Simulations Plus(SLP) - 2025 Q3 - Quarterly Results

Financial Performance and Outlook Third Quarter 2025 Financial Highlights 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][6] Nine Months 2025 Financial Highlights 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 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] - 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] - 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] - 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] - 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] Fiscal 2025 Guidance 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 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 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 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] Non-GAAP Financial Measures and Reconciliations Explanation of Non-GAAP Measures 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] - 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] - Management uses these non-GAAP measures for internal planning, evaluating historical performance, and calculating performance-based compensation[12] Reconciliation of Adjusted EBITDA to Net Income 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 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 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] - Solutions integrate artificial intelligence/machine learning (AI/ML) with various pharmacokinetics, biopharmaceutics, and pharmacology/toxicology modeling approaches[17] Conference Call Information 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] Forward-Looking Statements 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] - Key risk factors include the effectiveness of the new internal structure, maintaining competitive advantages, customer acceptance of new software, and general economic conditions[19]