Simulations Plus(US:SLP)2025-12-01 23:00Financial 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]