Simulations Plus(US:SLP)2026-01-08 23:00Financial 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]