Simulations Plus(US:SLP)2023-04-06 00:09Financial Data and Key Metrics Changes - Total revenue increased by 6% year-over-year, with software revenue growing by 7% and services revenue by 4% [53][40] - Net income decreased by 5% to $4.2 million, with diluted earnings per share at $0.20 [65] - Adjusted EBITDA was $6.2 million, with an adjusted EBITDA margin of 40%, compared to $7.2 million and 48% margin last year [65] - SG&A expenses rose to $7.8 million, or 49% of revenue, compared to $5.6 million, or 38% of revenue last year [26] Business Line Data and Key Metrics Changes - Software represented 60% of revenue during the year, with a gross margin of 83% for the quarter [21] - GastroPlus accounted for 55% of software revenue, with an 18% growth in the second quarter [22][31] - MonolixSuite revenue declined by 8% due to software harmonization and foreign exchange impacts, but new customer additions were noted [32] - ADMET Predictor saw a 2% revenue decline, with one new commercial customer added [33] Market Data and Key Metrics Changes - The customer renewal rate was 94% based on fees and 80% based on accounts, reflecting the impact of smaller biotech customer non-renewals [47] - The services revenue breakdown for the quarter included 50% from PKPD services and 20% from QSP/QST services [48] - The backlog for services grew to $15.4 million, indicating operational momentum [35] Company Strategy and Development Direction - The company is focused on internal investment for organic growth, corporate development for inorganic growth, and returning capital to shareholders [37] - An accelerated share repurchase program was initiated, with a $20 million ASR expected to conclude in the third quarter [38] - The company aims for 10% to 15% organic revenue growth for the fiscal year, translating to $59.3 million to $62 million [38] Management's Comments on Operating Environment and Future Outlook - Management noted that the sales cycle is being impacted by economic concerns, particularly for smaller biotech clients [30][61] - The renewal harmonization initiative is expected to yield efficiency benefits, with minimal impact on year-over-year software revenue growth anticipated [29] - Management expressed confidence in achieving full-year guidance despite economic challenges [77][79] Other Important Information - The company is investing in R&D to maintain its leadership position and expand industry collaborations [78] - The company has submitted four FDA grant applications to enhance modeling functionalities [55] Q&A Session Summary Question: Could you provide an estimate of the expected EPS impact from the buyback this year? - The ASR is expected to improve EPS by about $0.01, which is included in the guidance [41] Question: What therapeutic verticals showed strength or weakness in the quarter? - The service revenue drop was primarily in the QSP/QST consulting business, with no significant changes in oncology and neuroscience spending [57] Question: Is the renewal timing changes affecting the revenue growth? - Yes, the renewal timing changes have impacted revenue delivery, but the company is managing through it [80][81] Question: How is the company addressing the churn in small biotech accounts? - Churn continues into the third quarter, with larger companies also experiencing slowdowns, but discussions for potential funding are ongoing [102]