Core Viewpoint - Simulations Plus, Inc. experienced a significant decline in share price following a substantial net loss and the dismissal of its independent auditor, raising concerns about asset valuations and corporate governance [1][2][4]. Financial Performance - The company reported a net loss of $67.3 million for Q3 2025, which included a $77.2 million impairment charge [1]. - The impairment charge was attributed to adjustments in the book value of assets to align with current market values [4]. Auditor Dismissal - Simulations Plus terminated its engagement with Grant Thornton on July 9, 2025, just a few months after hiring them on April 15, 2025 [1][4]. - The company cited issues related to segment reporting and internal controls over financial reporting as reasons for the auditor change, claiming no "reportable events" occurred [5]. Investigation - Hagens Berman, a national shareholders rights firm, has initiated an investigation into whether Simulations Plus misled investors regarding asset valuations and the reasons for the auditor's dismissal [2][7]. - Grant Thornton disputed the company's account, indicating that they had raised specific concerns during their review of the financial statements [6].

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 below the consensus estimate of $20.9 million [3]. - The company had previously released preliminary third-quarter sales figures in June, which were also lower than expectations, ranging from $19 million to $20 million compared to a consensus of $22.78 million [3]. - Following the earnings report, Simulations Plus stock price fell by 25.75% on July 15, 2025 [3]. Group 2: Legal Action - Rosen Law Firm is preparing a class action to seek recovery of investor losses for those who purchased Simulations Plus securities [2]. - Investors can join the prospective class action without any out-of-pocket fees through a contingency fee arrangement [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 [4]. - In 2019, the firm secured over $438 million for investors, showcasing its capability in recovering significant amounts for clients [4].

Core Insights - Simulations Plus, Inc. is under investigation for potential securities fraud and unlawful business practices involving its officers and directors [1] - The company reported disappointing financial results for Q3 2025, with sales of $20.4 million, a net loss of $67.3 million, and a diluted loss per share of $3.35, significantly down from a net income of $3.1 million and earnings per share of $0.15 in Q3 2024 [3] - Following the financial report, Simulations Plus's stock price dropped by $4.50, or 25.76%, closing at $12.97 per share [4] - The company revised its fiscal 2025 adjusted earnings guidance down to a range of $0.93 to $1.06, from a previous estimate of $1.07 to $1.20 [3] - A restructuring initiative was initiated in June 2025, which includes workforce reductions and cost-cutting measures aimed at improving operational efficiency [3]

Core Insights - Simulations Plus is under investigation for potential securities fraud and unlawful business practices [1] - The company reported third fiscal quarter sales of $20.4 million, missing the consensus estimate of $20.9 million, and incurred a net loss of $67.3 million, including a non-cash impairment charge of $77.2 million [2] - Following the financial report, Simulations Plus's stock price dropped by $4.50, or 25.76%, closing at $12.97 per share [3] - The company revised its fiscal 2025 adjusted earnings guidance down to $0.93 to $1.06 from a previous range of $1.07 to $1.20 [2] - A restructuring initiative was initiated in June, involving workforce reductions and cost-cutting measures to enhance operational efficiency [2]

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: Investigation and Class Action - Shareholders of Simulations Plus may be entitled to compensation through a class action lawsuit without any out-of-pocket fees, as the Rosen Law Firm prepares to seek recovery of investor losses [2]. - Interested investors can join the prospective class action by submitting a form or contacting the law firm directly [2]. Group 2: Company Performance and Market Reaction - 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 sales figures in June, which were already lower than expectations, with estimates ranging from $19 million to $20 million compared to a consensus of $22.78 million [3]. - Following the release of the earnings report, Simulations Plus stock price dropped by 25.75% on July 15, 2025 [3]. Group 3: Rosen Law Firm's Credentials - The 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 has been consistently ranked among the top firms for securities class action settlements and has recovered hundreds of millions of dollars for investors, including over $438 million in 2019 alone [4].

Core Insights - Simulations Plus Inc. reported a 10% year-over-year increase in sales to $20.4 million, but this was below the consensus estimate of $20.9 million [1] - The company experienced a significant net loss of $67.3 million, primarily due to a non-cash impairment charge of $77.2 million, contrasting with a net income of $3.1 million in the prior year [3] - Adjusted earnings per share increased to 45 cents, up from 27 cents a year ago, despite the revenue miss [2] Financial Performance - Sales for the third quarter reached $20.4 million, a 10% increase year-over-year, but below the consensus estimate [1] - Software revenue increased by 6% to $12.6 million, while services revenue rose by 17% to $7.7 million [2] - Gross profit was $13.0 million, achieving a 64% margin [2] - Adjusted EBITDA was $7.4 million, representing 37% of total revenue, an increase from $5.6 million (30% of total revenue) in the same period last year [3] Guidance and Outlook - The fiscal 2025 adjusted earnings guidance was revised down to $0.93 to $1.06 from $1.07 to $1.20 [4] - Sales forecast for fiscal 2025 was adjusted to $76 million to $80 million, down from $90 million to $93 million, and below the consensus of $82.9 million [4] - The anticipated adjusted EBITDA margin for fiscal 2025 was revised to between 23% and 27%, down from 31% to 33% [5] Market Conditions - Analysts noted ongoing cautious spending by biopharma clients due to uncertainties surrounding funding, drug pricing, and potential tariffs, leading to budget cuts and project cancellations [6] - Despite some resilience in the software business, signs of potential softening were observed as the company heads into fiscal 2026 [7] - KeyBanc downgraded Simulations Plus from Overweight to Sector Weight, citing challenges due to customer concentration and biotech exposure [7] Stock Performance - Following the earnings report, SLP stock declined by 25% to $13.10 [8]

Company Performance - Simulations Plus, Inc. reported third-quarter fiscal 2025 adjusted earnings of 45 cents per share, a 66.7% increase year over year, surpassing the Zacks Consensus Estimate of 26 cents per share [1] - Quarterly revenues increased by 10% year over year to $20.4 million, driven by growth in software and services, along with a $2.4 million contribution from the Pro-ficiency acquisition [2] - Organic revenue fell by 4%, primarily due to reduced QSP/QST software sales and a decline in biosimulation services revenue [3] Strategic Developments - The company underwent a strategic reorganization, transitioning to a functionally-driven operating model to streamline operations and focus on high-growth areas [4] - Simulations Plus announced a $1 million investment in Nurocor, a cloud-based software company, as part of its Corporate Development Initiative targeting early-stage technology companies [5] Market Outlook - The clinical trial technology and services sector was estimated at $25.7 billion in 2024, with a projected CAGR of 15.5% from 2025 to 2030, driven by the adoption of digital health technologies [6] - Despite macroeconomic challenges, the company is committed to innovation, focusing on integrating AI-driven capabilities across its product lines [7] Financial Details - The gross margin for the quarter was 64%, down from 71.5% in the prior-year quarter, attributed to a $2 million rise in cost of revenues [16] - Total operating expenses increased by 667% to $87.3 million due to a one-time non-cash impairment charge of $77.2 million [17] - Cash and short-term investments as of May 31, 2025, were $28.5 million, up from $21.5 million as of February 28, 2024 [18] Guidance Revision - The company revised its fiscal 2025 revenue guidance to between $76 million and $80 million, down from the previous estimate of $90-$93 million [21] - Adjusted earnings per share are now expected to be in the range of 93 cents to $1.06, a decrease from the earlier projection of $1.07 to $1.20 [22]

[PART I. FINANCIAL INFORMATION](index=2&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) [Item 1. Condensed Consolidated Financial Statements](index=3&type=section&id=Item%201.%20Condensed%20Consolidated%20Financial%20Statements) The company's financials reflect a significant net loss and asset decrease due to a $77.2 million impairment charge [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets and shareholders' equity declined significantly, driven by major impairment charges to goodwill Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | May 31, 2025 | August 31, 2024 | Change | | :--- | :--- | :--- | :--- | | Cash and cash equivalents | $26,950 | $10,311 | +$16,639 | | Total current assets | $51,775 | $39,341 | +$12,434 | | Goodwill | $43,487 | $96,078 | -$52,591 | | Intellectual property, net | $6,464 | $23,130 | -$16,666 | | Other intangible assets, net | $12,368 | $23,210 | -$10,842 | | **Total assets** | **$134,360** | **$196,639** | **-$62,279** | | Total liabilities | $10,581 | $14,208 | -$3,627 | | (Accumulated deficit) retained earnings | ($33,683) | $30,354 | -$64,037 | | **Total shareholders' equity** | **$123,779** | **$182,431** | **-$58,652** | [Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Revenue grew but a $77.2 million impairment charge led to a substantial net loss for the quarter and nine-month period Statement of Operations Highlights (in thousands, except per share data) | Metric | Q3 2025 | Q3 2024 | % Change | 9 Months 2025 | 9 Months 2024 | % Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Total Revenues | $20,363 | $18,544 | 10% | $61,719 | $51,349 | 20% | | Gross Profit | $13,032 | $13,257 | -2% | $36,377 | $36,326 | 0% | | Impairments | $77,221 | $0 | N/A | $77,221 | $0 | N/A | | (Loss) Income from Operations | ($74,226) | $1,880 | -4048% | ($71,388) | $7,282 | -1080% | | Net (Loss) Income | ($67,317) | $3,137 | -2246% | ($64,037) | $9,111 | -803% | | Diluted (Loss) EPS | ($3.35) | $0.15 | -2333% | ($3.19) | $0.45 | -809% | [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Operating cash flow remained positive, supported by a large non-cash impairment charge offsetting the net loss Cash Flow Summary (in thousands) | Activity | Nine Months Ended May 31, 2025 | Nine Months Ended May 31, 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $12,539 | $11,656 | | Net cash provided by investing activities | $5,353 | $45,533 | | Net cash used in financing activities | ($1,253) | ($5,620) | | **Net increase in cash and cash equivalents** | **$16,639** | **$51,569** | [Notes to Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Notes detail a $77.2M impairment charge, a 10% workforce reduction, and segment performance post-acquisition - In Q3 2025, the company recorded total impairment charges of **$77.2 million** due to revenue underperformance and a significant stock price decline[59](index=59&type=chunk)[63](index=63&type=chunk)[141](index=141&type=chunk) - The company executed a restructuring plan at the end of Q3 2025, reducing its workforce by approximately **10%** for annualized savings of approximately **$4.3 million**[119](index=119&type=chunk)[120](index=120&type=chunk) Segment Performance - Nine Months Ended May 31, 2025 (in thousands) | Segment | Revenues | Gross Profit | Gross Margin | | :--- | :--- | :--- | :--- | | Software | $36,814 | $29,049 | 79% | | Services | $24,905 | $7,328 | 29% | | **Total** | **$61,719** | **$36,377** | **59%** | - The company's business now comprises **six business units** following the Pro-ficiency acquisition[17](index=17&type=chunk)[19](index=19&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=28&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses revenue growth from acquisitions, margin decline, and the impact of a $77.2M impairment charge - For the nine months ended May 31, 2025, revenue increased **20% to $61.7 million**, driven by the Pro-ficiency acquisition[146](index=146&type=chunk) - Gross margin for the nine-month period **declined to 59% from 71%**, largely attributed to the underperformance of Pro-ficiency revenues[147](index=147&type=chunk)[149](index=149&type=chunk) - A triggering event, identified as revenue underperformance and a stock price decline, led to **$77.2 million in impairment charges**[141](index=141&type=chunk)[154](index=154&type=chunk) - The company used **$100 million in cash** for the Pro-ficiency acquisition and held **$27.0 million in cash** as of May 31, 2025[160](index=160&type=chunk)[168](index=168&type=chunk) [Quantitative and Qualitative Disclosures about Market Risk](index=38&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company reports no material change in its market risk exposure since the last Annual Report - There has been **no material change** in the company's exposure to market risk since the last Annual Report[192](index=192&type=chunk) [Controls and Procedures](index=39&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective with no material changes to internal controls - Management concluded that as of May 31, 2025, the company's disclosure controls and procedures were **effective**[193](index=193&type=chunk) - **No material changes** to internal control over financial reporting occurred during the most recent fiscal quarter[194](index=194&type=chunk) [PART II. OTHER INFORMATION](index=39&type=section&id=PART%20II.%20OTHER%20INFORMATION) [Legal Proceedings](index=39&type=section&id=Item%201.%20Legal%20Proceedings) The company is not a party to any material legal proceedings - The company is **not a party to any material legal proceedings**[101](index=101&type=chunk)[196](index=196&type=chunk) [Risk Factors](index=40&type=section&id=Item%201A.%20Risk%20Factors) Updated risks include liquidity post-acquisition, AI implementation, and potential government regulatory changes - The **$100 million cash payment** for the Pro-ficiency acquisition has created potential liquidity and cash flow risks[198](index=198&type=chunk) - The company identifies risks related to its use of AI, including flawed algorithms and an **evolving, uncertain legal and regulatory environment**[199](index=199&type=chunk)[202](index=202&type=chunk)[203](index=203&type=chunk) - Changes in government regulation, including from the new **Department of Government Efficiency (DOGE)**, could adversely impact business[204](index=204&type=chunk)[205](index=205&type=chunk)[206](index=206&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=42&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company reports no unregistered sales of equity securities or share repurchases during the period - There were **no unregistered sales** of equity securities in the period[207](index=207&type=chunk) - The company **did not repurchase any of its shares** during the three and nine months ended May 31, 2025[172](index=172&type=chunk)[208](index=208&type=chunk) [Defaults upon Senior Securities](index=42&type=section&id=Item%203.%20Defaults%20upon%20Senior%20Securities) The company reported no defaults upon senior securities - **None**[209](index=209&type=chunk) [Mine Safety Disclosures](index=42&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - **Not applicable**[210](index=210&type=chunk) [Other Information](index=43&type=section&id=Item%205.%20Other%20Information) A director adopted a prearranged Rule 10b5-1 stock trading plan for the potential sale of company shares - On April 29, 2025, Director Dr. Lisa LaVange adopted a **Rule 10b5-1 trading plan** for the potential sale of up to 4,100 shares of common stock[211](index=211&type=chunk) [Exhibits](index=44&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Form 10-Q, including agreements and officer certifications - Exhibits filed include acquisition agreements, corporate governance documents, and required **CEO/CFO certifications**[217](index=217&type=chunk)

Financial Data and Key Metrics Changes - Third quarter revenue increased by 10% to $20.4 million, including a $2.4 million contribution from the Proficiency acquisition, while organic revenue declined by 4% due to lower software and biosimulation services revenue [5][21] - Diluted EPS loss was $3.35, including a non-cash impairment expense of $77.2 million, compared to a profit of $0.15 last year; adjusted diluted EPS was $0.45 compared to $0.27 last year [6][27] - Adjusted EBITDA was $7.4 million, or 37% of revenue, compared to $5.6 million, or 30% of revenue last year [6][27] Business Line Data and Key Metrics Changes - Software revenue grew by 6%, representing 62% of total revenue, while services revenue increased by 17%, representing 38% of total revenue [21] - The ADMET Predictor platform grew by 8% year over year, while the QSV QST biosimulation platform declined by 39% year over year [12][14] - Proficiency contributed $400,000 in revenue for the quarter and $4.4 million on a trailing twelve-month basis [15] Market Data and Key Metrics Changes - The clinical operations space is facing headwinds due to market disruptions affecting clinical trial initiations and commercialization budgets, impacting revenue outlook for fiscal year 2025 and into 2026 [7][10] - The biopharma market has been challenging, with large pharma facing patent expirations and pricing pressures, while biotech companies are experiencing a pullback in available capital [10] Company Strategy and Development Direction - The company is committed to its clinical operations and medical communications businesses, focusing on leveraging AI technologies to improve clinical operational efficiencies [8][9] - A strategic reorganization was implemented to transition to a functionally driven operating model, aimed at enhancing client engagement and streamlining operations [18][20] - The company plans to roll out new AI-driven initiatives across its product suite, including enhancements to the GastroPlus platform [31][35] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about long-term prospects for biosimulation growth and the use of AI in clinical operations, despite current market headwinds [29][30] - The company anticipates modest improvement in fiscal year 2026 compared to fiscal year 2025, with expectations of flat organic revenue growth [31] - Management highlighted the importance of adapting to client needs and market conditions to optimize performance [51] Other Important Information - The company ended the quarter with $28.5 million in cash and short-term investments, remaining well-capitalized with no debt [28] - The total gross margin for the quarter was 64%, down from 71% in the prior year, primarily due to increased costs of revenues [24] Q&A Session Summary Question: What is driving the margin erosion next quarter? - Management indicated that the reorganization and expense structure changes will impact future margins, with a revenue step down affecting fourth quarter margins [38][40] Question: Can you provide more color on the renewal rates drop? - Management noted that renewal rates were impacted by client consolidations and site closures, but historically, renewal rates have been maintained in the 90% to 95% range [41][43] Question: Are clients becoming more comfortable with the new FDA guidance? - Management stated that while the FDA's announcement is significant, it will take time for clients to translate this into actionable steps, and the environment remains cautious [46][48] Question: What has been the biggest headwind recently? - Management highlighted that multiple uncertainties are causing clients to be cautious in their spending decisions, rather than a single factor [50] Question: What are the expectations for R&D investment moving forward? - Management indicated a commitment to balancing R&D investment with the goal of improving EBITDA, with opportunities for increased spending in AI development [82] Question: Will product development pacing change with AI initiatives? - Management confirmed that while there will be more frequent updates, the regulatory environment may limit how often clients can adopt new features [90]

Financial Performance and Outlook [Third Quarter 2025 Financial Highlights](index=1&type=section&id=Third%20Quarter%202025%20Financial%20Highlights) Simulations Plus reported a 10% revenue increase in Q3 FY2025, but a significant net loss due to a one-time impairment charge, while adjusted metrics showed growth Q3 FY2025 vs Q3 FY2024 Financial Highlights | Metric | Q3 FY2025 | Q3 FY2024 | Change | | :--- | :--- | :--- | :--- | | Total Revenue | $20.4 million | $18.5 million | +10% | | Software Revenue | $12.6 million | $11.9 million | +6% | | Services Revenue | $7.7 million | $6.6 million | +17% | | Gross Profit | $13.0 million | $13.3 million | -2.3% | | Gross Margin | 64% | 71.5% | -7.5 p.p. | | Net (Loss) Income | ($67.3 million) | $3.1 million | N/A | | Diluted (Loss) EPS | ($3.35) | $0.15 | N/A | | Adjusted EBITDA | $7.4 million | $5.6 million | +32.1% | | Adjusted Diluted EPS | $0.45 | $0.27 | +66.7% | - The quarterly results were significantly impacted by a non-cash impairment charge of **$77.2 million**[5](index=5&type=chunk)[6](index=6&type=chunk) [Nine Months 2025 Financial Highlights](index=1&type=section&id=Nine%20Months%202025%20Financial%20Highlights) For the first nine months of fiscal 2025, revenue increased by 20%, but a substantial net loss was recorded due to the impairment charge, while adjusted metrics showed growth Nine Months FY2025 vs Nine Months FY2024 Financial Highlights | Metric | Nine Months FY2025 | Nine Months FY2024 | Change | | :--- | :--- | :--- | :--- | | Total Revenue | $61.7 million | $51.3 million | +20% | | Software Revenue | $36.8 million | $31.1 million | +18% | | Services Revenue | $24.9 million | $20.2 million | +23% | | Gross Profit | $36.4 million | $36.3 million | +0.1% | | Gross Margin | 59% | 70.7% | -11.7 p.p. | | Net (Loss) Income | ($64.0 million) | $9.1 million | N/A | | Diluted (Loss) EPS | ($3.19) | $0.45 | N/A | | Adjusted EBITDA | $18.5 million | $16.1 million | +14.9% | | Adjusted Diluted EPS | $0.93 | $0.77 | +20.8% | [Management Commentary](index=1&type=section&id=Management%20Commentary) Management discussed Q3 revenue drivers, strategic reorganization, and future AI-driven initiatives, noting the impact of a significant non-cash impairment charge - Software revenue growth of **6%** was mainly driven by ADMET Predictor®, with modest growth in GastroPlus® and MonolixSuite, offset by a decline in QSP/QST biosimulations software[4](index=4&type=chunk) - Services revenue grew **17%**, but the company experienced project delays and a cancellation from BioPharma clients due to cautious spending, which slowed contractual commitments[4](index=4&type=chunk) - A one-time non-cash impairment charge of **$77.2 million** was recognized to align the book value of assets with their current market value[6](index=6&type=chunk) - The company underwent a strategic reorganization, shifting from a business unit structure to a **functionally-driven operating model** to streamline operations and unlock synergies[7](index=7&type=chunk) - The company is rolling out **new AI-driven initiatives** across its product lines to expand its value proposition and solidify its leadership in model-informed drug development[8](index=8&type=chunk) [Fiscal 2025 Guidance](index=2&type=section&id=Fiscal%202025%20Guidance) Simulations Plus updated its full-year fiscal 2025 guidance, projecting revenue growth between 9% and 14% and an adjusted diluted EPS range Updated Fiscal 2025 Guidance | Metric | Guidance Range | | :--- | :--- | | Revenue | $76M - $80M | | Revenue Growth | 9% - 14% | | Software Mix | 55% - 60% | | Adjusted EBITDA Margin | 23% - 27% | | Adjusted Diluted EPS | $0.93 - $1.06 | Financial Statements [Condensed Consolidated Statements of Operations](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) The income statement shows year-over-year revenue growth but a substantial shift to a net loss due to a significant impairment charge in Q3 FY2025 Selected Income Statement Data (in thousands) | Metric | Three Months Ended May 31, 2025 | Three Months Ended May 31, 2024 | Nine Months Ended May 31, 2025 | Nine Months Ended May 31, 2024 | | :--- | :--- | :--- | :--- | :--- | | Total Revenues | $20,363 | $18,544 | $61,719 | $51,349 | | Gross Profit | $13,032 | $13,257 | $36,377 | $36,326 | | Impairments | $77,221 | $— | $77,221 | $— | | (Loss) Income from Operations | ($74,226) | $1,880 | ($71,388) | $7,282 | | Net (Loss) Income | ($67,317) | $3,137 | ($64,037) | $9,111 | | Diluted (Loss) EPS | ($3.35) | $0.15 | ($3.19) | $0.45 | [Condensed Consolidated Balance Sheets](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) The balance sheet reflects a significant reduction in total assets and shareholders' equity as of May 31, 2025, primarily due to the impairment charge Selected Balance Sheet Data (in thousands) | Metric | May 31, 2025 | August 31, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $26,950 | $10,311 | | Total current assets | $51,775 | $39,341 | | Goodwill | $43,487 | $96,078 | | Total assets | $134,360 | $196,639 | | Total liabilities | $10,581 | $14,208 | | Total shareholders' equity | $123,779 | $182,431 | [Trended Financial Information](index=7&type=section&id=Trended%20Financial%20Information) Quarterly trended data shows revenue fluctuations and a deeply negative operating margin in Q3 FY2025 due to the impairment charge, with services backlog continuing to grow Quarterly Revenue Trend (in millions) | Quarter | Q3 FY24 | Q4 FY24 | Q1 FY25 | Q2 FY25 | Q3 FY25 | | :--- | :--- | :--- | :--- | :--- | :--- | | Total Revenue | $18.544 | $18.664 | $18.924 | $22.432 | $20.363 | Key Performance Metrics Trend | Metric (end of quarter) | Q3 FY24 | Q1 FY25 | Q2 FY25 | Q3 FY25 | | :--- | :--- | :--- | :--- | :--- | | Services Backlog (in millions) | $19.602 | $17.254 | $20.379 | $20.700 | - Revenue from the Americas region was $14.5 million in Q3 FY25, representing the **largest portion of total revenue**[26](index=26&type=chunk) Non-GAAP Financial Measures and Reconciliations [Explanation of Non-GAAP Measures](index=2&type=section&id=Explanation%20of%20Non-GAAP%20Measures) The company uses non-GAAP measures like Adjusted EBITDA and Adjusted Diluted EPS to clarify core operating performance by excluding non-recurring or non-operational items - **Adjusted EBITDA** excludes interest, taxes, amortization, equity-based compensation, goodwill impairment, and other non-recurring or non-operational items[14](index=14&type=chunk) - **Adjusted Net Income and Adjusted Diluted EPS** exclude the same items as Adjusted EBITDA, as well as the income tax effect of these adjustments[15](index=15&type=chunk) - Management uses these non-GAAP measures for **internal planning, evaluating historical performance, and calculating performance-based compensation**[12](index=12&type=chunk) [Reconciliation of Adjusted EBITDA to Net Income](index=8&type=section&id=Reconciliation%20of%20Adjusted%20EBITDA%20to%20Net%20Income) This section reconciles GAAP Net Loss to non-GAAP Adjusted EBITDA for Q3 FY2025, highlighting the impact of the impairment charge and other adjustments Q3 FY2025 Reconciliation of Net Income to Adjusted EBITDA (in millions) | Line Item | Amount | | :--- | :--- | | Net (Loss) Income | $(67.317) | | Impairments | $77.221 | | Depreciation and amortization | $2.318 | | Stock-based compensation | $1.279 | | Provision for income taxes | $(6.727) | | Other Adjustments | $0.663 | | **Adjusted EBITDA** | **$7.437** | [Reconciliation of Adjusted Diluted EPS to Diluted EPS](index=9&type=section&id=Reconciliation%20of%20Adjusted%20Diluted%20EPS%20to%20Diluted%20EPS) This table reconciles GAAP Net Loss to non-GAAP Adjusted Net Income for Q3 FY2025, resulting in a positive Adjusted Diluted EPS despite a GAAP diluted loss Q3 FY2025 Reconciliation of Net Income to Adjusted Net Income (in millions) | Line Item | Amount | | :--- | :--- | | Net (Loss) Income (GAAP) | $(67.317) | | Impairments | $77.221 | | Amortization | $2.165 | | Stock-based compensation | $1.279 | | Tax effect on adjustments | $(5.153) | | Other Adjustments | $0.833 | | **Adjusted Net income (Non-GAAP)** | **$9.028** | Q3 FY2025 EPS vs. Adjusted EPS | Metric | Value | | :--- | :--- | | Diluted EPS (GAAP) | $(3.35) | | Adjusted Diluted EPS (Non-GAAP) | $0.45 | Other Information [About Simulations Plus](index=3&type=section&id=About%20Simulations%20Plus) Simulations Plus provides biosimulation software and consulting services, integrating AI/ML and various modeling approaches for drug discovery and development - The company provides advanced software and consulting services to enhance drug discovery, development, research, clinical trial operations, regulatory submissions, and commercialization[17](index=17&type=chunk) - Solutions integrate artificial intelligence/machine learning (AI/ML) with various pharmacokinetics, biopharmaceutics, and pharmacology/toxicology modeling approaches[17](index=17&type=chunk) [Conference Call Information](index=2&type=section&id=Conference%20Call%20Information) The company will host a conference call and webcast on July 14, 2025, to discuss quarterly performance and forward-looking information - A conference call and webcast will be hosted by the CEO and CFO on July 14, 2025, at 5:00 p.m. Eastern Time to discuss the results[10](index=10&type=chunk) [Forward-Looking Statements](index=3&type=section&id=Forward-Looking%20Statements) This section cautions that the report contains forward-looking statements subject to risks and uncertainties, which could cause actual results to differ significantly - The report contains forward-looking statements involving risks and uncertainties, and **actual future results could differ significantly**[19](index=19&type=chunk) - Key risk factors include the **effectiveness of the new internal structure, maintaining competitive advantages, customer acceptance of new software, and general economic conditions**[19](index=19&type=chunk)