Core Insights - Simulations Plus, Inc. (SLP) reported first-quarter fiscal 2026 adjusted earnings of 13 cents per share, missing the Zacks Consensus Estimate by 27.8% and down from 17 cents in the prior-year quarter [1][12] - Quarterly revenues decreased by 3% year over year to $18.4 million, with software revenue declining amid strong service momentum, although the top line exceeded the consensus mark by 2% [2][12] Revenue Breakdown - Software revenues, accounting for 48% of total revenues, fell 17% year over year to $8.9 million, primarily due to challenging market conditions and client consolidation [5][12] - Services revenues, which made up 52% of total revenues, increased by 16% to $9.5 million, driven by strong performance in the MedCom business [7][12] Client and Market Dynamics - SLP ended the quarter with 302 commercial clients, generating an average revenue of $97,000 per client and maintaining an 88% renewal rate [6] - Management expressed confidence in the remainder of fiscal 2026, citing strong bookings, annual software price increases, and improving funding conditions for biopharma clients [3][12] Financial Metrics - The gross margin for the quarter was 59%, up from 54% in the prior-year quarter, with software segment gross margin at 84% and services gross margin at 36% [8][9] - Adjusted EBITDA declined to $3.5 million from $4.5 million in the prior-year quarter, with an adjusted EBITDA margin of 19% compared to 24% previously [9][10] Guidance and Outlook - SLP reaffirmed its fiscal 2026 revenue guidance, expecting revenues between $79 million and $82 million, indicating a 0-4% increase from fiscal 2025 [14] - The company anticipates adjusted earnings per share to be between $1.03 and $1.10, with an adjusted EBITDA margin between 26% and 30% [14]

Frederick broke down software revenue contributions by product category for the quarter. Development products—primarily GastroPlus and MonolixSuite—accounted for 81% of software revenue, while discovery products (primarily ADMET Predictor) were 15% and clinical operations products (primarily Pro-ficiency) were 4%.Adjusted profitability metrics were described as in line with expectations. O’Connor said adjusted EBITDA was $3.5 million and adjusted EPS was $0.13 for the quarter.Chief Executive Officer Shawn O ...

Financial Data and Key Metrics Changes - Total revenue decreased by 3% to $18.4 million, with adjusted EBITDA at $3.5 million and adjusted EPS at $0.13, aligning with internal expectations [4][8] - Total gross margin improved to 59%, with software gross margin at 84% and services gross margin at 36%, compared to 54%, 75%, and 26% respectively in the prior period [10][11] - The company ended the quarter with $35.7 million in cash and short-term investments, maintaining a strong capital position with no debt [11] Business Line Data and Key Metrics Changes - Software revenue decreased by 17%, contributing 48% to total revenue, while services revenue increased by 16%, contributing 52% [8] - Discovery products accounted for 15% of software revenue, development products for 81%, and clinical ops products for 4% [8] - Services revenue from development, including biosimulation services, represented 71% of services revenue, while commercialization services accounted for 29% [9] Market Data and Key Metrics Changes - The company reported an 88% renewal rate for the quarter, with an average revenue per client of $97,000 [8] - The ending backlog for services increased by 18% to $20.4 million from $17.3 million last year, indicating a healthy pipeline of projects [9] Company Strategy and Development Direction - The company aims to advance towards an integrated product ecosystem combining validated science, cloud-scale performance, and AI-driven modeling [5][6] - Strategic acquisitions and ongoing investment in science are key to broadening the company's reach and impact in the market [13][14] Management's Comments on Operating Environment and Future Outlook - Management noted positive trends in the macro environment, including improved biotech funding and reduced tariff threats, which are expected to positively impact client budgets [4][16] - There is optimism regarding increased spending from clients, with a backlog of projects ready to be initiated [17] Other Important Information - The company maintains its guidance for fiscal year 2026, projecting total revenue between $79-$82 million and adjusted EBITDA margin between 26%-30% [11] - The company is focused on enhancing AI capabilities within its product offerings, which is expected to contribute to pricing flexibility and license renewals [62] Q&A Session Summary Question: Can you provide more details on the positive commentary regarding Most Favored Nations and lower tariff risks? - Management indicated that stabilization in pricing agreements and reduced tariff discussions have positively impacted client budget preparations, leading to increased contract activity [16][17] Question: What is the expected mix cadence for software in the remaining quarters? - Management confirmed no change in guidance for software service mix, with expectations for stronger performance in the second and third quarters due to seasonal renewals [24][25] Question: Did consolidation in large pharma impact software renewals in the first quarter? - Management noted that while consolidation is a headwind, there was no significant impact on the first quarter results, and the outlook remains stable [27][28] Question: How is the integration of AI going with the core platform? - Initial AI features have received favorable responses, and the company plans to monetize these advancements through pricing adjustments and new modules [62] Question: What is the outlook for commercialization services? - The medical communications segment, which is part of the Pro-ficiency acquisition, showed strong growth and is expected to continue performing well in fiscal year 2026 [52][54]

Financial Data and Key Metrics Changes - Total revenue decreased by 3% to $18.4 million, with adjusted EBITDA at $3.5 million and adjusted EPS at $0.13 [4][8] - Total gross margin improved to 59%, with software gross margin at 84% and services gross margin at 36%, compared to 54%, 75%, and 26% respectively in the prior period [10][11] - The company ended the quarter with $35.7 million in cash and short-term investments, remaining well-capitalized with no debt [11] Business Line Data and Key Metrics Changes - Software revenue decreased by 17%, contributing 48% to total revenue, while services revenue increased by 16%, contributing 52% [8] - Discovery products accounted for 15% of software revenue, development products for 81%, and clinical ops products for 4% [8] - Services revenue from development, including biosimulation services, represented 71% of services revenue, while commercialization services represented 29% [9] Market Data and Key Metrics Changes - The company reported an 88% renewal rate for the quarter, with an average revenue per client of $97,000 [8] - The ending backlog for services increased by 18% to $20.4 million from $17.3 million last year, indicating a healthy pipeline of services projects [9] Company Strategy and Development Direction - The company aims to advance towards an integrated product ecosystem combining validated science, cloud-scale performance, and AI-driven services [5][6] - Strategic acquisitions and ongoing investment in science are key to broadening the company's reach and impact in the market [13][14] Management's Comments on Operating Environment and Future Outlook - Management noted positive trends in the macro environment, including improved biotech funding and reduced tariff threats, which are expected to positively impact client budgets [4][16] - There is optimism regarding increased spending from clients, which is anticipated to lead to higher software activity following the uptick in services [4][17] Other Important Information - The company maintains its guidance for fiscal year 2026, projecting total revenue between $79-$82 million and adjusted EBITDA margin between 26%-30% [11] - The company is focused on enhancing its AI capabilities and integrating them into its product offerings, which is expected to provide pricing flexibility and improve client engagement [62] Q&A Session Summary Question: Can you provide more details on the positive commentary regarding Most Favored Nations and its impact on customer budgets? - Management indicated that stabilization in pricing agreements and reduced tariff risks are positively impacting client budget discussions, leading to increased proposals for next year [16][17] Question: What is the expected mix cadence for software in the remaining quarters? - Management confirmed no change in guidance for software service mix, with expectations for stronger performance in the second and third quarters due to seasonal renewals [24][25] Question: Did consolidation in large pharma impact software renewals in the first quarter? - Management noted that while consolidation is a headwind, there was no significant impact on the first quarter results, and the outlook remains stable [27][28] Question: How is the integration of AI features progressing? - Initial responses to AI features have been favorable, with plans for monetization through modules and new products in the future [62] Question: What is the outlook for the commercialization services growth? - Management reported strong performance in medical communications, which is expected to continue positively in fiscal year 2026 [52][54]

Financial Data and Key Metrics Changes - Total revenue decreased by 3% to $18.4 million, with adjusted EBITDA at $3.5 million and adjusted EPS at $0.13 [4][8] - Total gross margin improved to 59%, with software gross margin at 84% and services gross margin at 36%, compared to 54%, 75%, and 26% respectively in the prior period [10][11] - The company ended the quarter with $35.7 million in cash and short-term investments, maintaining a strong capital position with no debt [11] Business Line Data and Key Metrics Changes - Software revenue decreased by 17%, contributing 48% of total revenue, while services revenue increased by 16%, contributing 52% of total revenue [8] - Discovery products accounted for 15% of software revenue, development products for 81%, and clinical ops products for 4% [8] - Services revenue from development services represented 71% and commercialization services represented 29% of total services revenue [9] Market Data and Key Metrics Changes - The company reported an 88% renewal rate for the quarter, with an average revenue per client of $97,000 [8] - The ending backlog for services increased by 18% to $20.4 million from $17.3 million last year, indicating a healthy pipeline of services projects [9] Company Strategy and Development Direction - The company aims to advance towards an integrated product ecosystem combining validated science, cloud-scale performance, and AI-driven services [5][13] - Strategic acquisitions and ongoing investment in scientific engines are key to broadening the company's reach and impact in the market [13] Management's Comments on Operating Environment and Future Outlook - Management noted positive trends in the macro environment, including the stabilization of Most Favored Nation pricing agreements and an improving biotech funding environment [4] - There is optimism regarding increased client spending, which is expected to lead to higher software activity in the future [4][17] Other Important Information - The company maintains its fiscal year 2026 guidance for total revenue between $79-$82 million, with year-over-year revenue growth between 0-4% [11] - The company plans to hold an investor day on January 21st to provide more insights into its strategy and product roadmap [67] Q&A Session Summary Question: Can you provide more details on the positive commentary regarding Most Favored Nations and lower tariff risks? - Management indicated that stabilization in pricing agreements and reduced tariff threats are positively impacting client budgets, leading to increased proposals and contracts [16][17] Question: What is the expected mix cadence for software in the remaining quarters? - Management confirmed no change in guidance for software service mix, with expectations for stronger performance in the second and third quarters due to seasonal renewals [24][25] Question: Did consolidation in large pharma impact software renewals in the first quarter? - Management noted no significant impact from consolidation in the first quarter, with expectations that the current acquisition activity will not heavily affect renewals [26][28] Question: How is the integration of AI with the core platform progressing? - Initial AI features have received favorable responses, and the company is exploring monetization opportunities through new modules and pricing adjustments [62] Question: Is the growth in commercialization services mainly from Pro-ficiency? - Yes, the growth in commercialization services is attributed to the Pro-ficiency acquisition, particularly in medical communications [52][54]

Company Overview - Simulations Plus, Inc. (SLP) operates as a pure-play in silico platform focused on model-informed, non-animal drug development [1] - The company integrates software systems with services tailored for clients, enhancing drug development processes [1] Product and Service Offerings - SLP provides a range of software products including GastroPlus, ADMET Predictor, MonolixSuite, DILIsym, and NAFLDsym [1] - The company also offers services in quantitative systems pharmacology (QSP) modeling, clinical pharmacology, training, and medical communications [1]

Company Overview - Simulations Plus, Inc. (SLP) operates as a pure-play in silico platform focused on model-informed, non-animal drug development [1] - The company integrates software systems with services tailored for clients, enhancing drug development processes [1] Product and Service Offerings - SLP provides a range of software products including GastroPlus, ADMET Predictor, MonolixSuite, DILIsym, and NAFLDsym [1] - The company also offers services in quantitative systems pharmacology (QSP) modeling, clinical pharmacology, training, and medical communications [1]

Core Insights - Simulations Plus, Inc. (SLP) reported adjusted earnings of 10 cents per share for Q4 fiscal 2025, matching the Zacks Consensus Estimate but down from 18 cents in the prior year [1] - Quarterly revenues decreased by 6% year over year to $17.5 million, primarily due to reduced software revenues, although this figure met consensus expectations [2][9] - The company achieved a full-year revenue growth of 13% to $79.2 million for fiscal 2025, despite facing near-term challenges [3][9] Financial Performance - Software revenues, which accounted for 52% of total quarterly revenues, fell by 9% year over year to $9 million, influenced by tough market conditions and customer consolidation [5] - Services revenues, making up 48% of total revenues, decreased by 3% to $8.4 million, with a significant drop in QSP services [7] - Gross profit for the quarter was $9.8 million, yielding a gross margin of 56%, compared to $6.8 million and a margin of 37% in the prior year [10] Customer and Market Dynamics - The company closed the quarter with 311 commercial customers, generating an average revenue of $94,000 per client and maintaining an 83% renewal rate [6] - The backlog of service projects grew by 28% year over year to $18 million, with approximately 90% expected to convert to revenue within a year [7] Future Outlook - For fiscal 2026, management anticipates low single-digit revenue growth, projecting revenues between $79 million and $82 million, which represents a year-over-year increase of 0-4% [12] - Adjusted earnings per share are estimated to be in the range of $1.03 to $1.10, with an adjusted EBITDA margin expected between 26% and 30% [13]

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 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 decreasing from 84% to 79% [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%, accounting for 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; Monolith Suite grew by 3% in Q4 and 14% for the fiscal year [11] 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][6] - 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 fiscal 2025, transitioning to a unified operating model that aligns product and technology with client-focused services [4] - The focus for fiscal 2026 includes enhancing biosimulation capabilities, integrating AI into workflows, and developing a connected ecosystem of products [8][9] - The company aims to support clients through discovery, clinical development, and commercialization with a modern, interoperable biosimulation ecosystem [8][9] 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][6] - The company anticipates a stable operating environment for fiscal 2026, with guidance for total revenue between $79 million and $82 million, reflecting year-over-year growth of 0%-4% [16] 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] - The effective tax rate for the fiscal year was 7%, with expectations for fiscal 2026 to be in the range of 12%-14% [15] Q&A Session Summary Question: Update on demand environment and trends - Management noted an uptick in biotech funding and positive discussions with clients regarding proposals and budgeting for the next year [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 AI capabilities [24][25] Question: Factors affecting large pharma spending - Management indicated that while there are positive trends, caution remains due to individual client circumstances and the overall budgeting cycle [31][32] Question: Guidance assumptions and potential biotech recovery - The guidance assumes continued cautious optimism in biotech funding but does not project a significant uptick in revenue from this sector for 2026 [43][44] 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 module needs [52][54] Question: Proficiency asset performance - Proficiency software revenue declined by 63% in Q4, while Med-Com services grew by 70%, indicating mixed performance post-acquisition [62][63] 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 [72][73] Question: Pricing flexibility and plans for 2026 - The company plans to implement more aggressive pricing due to new AI capabilities, with expectations for a positive impact on renewal rates [76][77]