03-$7.06 billion for fiscal 2025, up from previous estimates. The company is facing challenges in its Design IP business but benefits from demand for emulation and prototyping solutions [27][28] - **Descartes Systems Group Inc. (DSGX)**: Reported Q3 fiscal 2026 revenues of $187.7 million, an 11% year-over-year increase. The company recently acquired Finale, Inc. for $39.2 million to enhance its cloud-based solutions [29][30][32]

Group 1: Company Performance - Simulations Plus (SLP) reported fourth-quarter results that were soft but aligned with expectations, leading to an initial positive share price response that quickly lost momentum [1] - The revenue guidance from Simulations Plus suggests growth, which may have influenced the stock's performance [1] Group 2: Investment Strategy - Narweena, an asset manager, focuses on identifying market dislocations due to poor understanding of long-term business prospects, aiming for excess risk-adjusted returns through secular growth opportunities in markets with entry barriers [1] - The research process at Narweena emphasizes company and industry fundamentals to uncover unique insights, with a high risk appetite and long-term investment horizon targeting deeply undervalued stocks [1] - Narweena's investment thesis is based on the belief that an aging population with low growth and stagnating productivity will create new investment opportunities, while many industries may face stagnation or secular decline, potentially improving business performance due to reduced competition [1] - The firm notes that economies are increasingly dominated by asset-light businesses, leading to a declining need for infrastructure investments, which results in a large pool of capital chasing limited investment opportunities, driving up asset prices and compressing risk premia over time [1] Group 3: Leadership Background - Richard Durant, the leader of Narweena, holds undergraduate degrees in engineering and finance from the University of Adelaide and an MBA from Nanyang Technological University, where he was on the Dean's Honors List [1] - Durant has successfully passed the CFA exams, indicating a strong foundation in finance and investment analysis [1]

Core Insights - Simulations Plus reported mixed results for Q4 fiscal 2025, but the outlook for fiscal 2026 led to a stock increase of 21.6% for the week [1] - The company experienced a 6% revenue decline in Q4 to $17.5 million, with a full fiscal year revenue growth of 13% [2] - CEO Shawn O'Connor noted a cautious demand environment but highlighted accelerating adoption of cloud deployment, interoperability, and AI-driven workflows [3] Financial Performance - For fiscal 2026, Simulations Plus expects revenue growth between 0% and 4%, projecting revenue in the range of $79 million to $82 million [4] - Adjusted EPS for fiscal 2026 is anticipated to be between $1.03 and $1.10, compared to $1.03 in fiscal 2025 [4] - The stock has dropped 44% from its 52-week high and is down about 77% from its all-time high, trading for less than 20 times forward earnings [5] Growth Prospects - While the valuation appears reasonable, the company's growth is slowing, and reliance on AI-powered solutions may take time to yield results [6] - Investors are optimistic about the company's new AI-centric product vision, but it remains to be seen if it can enhance revenue and profit in the long term [6]