Simulations Plus(US:SLP)2024-10-24 03:55Financial Data and Key Metrics Changes - Total revenue increased by 18% year-over-year to $70 million, with a 14% organic growth rate excluding Pro-ficiency's contribution [4][16] - Full year diluted EPS was $0.49, exceeding the guidance range of $0.46 to $0.48 [4][23] - Total revenue for Q4 was $18.7 million, a 19% increase, including a $2.3 million contribution from Pro-ficiency [16][20] Business Line Data and Key Metrics Changes - Software revenue grew by 12% for the fiscal year, representing 59% of total revenue, while services revenue grew by 26%, representing 41% of total revenue [16][23] - In Q4, software revenue increased by 6%, but decreased by 6% on an organic basis; services revenue grew by 39%, 21% on an organic basis [9][11] - The Clinical Pharmacology and Pharmacometrics (CPP) business unit revenue grew by 18% for the fiscal year and 20% in Q4 [9][12] Market Data and Key Metrics Changes - The macro environment for pharma and biotech remains cost and funding constrained, but leading indicators suggest a potentially improved environment for the next year [8] - The company observed a wide range of activity levels among clients, with some positive initial budget discussions for 2025 [8] Company Strategy and Development Direction - The company aims to enhance its competitive edge through major upgrades across its biosimulation software tools, including the release of GPX and Monolix Sweet 2024 [5][6] - The acquisition of Pro-ficiency is expected to double the total addressable market (TAM) to $8 billion, significantly expanding market opportunities [7][24] - The company plans to focus on completing the integration of Pro-ficiency and expanding cross-selling opportunities while targeting an adjusted EBITDA margin of 31% to 33% for fiscal 2025 [24][25] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism regarding the operating environment, with guidance for fiscal year 2025 indicating organic growth of 10% to 15% [8][24] - The company is prepared to take advantage of any improvements in client spending during the year [8] Other Important Information - The company ended the fiscal year with $20 million in cash and investments, remaining well-capitalized with no debt [23] - The integration of Pro-ficiency is progressing ahead of expectations, with a focus on enhancing products and services [15][24] Q&A Session Summary Question: Update on staffing and services - Management acknowledged that low attrition rates have impacted margins and adjusted recruiting plans to align capacity with revenue streams in fiscal 2025 [27][28] Question: Competitive moat of Pro-ficiency - Management clarified that Pro-ficiency complements CRO services and is positioned uniquely in the market, with clinical trial uptick expected to benefit its business [28][29] Question: Contribution of Immunetrics and Pro-ficiency to total sales in Q4 - Pro-ficiency contributed approximately $2.1 million in Q4, lower than expected due to project revenue recognition timing [30][31] Question: EPS guidance for next year - Management explained the difference between adjusted diluted EPS and diluted EPS, emphasizing the exclusion of transaction-related expenses in the guidance for fiscal 2025 [34][35] Question: Integration update on Pro-ficiency - Management confirmed that sales and marketing teams have been integrated and training is underway to leverage new products and services [38][39] Question: Software revenue growth and challenges - Management noted that software revenue was down in Q4 due to renewal slippages and challenges in the Asian market, but overall growth for the year was 12% [42][43] Question: Service gross margin and clinical trial activity - Management indicated that Pro-ficiency supports a variety of clinical trials without concentration in specific therapeutic areas, and service margins are expected to improve [46][47]