Simulations Plus Reports Second Quarter Fiscal 2024 Financial Results

Rhea-AI Summary

Simulations Plus (SLP) reports strong financial results for Q2 fiscal 2024, with total revenue of $18.3 million and diluted EPS of $0.20. The company maintains full-year revenue guidance of $66 to $69 million and EPS guidance of $0.66 to $0.68. Revenue increased by 16% compared to Q2 2023, driven by growth in software and services segments. The company's management remains optimistic about future demand and strategic investments.

Positive

• Strong financial performance in Q2 fiscal 2024 with total revenue of $18.3 million and diluted EPS of $0.20
• Maintains full-year revenue guidance of $66 to $69 million and EPS guidance of $0.66 to $0.68
• Total revenue increased by 16% compared to Q2 2023, driven by growth in software and services segments
• Encouraging signs in biotech funding and market improvement for pharmaceutical companies
• Launch of corporate development initiative to focus on strategic investments and partnerships in early-stage technology companies
• Declaration of a cash dividend of $0.06 per share of common stock

Negative

• None.

Insights

Financial Analyst

Simulations Plus, Inc.'s recent financial report demonstrates a robust growth trajectory, with a 16% increase in total revenue and an 11% increase in software revenue. The company's ability to maintain a high gross margin of 72% is particularly impressive, indicating strong pricing power and cost management. The 27% increase in services revenue suggests a successful expansion in areas like Quantitative Systems Pharmacology (QSP) and Physiologically Based Pharmacokinetics (PBPK), which are increasingly important in the pharmaceutical industry.

From a valuation perspective, the company's guidance for a 35-39% increase in diluted EPS is a positive signal for investors, reflecting confidence in the company's profitability. However, the net income's slight decrease compared to the previous year warrants attention to ensure it is not indicative of a trend. The dividend declaration further reinforces the company's financial stability and its commitment to returning value to shareholders.

Pharmaceutical Industry Analyst

The pharmaceutical sector is highly reliant on innovative technologies like those provided by Simulations Plus. The company's focus on modeling and simulation software is critical for drug development and their sustained growth in this area is indicative of the increasing importance of such tools. The addition of a new AI biotech customer and the adoption of their ADMET Predictor® platform suggest a strong competitive position in the market.

Furthermore, the company's strategic initiative to invest in early-stage technology companies could be a catalyst for future growth. By positioning itself at the forefront of innovation, Simulations Plus may benefit from early access to cutting-edge technologies, potentially driving long-term growth. However, this strategy also introduces risks associated with early-stage investments, which typically have higher failure rates.

Market Research Analyst

The company's performance must be contextualized within the broader biotech funding environment, which has shown signs of improvement since the beginning of 2024. This is likely contributing to the increased demand for Simulations Plus's services. The company's guidance suggests a cautious yet optimistic outlook, likely factoring in the volatile nature of pharmaceutical funding.

The focus on Environmental, Social and Governance (ESG) efforts is also a strategic move, as investors increasingly value corporate responsibility. By aligning its operations with these principles, Simulations Plus may enhance its corporate image and appeal to a broader investor base, which could have positive implications for stock performance.

Total revenue of $18.3 million and diluted earnings per share (EPS) of $0.20

Maintains full-year revenue guidance of $66 to $69 million (+10-15%) and EPS guidance of $0.66 to $0.68

LANCASTER, Calif.--(BUSINESS WIRE)-- Simulations Plus, Inc. (NASDAQ: SLP) (“Simulations Plus”), a leading provider of modeling and simulation software and services for pharmaceutical safety and efficacy, today reported financial results for its second quarter fiscal 2024, ended February 29, 2024.

Second Quarter 2024 Financial Highlights (compared to second quarter 2023)

• Total revenue increased 16% to $18.3 million
• Software revenue increased 11% to $11.6 million, representing 63% of total revenue
• Services revenue increased 27% to $6.7 million, representing 37% of total revenue
• Gross profit increased to $13.2 million; gross margin was 72%
• Adjusted EBITDA of $7.1 million, representing 39% of total revenue
• Net income of $4.0 million and diluted earnings per share (EPS) of $0.20 versus net income of $4.2 million and diluted EPS of $0.20

Six Months 2024 Financial Highlights (compared to six months 2023)

• Total revenue increased 18% to $32.8 million
• Software revenue increased 16% to $19.2 million
• Services revenue increased 22% to $13.6 million
• Gross profit increased 3% to $23.1 million; gross margin was 70%
• Adjusted EBITDA of $10.5 million, representing 32% of total revenue
• Net income of $6.0 million and diluted EPS of $0.29 versus net income of $5.4 million and diluted EPS of $0.26

Management Commentary

“Our second quarter results reflected strong performance in both our software and services segments,” said Shawn O’Connor, Chief Executive Officer of Simulations Plus. “Total revenue increased 16%, driven by higher software revenues in our Clinical Pharmacology & Pharmacometrics (CPP) business unit and the Cheminformatics business unit, whose ADMET Predictor^® platform continued to gain adoption and added another new Artificial Intelligence (AI) biotech customer in the second quarter. Services revenue growth was primarily driven by higher revenues in our Quantitative Systems Pharmacology (QSP) and Physiologically Based Pharmacokinetics (PBPK) business units.

“Since the beginning of calendar 2024, we have seen encouraging signs in biotech funding with notable strength from biotech companies that have candidates undergoing clinical trials. Regarding large pharmaceutical companies, funding continues to vary depending on their near-term direction and business outlook, but the overall market is healthier compared to a year ago. For the balance of 2024, we remain cautiously optimistic that demand for our comprehensive suite of modeling and simulation software products and services will continue to gain momentum as the funding environment improves.

“During the quarter, we also launched our corporate development initiative to intensify our focus on strategic investments and partnerships in early-state technology companies. While strategic acquisitions to complement organic growth remain a priority, we believe there are hidden gems among early-stage companies developing high-potential technologies. We believe that our ability to identify and evaluate commercial applications for emerging technologies will complement our own R&D efforts and position Simulations Plus at the forefront of innovation.

“Our strong performance in the first half of the year, combined with market improvement, puts us on track to achieve our guidance for fiscal 2024. We entered the third quarter with a healthy pipeline and a solid balance sheet, and we are confident that Simulations Plus is firmly positioned to advance its critical role in drug development workflow. Our unwavering focus remains on delivering disciplined growth and achieving long-term returns for our shareholders.”

Fiscal 2024 Guidance

		Fiscal 2024 Guidance		Annual Increase
Revenue		$66M - $69M		10 - 15%
Software mix		55 - 60%		—
Services mix		40 - 45%		—
Diluted earnings per share		$0.66 - $0.68		35 - 39%

Quarterly Dividend

The Company’s Board of Directors declared a cash dividend of $0.06 per share of the Company’s common stock, payable on May 6, 2024, to shareholders of record as of April 29, 2024. The declaration of any future dividends will be determined by the Board of Directors each quarter and will depend on earnings, financial condition, capital requirements, and other factors.

Environmental, Social, and Governance

We focus our Environmental, Social, and Governance (ESG) efforts where we can have the most positive impact. To learn more about our latest initiatives and priorities, please visit our website to read our 2023 ESG update.

Webcast and Conference Call Details

Shawn O’Connor, chief executive officer, and Will Frederick, chief financial and operations officer, will host a conference call and webcast today at 5 p.m. Eastern Time to discuss the details of the Company’s performance for the quarter and certain forward-looking information. The call may be accessed by registering here or by calling 1-877-451-6152 (domestic) or 1-201-389-0879 (international) or by clicking on this Call me™ link to request a return call. The webcast will be available on our website under Conference Calls & Presentations. A replay of the webcast will be available on the website approximately one hour following the call.

Non-GAAP Definitions

Adjusted EBITDA

Adjusted EBITDA is defined as earnings (loss) before interest, taxes, depreciation and amortization, stock-based compensation, (gain) loss on currency exchange, any acquisition- or financial-transaction-related expenses, and any asset impairment charges. Currency exchange excluded represents the exchange rate fluctuations on the foreign currency denominated transactions. The impact of transactions in foreign currency represents the effect of converting revenue and expenses occurring in a currency other than the functional currency. The Company believes that the non-GAAP financial measures presented facilitate an understanding of operating performance and provide a meaningful comparison of its results between periods. The Company’s management uses non-GAAP financial measures to, among other things, evaluate its ongoing operations in relation to historical results, for internal planning and forecasting purposes and in the calculation of performance-based compensation. Adjusted EBITDA represents a measure that we believe is customarily used by investors and analysts to evaluate the financial performance of companies in addition to the GAAP measures that we present. Our management also believes that Adjusted EBITDA is useful in evaluating our core operating results. However, Adjusted EBITDA is not a measure of financial performance under accounting principles generally accepted in the United States of America and should not be considered an alternative to net income or operating income as an indicator of our operating performance or to net cash provided by operating activities as a measure of our liquidity. The Company’s Adjusted EBITDA measure may not provide information that is directly comparable to that provided by other companies in its industry, as other companies in its industry may calculate non-GAAP financial results differently, particularly related to nonrecurring, unusual items.

Adjusted Diluted EPS

Adjusted diluted EPS is calculated based on net income excluding the impact of any acquisition- or financial-transaction-related expenses, any asset impairment charges, and tax provisions / benefits related to the previous items. The Company excludes the above items because they are outside of the Company’s normal operations and/or, in certain cases, are difficult to forecast accurately for future periods.

The Company believes that the use of non-GAAP measures helps investors to gain a better understanding of the Company’s core operating results and future prospects, consistent with how management measures and forecasts the Company’s performance, especially when comparing such results to previous periods or forecasts.

About Simulations Plus

Serving clients worldwide for more than 25 years, Simulations Plus is a leading provider in the biosimulation market providing software and consulting services supporting drug discovery, development, research, and regulatory submissions. We offer solutions that bridge artificial intelligence (AI)/machine learning, physiologically based pharmacokinetics, quantitative systems pharmacology/toxicology, and population PK/PD modeling approaches. Our technology is licensed and applied by major pharmaceutical, biotechnology, and regulatory agencies worldwide. For more information, visit our website at www.simulations-plus.com. Follow us on LinkedIn | X | YouTube.

Forward-Looking Statements

Except for historical information, the matters discussed in this press release are forward-looking statements that involve risks and uncertainties. Words like “believe,” “expect,” and “anticipate” mean that these are our best estimates as of this writing, but there can be no assurances that expected or anticipated results or events will actually take place, so our actual future results could differ significantly from those statements. Factors that could cause or contribute to such differences include, but are not limited to: our ability to successfully integrate the Immunetrics business with our own, as well as expenses we may incur in connection therewith, our ability to maintain our competitive advantages, acceptance of new software and improved versions of our existing software by our customers, the general economics of the pharmaceutical industry, our ability to finance growth, our ability to continue to attract and retain highly qualified technical staff, market conditions, macroeconomic factors, and a sustainable market. Further information on our risk factors is contained in our quarterly and annual reports and filed with the U.S. Securities and Exchange Commission.

SIMULATIONS PLUS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(Unaudited)
		Three Months Ended								Six Months Ended
(in thousands, except per common share amounts)		February 29, 2024				February 28, 2023				February 29, 2024				February 28, 2023
Revenues
Software		$	11,614			$	10,487			$	19,203			$	16,561
Services			6,691				5,263				13,602				11,153
Total revenues			18,305				15,750				32,805				27,714
Cost of revenues
Software			1,348				843				2,339				1,728
Services			3,736				1,777				7,397				3,563
Total cost of revenues			5,084				2,620				9,736				5,291
Gross profit			13,221				13,130				23,069				22,423
Operating expenses
Research and development			1,312				1,317				2,529				2,483
Sales and marketing			1,949				1,730				3,938				3,215
General and administrative			5,518				6,049				11,200				11,813
Total operating expenses			8,779				9,096				17,667				17,511
Income from operations			4,442				4,034				5,402				4,912
Other income			810				1,034				2,256				1,774
Income before income taxes			5,252				5,068				7,658				6,686
Provision for income taxes			(1,223	)			(894	)			(1,684	)			(1,267	)
Net income		$	4,029			$	4,174			$	5,974			$	5,419
Earnings per share
Basic		$	0.20			$	0.21			$	0.30			$	0.27
Diluted		$	0.20			$	0.20			$	0.29			$	0.26
Weighted-average common shares outstanding
Basic			19,975				20,112				19,961				20,200
Diluted			20,315				20,529				20,288				20,657
Other comprehensive (loss) income, net of tax
Foreign currency translation adjustments			(15	)			(23	)			(69	)			30
Comprehensive income		$	4,014			$	4,151			$	5,905			$	5,449

SIMULATIONS PLUS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
		(Unaudited)				(Audited)
(in thousands, except share and per share amounts)		February 29, 2024				August 31, 2023
ASSETS
Current assets
Cash and cash equivalents		$	37,031			$	57,523
Accounts receivable, net of allowance for credit losses of $30 and $46			13,114				10,201
Prepaid income taxes			1,364				804
Prepaid expenses and other current assets			4,975				3,904
Short-term investments			71,473				57,940
Total current assets			127,957				130,372
Long-term assets
Capitalized computer software development costs, net of accumulated amortization of $17,962 and $17,199			12,333				11,335
Property and equipment, net			843				671
Operating lease right-of-use assets			1,062				1,247
Intellectual property, net of accumulated amortization of $10,117 and $9,301			7,873				8,689
Other intangible assets, net of accumulated amortization of $2,606 and $2,107			12,935				12,825
Goodwill			19,099				19,099
Long-term investments			9,024				—
Deferred tax assets			2,323				1,438
Other assets			524				425
Total assets		$	193,973			$	186,101
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable		$	360			$	144
Accrued compensation			3,184				4,392
Accrued expenses			2,992				659
Contracts payable			5,110				3,250
Operating lease liability - current portion			425				442
Deferred revenue			2,457				3,100
Total current liabilities			14,528				11,987
Long-term liabilities
Operating lease liability			607				755
Contracts payable – net of current portion			1,800				3,330
Total liabilities			16,935				16,072
Commitments and contingencies			—				—
Shareholders' equity
Preferred stock, $0.001 par value - 10,000,000 shares authorized; no shares issued and outstanding		$	—			$	—
Common stock, $0.001 par value and additional paid-in capital —50,000,000 shares authorized; 19,983,703 and 19,937,961 shares issued and outstanding			148,472				144,974
Retained earnings			28,776				25,196
Accumulated other comprehensive loss			(210	)			(141	)
Total shareholders' equity			177,038				170,029
Total liabilities and shareholders' equity		$	193,973			$	186,101

SIMULATIONS PLUS, INC.
Trended Financial Information*
(Unaudited)
(in millions except earnings per share amounts)
		FY 2022																FY 2023																FY 2024								FY 2022				FY 2023				FY 2024
		Q1				Q2				Q3				Q4				Q1				Q2				Q3				Q4				Q1				Q2				Full Year				Full Year				YTD
Revenue
Software		$	7.4			$	9.8			$	9.6			$	5.9			$	6.1			$	10.5			$	10.6			$	9.3			$	7.6			$	11.6			$	32.7			$	36.5			$	19.2
Services			5.0				5.0				5.3				5.8				5.9				5.3				5.6				6.3				6.9				6.7				21.2				23.1				13.6
Total		$	12.4			$	14.8			$	15.0			$	11.7			$	12.0			$	15.8			$	16.2			$	15.6			$	14.5			$	18.3			$	53.9			$	59.6			$	32.8
Gross Margin
Software			90.0	%			92.0	%			92.4	%			86.1	%			85.4	%			92.0	%			91.5	%			89.4	%			86.9	%			88.4	%			90.6	%			90.1	%			87.8	%
Services			60.0	%			59.3	%			65.6	%			68.2	%			69.7	%			66.2	%			63.4	%			62.1	%			47.0	%			44.2	%			63.5	%			65.3	%			45.6	%
Total			77.8	%			80.9	%			82.9	%			77.2	%			77.7	%			83.4	%			81.8	%			78.4	%			67.9	%			72.2	%			79.9	%			80.5	%			70.3	%
Income from operations		$	3.8			$	5.5			$	4.9			$	0.7			$	0.9			$	4.0			$	4.1			$	(0.3	)		$	1.0			$	4.4			$	14.9			$	8.7			$	5.4
Operating Margin			30.6	%			37.0	%			33.1	%			5.9	%			7.3	%			25.6	%			25.2	%			-1.8	%			6.6	%			24.3	%			27.7	%			14.6	%			16.5	%
Net Income		$	3.0			$	4.4			$	4.1			$	1.0			$	1.2			$	4.2			$	4.0			$	0.5			$	1.9			$	4.0			$	12.5			$	10.0			$	6.0
Diluted Earnings Per Share		$	0.15			$	0.21			$	0.20			$	0.05			$	0.06			$	0.20			$	0.20			$	0.03			$	0.10			$	0.20			$	0.60			$	0.49			$	0.29
Adjusted EBITDA		$	5.3			$	7.2			$	6.5			$	2.5			$	3.0			$	6.2			$	6.5			$	4.9			$	3.4			$	7.1			$	21.5			$	20.6			$	10.5
Adjusted Diluted EPS		$	0.15			$	0.21			$	0.20			$	0.06			$	0.07			$	0.21			$	0.21			$	0.18			$	0.10			$	0.20			$	0.61			$	0.67			$	0.10
Cash Flow from Operations		$	3.6			$	2.6			$	3.8			$	7.9			$	4.7			$	5.5			$	8.5			$	3.1			$	0.2			$	5.8			$	17.9			$	21.9			$	6.0
Revenue Breakdown by Region
Americas		$	8.5			$	9.7			$	11.2			$	8.4			$	8.5			$	10.6			$	10.8			$	11.0			$	10.9			$	12.5			$	37.7			$	40.8			$	23.4
EMEA			3.0				3.7				1.9				1.7				2.1				3.6				3.4				2.6				2.3				4.7				10.4				11.7				7.0
Asia Pacific			0.9				1.4				1.9				1.6				1.3				1.5				2.1				2.1				1.3				1.2				5.8				7.0				2.5
Total		$	12.4			$	14.8			$	15.0			$	11.7			$	12.0			$	15.8			$	16.2			$	15.6			$	14.5			$	18.3			$	53.9			$	59.6			$	32.8
Software Performance Metrics
Average Revenue per Customer (in thousands)
Commercial		$	71			$	101			$	95			$	65			$	68			$	110			$	97			$	88			$	79			$	113
Services Performance Metrics
Backlog (in millions)		$	15.4			$	17.0			$	16.7			$	15.9			$	15.8			$	15.4			$	15.7			$	19.5			$	18.9			$	18.0
*Numbers may not add due to rounding

SIMULATIONS PLUS, INC.
Reconciliation of Adjusted EBITDA to Net Income*
(Unaudited)
(in millions)
		FY 2022																FY 2023																FY 2024								FY 2022				FY 2023				FY 2024
		Q1				Q2				Q3				Q4				Q1				Q2				Q3				Q4				Q1				Q2				Full Year				Full Year				YTD
Net Income		$	3.0			$	4.4			$	4.1			$	1.0			$	1.2			$	4.2			$	4.0			$	0.5			$	1.9			$	4.0			$	12.5			$	10.0			$	6.0
Excluding:
Interest income and expense, net			(0.1	)			(0.1	)			(0.1	)			(0.4	)			(0.8	)			(1.0	)			(1.1	)			(1.3	)			(1.3	)			(1.3	)			(0.7	)			(4.1	)			(2.6	)
Provision for income taxes			0.8				1.1				0.7				(0.1	)			0.4				0.9				0.9				(0.5	)			0.5				1.2				2.6				1.7				1.7
Depreciation and amortization			0.8				1.0				0.9				0.9				0.9				0.9				0.9				1.1				1.1				1.1				3.6				3.9				2.2
Stock-based compensation			0.6				0.7				0.7				0.7				0.9				1.2				1.1				1.1				1.3				1.6				2.7				4.2				2.9
(Gain) loss on currency exchange			(0.1	)			(0.1	)			0.2				0.2				—				—				0.3				0.2				—				0.1				0.2				0.5				0.1
Impairment of other intangibles			—				—				—				—				—				—				—				0.5				—				—				—				0.5				—
Change in value of contingent consideration			0.1				0.1				—				—				—				—				—				0.7				(0.1	)			0.4				0.3				0.7				0.3
Mergers & Acquisitions expense			—				—				—				0.3				0.3				0.1				0.4				2.5				—				—				0.3				3.3				—
Adjusted EBITDA		$	5.3			$	7.2			$	6.5			$	2.5			$	3.0			$	6.2			$	6.5			$	4.9			$	3.4			$	7.1			$	21.5			$	20.6			$	10.5
*Numbers may not add due to rounding

SIMULATIONS PLUS, INC.
Reconciliation of Adjusted Diluted EPS to Diluted EPS*
(Unaudited)
(in millions, except Diluted EPS and Adjusted Diluted EPS)
		FY 2022																FY 2023																FY 2024								FY 2022				FY 2023				FY 2024
		Q1				Q2				Q3				Q4				Q1				Q2				Q3				Q4				Q1				Q2				Full Year				Full Year				YTD
Net Income (GAAP)		$	3.0			$	4.4			$	4.1			$	1.0			$	1.2			$	4.2			$	4.0			$	0.5			$	1.9			$	4.0			$	12.5			$	10.0			$	6.0
Excluding:
Mergers & Acquisitions expense			—				—				—				0.3				0.3				0.1				0.4				0.9				—				—				0.3				1.7				—
Immunetrics transaction costs			—				—				—				—				—				—				—				2.3				—				—				—				2.3				—
Cognigen trade name write-off			—				—				—				—				—				—				—				0.5				—				—				—				0.5				—
Tax effect on above adjustments			—				—				—				(0.1	)			(0.1	)			—				(0.1	)			(0.5	)			—				—				(0.1	)			(0.7	)			—
Adjusted Net income (Non-GAAP)		$	3.0			$	4.4			$	4.1			$	1.2			$	1.5			$	4.2			$	4.3			$	3.7			$	1.9			$	4.0			$	12.8			$	13.8			$	6.0
Weighted-average common shares outstanding:
Diluted			20.7				20.7				20.8				20.9				20.8				20.5				20.4				20.4				20.3				20.3				20.7				20.5				20.3
Diluted EPS (GAAP)		$	0.15			$	0.21			$	0.20			$	0.05			$	0.06			$	0.20			$	0.20			$	0.03			$	0.10			$	0.20			$	0.60			$	0.49			$	0.29
Adjusted Diluted EPS (Non-GAAP)		$	0.15			$	0.21			$	0.20			$	0.06			$	0.07			$	0.21			$	0.21			$	0.18			$	0.10			$	0.20			$	0.61			$	0.67			$	0.29
*Numbers may not add due to rounding

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20240403155229/en/

Investor Relations Contacts:

Lisa Fortuna

Financial Profiles

310-622-8251

slp@finprofiles.com

Renee Bouche

Simulations Plus Investor Relations

661-723-7723

renee.bouche@simulations-plus.com

Source: Simulations Plus, Inc.

FAQ

What were Simulations Plus' (SLP) total revenue and diluted EPS for Q2 fiscal 2024?

Simulations Plus reported total revenue of $18.3 million and diluted EPS of $0.20 for Q2 fiscal 2024.

What is Simulations Plus' (SLP) full-year revenue guidance for fiscal 2024?

Simulations Plus maintains full-year revenue guidance of $66 to $69 million for fiscal 2024.

How much did total revenue increase in Q2 fiscal 2024 compared to Q2 2023 for Simulations Plus (SLP)?

Total revenue for Simulations Plus increased by 16% in Q2 fiscal 2024 compared to Q2 2023.

What initiatives did Simulations Plus (SLP) launch during the quarter?

Simulations Plus launched a corporate development initiative to focus on strategic investments and partnerships in early-stage technology companies during the quarter.

What dividend did Simulations Plus (SLP) declare for its common stock shareholders?

Simulations Plus declared a cash dividend of $0.06 per share of common stock, payable on May 6, 2024.