Financial Data and Key Metrics Changes - Revenue for fiscal year 2025 increased by 13% to $79.2 million, while total revenue for the fourth quarter decreased by 6% to $17.5 million [4][10] - Adjusted EBITDA grew by 8%, and adjusted EPS also increased by 8% for the fiscal year [4] - Total gross margin for the fiscal year was 58%, down from 62% in the prior year, with software gross margin at 79% and services gross margin at 30% [13][15] Business Line Data and Key Metrics Changes - Software revenue decreased by 9% in Q4, representing 52% of total revenue, while services revenue decreased by 3%, representing 48% [10] - For the fiscal year, software revenue increased by 12%, accounting for 58% of total revenue, and services revenue increased by 15%, representing 42% [10] - Specific product performance: ADMET Predictor declined by 10% in Q4 but grew by 5% for the fiscal year; GastroPlus declined by 3% in Q4 but grew by 1% for the fiscal year; MonolixSuite grew by 3% in Q4 and 14% for the fiscal year [11] Market Data and Key Metrics Changes - The external environment remained challenging, with client budgets pressured by pharmaceutical headwinds, including tariffs and pricing implementations [4] - Early signs of stabilization were noted as large pharma gained clearer visibility into pricing frameworks and biotech funding improved modestly [5][6] Company Strategy and Development Direction - The company completed a strategic reset, transitioning to a unified operating model to enhance client focus and operational efficiency [4] - The strategy includes building an integrated product ecosystem that combines validated science, cloud-scale performance, and AI capabilities [8][9] - The company aims to support clients through the entire drug development process, from discovery to commercialization, leveraging advancements in AI and cloud computing [6][8] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism about the upcoming fiscal year, noting positive discussions with clients regarding budgeting and proposal activity [21] - The company anticipates that the overall market conditions will resemble those at the end of fiscal year 2025, with potential upside if biotech funding continues to improve [16][43] Other Important Information - The company ended the fiscal year with $32.4 million in cash and short-term investments, remaining well-capitalized with no debt [15][16] - Guidance for fiscal year 2026 includes total revenue between $79 million and $82 million, with year-over-year growth expected between 0% and 4% [16] Q&A Session Summary Question: Update on demand environment and trends - Management noted an uptick in biotech funding and positive budgeting activity for the upcoming year, although caution remains due to potential market surprises [21][22] Question: Feedback on GastroPlus release with AI capabilities - Initial responses to the AI-infused GastroPlus have been positive, with clients eager to leverage new functionalities [24][25] Question: Factors affecting large pharma spending - Management highlighted that large pharma's budgeting cycle is in place, with a cautiously optimistic outlook for increased spending in 2026 [31][32] Question: Guidance assumptions and renewal rates - The guidance assumes continued low to mid-80% renewal rates due to client consolidations and scrutiny of software configurations [70] Question: Pro-ficiency asset performance - Pro-ficiency software revenue declined by 63% in Q4, while service revenue from the acquisition grew by 70% [62][63]

Financial Data and Key Metrics Changes - Revenue for fiscal year 2025 increased by 13% to $79.2 million, while total revenue for Q4 decreased by 6% to $17.5 million [10][11] - Adjusted EBITDA grew by 8%, and adjusted EPS also increased by 8% for the fiscal year [4] - Total gross margin for the fiscal year was 58%, down from 62% in the prior year, with software gross margin decreasing from 84% to 79% [14][16] Business Line Data and Key Metrics Changes - Software revenue for Q4 decreased by 9%, representing 52% of total revenue, while services revenue decreased by 3%, representing 48% of total revenue [10] - For the fiscal year, software revenue increased by 12%, representing 58% of total revenue, and services revenue increased by 15%, representing 42% of total revenue [10] - Discovery products contributed 18% to Q4 software revenue, while development products contributed 77% [10] Market Data and Key Metrics Changes - The company noted early signs of stabilization in the market, with large pharma gaining clearer visibility into pricing frameworks and biotech funding improving modestly [5] - Proposal activity and conference engagement have strengthened, indicating a more confident budgeting cycle among clients [5] Company Strategy and Development Direction - The company completed a strategic reset in 2025, transitioning to a unified operating model that aligns product and technology with client-focused services [4] - The focus is on building an integrated product ecosystem that combines validated science, cloud-scale performance, and AI capabilities [8][9] - The company aims to support clients through the entire drug development process, from discovery to commercialization, leveraging advancements in AI and cloud computing [6][18] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism about the future, noting that while uncertainty persists, there are positive trends in biotech funding and client budgeting [5][18] - The company anticipates a stable operating environment for fiscal year 2026, with revenue guidance set between $79 million and $82 million [17] Other Important Information - The company ended the fiscal year with $32.4 million in cash and short-term investments, remaining well-capitalized with no debt [16] - The effective tax rate for the fiscal year was 7%, with expectations for 12%-14% in fiscal 2026 [16] Q&A Session Summary Question: Update on demand environment and trends affecting bookings and revenue - Management noted an uptick in biotech funding and positive discussions with clients regarding proposals and budgeting for the next year [21][23] Question: Feedback on the AI-infused GastroPlus release - Initial responses have been positive, with clients excited about the new capabilities and how they fit into their internal IT infrastructure [25][26] Question: Factors affecting large pharma spending and potential caution - Management highlighted that each client has unique challenges, but overall budgeting for 2026 appears positive [29][31] Question: Guidance details and underlying assumptions - No significant changes have occurred since the guidance was provided in October, with expectations for a stable revenue flow [36][38] Question: Renewal rates and factors affecting them - Renewal rates have been impacted by client consolidations and budget scrutiny, but management expects improvement as clients have already reviewed their needs [48][50] Question: Proficiency asset performance and revenue contributions - Proficiency software revenue was down 63% in Q4, while services revenue grew 70%, indicating a slowdown in clinical trial starts [55][56] Question: Cash flow outlook and acquisition interest - Cash flow remains robust, and the company is actively looking for acquisition opportunities in biosimulation and clinical operations [62][64] Question: Pricing flexibility and plans for the upcoming year - The company plans to implement more aggressive pricing due to new AI capabilities, but service side pricing will remain competitive [66][68]