Simulations Plus(SLP) - 2022 Q3 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Condensed Consolidated Financial Statements Presents unaudited condensed consolidated financial statements for Q3 and YTD May 31, 2022, including balance sheets, operations, equity, and cash flows Condensed Consolidated Balance Sheets | (in thousands) | May 31, 2022 | August 31, 2021 | | :--- | :--- | :--- | | Total Current Assets | $144,854 | $139,313 | | Total Assets | $186,223 | $179,978 | | Total Current Liabilities | $5,915 | $11,574 | | Total Liabilities | $8,664 | $14,196 | | Total Shareholders' Equity | $177,559 | $165,782 | - Total assets increased to $186.2 million as of May 31, 2022, from $180.0 million at August 31, 2021, while total liabilities decreased significantly from $14.2 million to $8.7 million, primarily due to the settlement of contracts payable[9] Condensed Consolidated Statements of Operations and Comprehensive Income | (in thousands) | Three Months Ended May 31, 2022 | Three Months Ended May 31, 2021 | Nine Months Ended May 31, 2022 | Nine Months Ended May 31, 2021 | | :--- | :--- | :--- | :--- | :--- | | Total Revenues | $14,959 | $12,777 | $42,172 | $36,625 | | Gross Profit | $12,400 | $10,306 | $34,027 | $28,810 | | Income from Operations | $4,946 | $4,542 | $14,217 | $11,079 | | Net Income | $4,087 | $3,787 | $11,522 | $9,477 | | (per share) | Three Months Ended May 31, 2022 | Three Months Ended May 31, 2021 | Nine Months Ended May 31, 2022 | Nine Months Ended May 31, 2021 | | :--- | :--- | :--- | :--- | :--- | | Diluted EPS | $0.20 | $0.18 | $0.56 | $0.46 | Condensed Consolidated Statements of Cash Flows | (in thousands) | Nine Months Ended May 31, 2022 | Nine Months Ended May 31, 2021 | | :--- | :--- | :--- | | Net cash provided by operating activities | $9,973 | $10,930 | | Net cash provided by investing activities | $2,002 | $865 | | Net cash used in financing activities | $(6,606) | $(2,191) | | Net increase in cash and cash equivalents | $5,369 | $9,604 | - For the nine months ended May 31, 2022, cash used in financing activities increased significantly to $6.6 million, primarily due to $3.7 million in payments on contracts payable related to the Lixoft acquisition and $3.6 million in dividend payments[16][163] Notes to Condensed Consolidated Financial Statements Provides detailed information on accounting policies, revenue recognition, segment reporting, shareholder equity, and commitments - As of May 31, 2022, the company had remaining performance obligations of approximately $13.2 million, with 89% expected to be recognized as revenue over the next 12 months[25] - The company's goodwill balance of $12.9 million is attributed to the Cognigen, DILIsym, and Lixoft reporting units, with no impairment charges recognized during the period[48][49] - In May 2022, the final earnout and holdback payments for the Lixoft acquisition were settled, resulting in the contracts payable liability being reduced to zero[53][73][74] | (in thousands) | Nine Months Ended May 31, 2022 | Nine Months Ended May 31, 2021 | | :--- | :--- | :--- | | Software Revenue | $26,767 | $22,337 | | Services Revenue | $15,405 | $14,288 | | Total Revenue | $42,172 | $36,625 | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management analyzes financial performance for Q3 and YTD FY2022, covering revenue, gross profit, operating expenses, liquidity, and cash flows Results of Operations Q3 2022 revenue grew 17% to $15.0 million and net income rose 8% to $4.1 million, driven by software and services growth, with increased SG&A expenses Comparison of Three Months Ended May 31 | (in thousands) | 2022 | 2021 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Revenue | $14,959 | $12,777 | $2,182 | 17% | | Gross Profit | $12,400 | $10,306 | $2,094 | 20% | | Net Income | $4,087 | $3,787 | $300 | 8% | Comparison of Nine Months Ended May 31 | (in thousands) | 2022 | 2021 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Revenue | $42,172 | $36,625 | $5,547 | 15% | | Gross Profit | $34,027 | $28,810 | $5,217 | 18% | | Net Income | $11,522 | $9,477 | $2,045 | 22% | - Selling, general, and administrative (SG&A) expenses increased by $1.7 million (33%) for the three months ended May 31, 2022, primarily due to higher personnel costs ($537k), travel costs ($193k), and insurance expense ($154k)[126] Segment Results of Operations by Business Unit Software revenue increased 16% in Q3 and 20% YTD, while Services revenue grew 19% in Q3 and 8% YTD, driven by specific product and consulting services - For the three months ended May 31, 2022, Software revenue grew 16% YoY, largely due to a $1.0 million increase in GastroPlus sales[142][145] - Services revenue for the third quarter increased by 19% YoY, driven by growth in PBPK services ($612k) and PKPD services ($557k)[142][146] Liquidity and Capital Resources The company maintains a strong financial position with $42.4 million cash, $80.1 million short-term investments, and $138.9 million working capital, completing Lixoft acquisition payments - As of May 31, 2022, the company had $42.4 million in cash and cash equivalents, $80.1 million in short-term investments, and $138.9 million in working capital[152] - In April and May 2022, the company settled the final holdback and earnout considerations for the Lixoft acquisition, paying a total of $5.5 million ($3.6M cash, $1.9M stock)[154] - Net cash provided by operating activities was $10.0 million for the nine months ended May 31, 2022, a slight decrease from $10.9 million in the prior year period[159][160] Item 3. Quantitative and Qualitative Disclosures about Market Risk No material changes in market risk exposure since the Annual Report on Form 10-K for fiscal year ended August 31, 2021 - As of May 31, 2022, there has been no material change in the company's exposure to market risk from that described in its most recent Annual Report[172] Item 4. Controls and Procedures Management concluded disclosure controls and procedures were effective as of May 31, 2022, with no material changes to internal control over financial reporting - Based on an evaluation as of May 31, 2022, management concluded that the company's disclosure controls and procedures were effective[173] - No material changes to the company's internal controls over financial reporting were identified during the most recent fiscal quarter[174] PART II. OTHER INFORMATION Item 1. Legal Proceedings The company is not a party to any material legal proceedings and is unaware of any pending or threatened actions - The company is not a party to any material legal proceedings[84][177] Item 1A. Risk Factors Updates risk factors, highlighting new risks from economic uncertainty, geopolitical instability, and inflation's potential impact on cost structure - The company identifies new risks related to economic uncertainty and capital market disruption stemming from geopolitical instability, specifically the military conflict between Russia and Ukraine[179] - Inflation is cited as a potential risk that could adversely affect business and financial results by increasing the overall cost structure, which may not be fully offset by price increases[182] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds Reports issuance of $1.9 million in unregistered common stock in April and May 2022 to former Lixoft shareholders for holdback and earnout payments - On April 1, 2022, the company released 20,326 unregistered shares valued at $0.7 million as part of a holdback payment to former Lixoft shareholders[183] - On May 5, 2022, the company issued 23,825 unregistered shares valued at $1.2 million as part of an earnout payment to former Lixoft shareholders[184] Item 3. Defaults upon Senior Securities The company reports no defaults upon senior securities - None[186] Item 6. Exhibits Lists all exhibits filed with Form 10-Q, including agreements and certifications by CEO and CFO as per Sarbanes-Oxley Act - The report includes certifications from the CEO and CFO pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002[190]