Simulations Plus(US:SLP)2025-12-01 21:16Revenue and Financial Performance - The software business accounted for 58% of total revenue for the fiscal year ended August 31, 2025[33]. - The services business represented 42% of total revenue for the fiscal year ended August 31, 2025, an increase from 39% in 2023[47]. - Software revenue accounted for 58% of total revenue in fiscal year 2025, down from 61% in 2023[52]. - Revenue increased by $9.2 million, or 13%, to $79.2 million for the fiscal year ended August 31, 2025, compared to $70.0 million for the fiscal year ended August 31, 2024[206]. - Cost of revenues increased by $6.1 million, or 23%, primarily due to a $3.2 million or 49% increase in software-related costs and a $2.9 million or 14% increase in service-related costs[207]. - Gross profit increased by $3.1 million, or 7%, to $46.2 million, with gross margin percentages of 58% for 2025 and 62% for 2024, indicating a decline in gross margin[208]. - The company reported a net loss of $64.7 million for the fiscal year ended August 31, 2025, compared to a net income of $9.9 million for the fiscal year ended August 31, 2024, representing a decline of 750%[205]. - The company incurred $77.2 million in impairments for the fiscal year ended August 31, 2025, which significantly impacted overall financial performance[205]. - Other income decreased by $4.9 million, or 78%, to $1.4 million for the fiscal year ended August 31, 2025, compared to $6.3 million for the fiscal year ended August 31, 2024[205]. Product Development and Innovation - Version 13 of ADMET Predictor was released in June 2025, introducing new features including OBESITYsym™ and Thales™[35]. - GastroPlus version 10 (branded as GPX™) was released in May 2024, featuring a redesigned platform with advanced models and integrated ML technology[38]. - The ADMET Predictor software predicts over 175 different properties for molecular structures, enhancing drug discovery efficiency[33]. - The company has made significant investments in improving integration of its software models and enhancing its AI/ML engine[37]. - The company supports clients in drug development from early discovery through clinical trials to commercialization[23]. - The company aims to derive more revenues from existing clients by expanding their use of products and services[100]. Strategic Initiatives and Collaborations - The company has entered collaborations for validation of ADMET Predictor models and development of new AI drug discovery offerings[39]. - The company pivoted to an account-based solution selling business model during Q4 2025, focusing on client pain points across the drug development lifecycle[55]. - The company is actively seeking strategic acquisitions to expand its pharmaceutical software portfolio and services offerings[60]. - The company has developed products internally and intends to continue licensing or acquiring technology from third parties when it makes business sense[64]. Employee Engagement and Corporate Culture - The company employed 213 people as of August 31, 2025, with over 70% having backgrounds in life sciences software, services, and R&D[71]. - The voluntary turnover rate was under 6% in fiscal year 2024, indicating strong employee engagement[72]. - The company plans to place greater emphasis on leadership development and succession planning in the coming year[76]. - The company maintains a remote-first philosophy to support employee work-life balance[89]. - The company has a paid parental leave program and increased focus on physical and mental wellness for employees[92]. Risks and Challenges - The company faces risks from increasing competition and costs in the pharmaceutical and biotechnology industries[102]. - The life science market for modeling and simulation software is highly competitive, with significant pressure from larger technology companies and open-source alternatives[105]. - The lengthy sales cycle may lead to delays in recognizing revenue, negatively impacting financial results if contracts are not finalized[110]. - Fixed-price contracts pose financial risks, including potential losses from underpricing or overrunning cost estimates[111]. - The company faces risks associated with global operations, including currency fluctuations and political instability, which could adversely affect financial results[114]. - Changes in U.S. and international tax laws could negatively impact the company's effective tax rate and overall financial results[115]. - The company is dependent on key personnel, and the loss of these employees could harm business operations[122]. - Acquisitions and strategic alliances carry risks, including integration challenges and potential undiscovered liabilities[123]. - The company faces foreign currency exchange rate risks due to international operations, which could materially affect revenues and profit margins[126]. - The reliance on a single internal hosting facility and Amazon Web Services for operations poses risks; disruptions could adversely impact business[139]. Compliance and Governance - The company is committed to strong corporate governance practices, with a diverse Board of Directors overseeing risk management[94]. - The company emphasizes the importance of data security and compliance with various data privacy laws, including the EU GDPR and China's PIPL[92]. - The company has implemented a comprehensive data privacy management program to comply with evolving data privacy laws globally[138]. - Changes in data privacy laws could impose additional compliance costs and operational complexities for the company[136]. - The company has established a comprehensive cybersecurity program to address risks and ensure compliance with legal obligations, guided by industry best practices[174]. - As of the report date, there are no known cybersecurity incidents that have materially impacted the company's financial condition[177]. Financial Management and Shareholder Value - The company has suspended quarterly dividends on common stock to reinvest in the business, with no expectation of future dividends[157]. - The company has authorized a share repurchase program of up to $50 million, with $20 million already repurchased as of May 31, 2023[165]. - The company may need to raise additional capital, which could dilute existing shareholders and impact stock price[163]. - The company's stock price may be volatile due to various factors, including market conditions and operational performance[160]. - The company’s ability to maintain effective internal controls over financial reporting may be challenged as it grows through acquisitions[156].