Simulations Plus Reports Second Quarter Fiscal 2025 Financial Results

Rhea-AI Summary

Simulations Plus (SLP) reported strong Q2 fiscal 2025 results with total revenue growing 23% year-over-year to $22.4 million. Software revenue increased 16% to $13.5 million (60% of total), while services revenue rose 34% to $8.9 million (40% of total).

The company's Quantitative Systems Pharmacology (QSP) business unit showed exceptional growth of 89%, primarily due to a new model license in atopic dermatitis. Cheminformatics and Clinical Pharmacology & Pharmacometrics revenues grew by 8% and 9% respectively.

However, net income decreased to $3.1 million ($0.15 EPS) compared to $4.0 million ($0.20 EPS) in Q2 2024. The company maintains its full-year 2025 guidance of $90-93 million in revenue and adjusted diluted EPS of $1.07-1.20.

Positive

• Total revenue grew 23% YoY to $22.4 million
• Software revenue increased 16% to $13.5 million
• Services revenue rose 34% to $8.9 million
• QSP business unit expanded 89%
• Services backlog grew 13% YoY to $20.4 million
• Maintained strong full-year guidance of $90-93M revenue

Negative

• Net income declined to $3.1M from $4.0M YoY
• Diluted EPS decreased to $0.15 from $0.20 YoY
• Adjusted EBITDA margin dropped to 29% from 39% YoY
• Gross margin decreased to 59% in Q2 2025

Insights

Financial Analyst

Simulations Plus delivered 23% revenue growth in Q2 FY2025, with impressive gains in both software (16% growth) and services (34% growth). Their $22.4 million quarterly revenue and growing $20.4 million backlog (up 13% YoY) demonstrate strong market demand despite acknowledged funding constraints in the biopharma sector.

However, the quarter shows clear margin compression with net income declining to $3.1 million from $4.0 million last year and adjusted EBITDA margins falling to 29% from 39%. This reflects significantly higher costs, particularly in software COGS which nearly doubled year-over-year, alongside substantial increases in R&D (63%) and sales/marketing (91%).

The QSP business unit's 89% expansion highlights the company's strategic positioning in specialized modeling segments. Management's maintained full-year guidance of $90-93 million in revenue with 31-33% adjusted EBITDA margins suggests they expect operational leverage to improve in H2.

The results reveal a company investing heavily in growth initiatives while successfully expanding its market footprint. The maintained guidance indicates management's confidence that these investments will yield improved profitability as the year progresses, despite the near-term margin pressure evident in Q2 results.

Biotech Industry Specialist

Simulations Plus is strategically capitalizing on the pharmaceutical industry's shift toward computational methods in drug development. Their standout 89% growth in Quantitative Systems Pharmacology specifically around atopic dermatitis modeling demonstrates how specialized simulation tools are becoming essential in complex therapeutic areas where traditional approaches have limitations.

The company's balanced revenue mix between software (60%) and services (40%) provides both recurring revenue stability and consultative growth opportunities. Their maintained guidance despite the "ongoing cost constrained and funding environment" for biopharma customers speaks to their essential positioning in drug development workflows.

The expanded service offerings in Medical Communications and continued investment in R&D ($2.1 million this quarter) show a company adapting to provide end-to-end solutions beyond pure modeling software. This comprehensive approach creates stronger client relationships spanning from discovery through clinical trials and regulatory submissions.

While the near-term margin compression is noticeable, the strategic expansion across biosimulation platforms, AI/ML integration, and downstream commercial support services positions Simulations Plus as a resilient player amid industry funding constraints. Their expanded capabilities in PBPK, QSP/QST, and population modeling directly address biopharma's need to reduce costly late-stage failures through earlier predictive insights.

Total revenue grew 23% year-over-year driven by strong growth in both software and services

Maintains full-year revenue guidance of $90 to $93 million and adjusted diluted EPS of $1.07 to $1.20

RESEARCH TRIANGLE PARK, N.C.--(BUSINESS WIRE)-- Simulations Plus, Inc. (Nasdaq: SLP) (“Simulations Plus”), a leading provider of cheminformatics, biosimulation, simulation-enabled performance and intelligence solutions, and medical communications to the biopharma industry, today reported financial results for its second quarter fiscal 2025, ended February 28, 2025.

Second Quarter 2025 Financial Highlights (as compared to second quarter 2024)

• Total revenue increased 23% to $22.4 million

• Software revenue increased 16% to $13.5 million, representing 60% of total revenue

• Services revenue increased 34% to $8.9 million, representing 40% of total revenue

• Gross profit was $13.1 million; gross margin was 59%

• Net income of $3.1 million and diluted EPS of $0.15 compared to net income of $4.0 million and diluted EPS of $0.20

• Adjusted EBITDA of $6.6 million, representing 29% of total revenue, compared to $7.1 million, representing 39% of total revenue

• Adjusted net income of $6.2 million and adjusted diluted EPS of $0.31, compared to adjusted net income of $6.4 million and adjusted diluted EPS of $0.32

Six Months 2025 Financial Highlights (as compared to six months 2024)

• Total revenue increased 26% to $41.4 million

• Software revenue increased 26% to $24.2 million, representing 59% of total revenue

• Services revenue increased 26% to $17.2 million, representing 41% of total revenue

• Gross profit was $23.3 million; gross margin was 56%

• Net income of $3.3 million and diluted EPS of $0.16 versus net income of $6.0 million and diluted EPS of $0.29

• Adjusted EBITDA of $11.1 million, representing 27% of total revenue, compared to $10.5 million, representing 32% of total revenue

• Adjusted net income of $9.6 million and adjusted diluted EPS of $0.48, compared to adjusted net income of $10.1 million and adjusted diluted EPS of $0.50

Management Commentary

“We delivered strong performance in our second fiscal quarter 2025 with total revenue growing by 23%,” said Shawn O’Connor, Chief Executive Officer of Simulations Plus. “Our software revenue rose 16%, driven by outstanding execution across all of our software platforms. Leading growth this quarter, our Quantitative Systems Pharmacology (QSP) business unit expanded 89%, primarily driven by the addition of a model license in the disease area of atopic dermatitis. Additionally, our Cheminformatics revenues increased by 8%, while our Clinical Pharmacology & Pharmacometrics (CPP) business unit posted a 9% revenue increase.

“Services revenue for the second fiscal quarter grew 34%, with notable strength in our Medical Communications (MC) business unit. Services bookings in our CPP and MC business units were exceptional contributors to the 13% year-over-year increase in our backlog, which ended the quarter at $20.4 million.

“We are pleased with our solid performance in the first half of the year despite the ongoing cost constrained and limited funding environment for our biopharma customers. As we enter the second half of 2025, we believe we are well-positioned to maintain our momentum and are on track to achieve our stated guidance.”

Fiscal 2025 Guidance

		Fiscal 2025 Guidance
Revenue		$90M - $93M
Revenue growth		28 - 33%
Software mix		55 - 60%
Adjusted EBITDA margin		31 - 33%
Adjusted diluted EPS		$1.07 - $1.20

Webcast and Conference Call Details

Shawn O’Connor, Chief Executive Officer, and Will Frederick, Chief Financial and Operating Officer, will host a conference call and webcast today at 5:00 p.m. Eastern Time to discuss the details of Simulations Plus’ 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 can be accessed on the investor relations page of the Simulations Plus website https://www.simulations-plus.com/investorscorporate-profile/corporate-profile/ where it will also be available for replay approximately one hour following the call.

Non-GAAP Financial Measures

This press release contains “non-GAAP financial measures,” which are measures that either exclude or include amounts that are not excluded or included in the most directly comparable measures calculated and presented in accordance with U.S. generally accepted accounting principles (“GAAP”).

A further explanation and reconciliation of these non-GAAP financial measures is included below and in the financial tables in this release.

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 and Adjusted Diluted EPS represent measures that we believe are 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 these measures are useful in evaluating our core operating results. However, Adjusted EBITDA and Adjusted Diluted EPS are not measures of financial performance under accounting principles generally accepted in the United States of America and should not be considered an alternative to net income, operating income, or diluted EPS as indicators of our operating performance or to net cash provided by operating activities as a measure of our liquidity. We believe the Company’s Adjusted EBITDA and Adjusted Diluted EPS measures provide information that is directly comparable to that provided by other peer companies in our industry, but other companies may calculate non-GAAP financial results differently, particularly related to nonrecurring, unusual items.

Please note that the Company has not reconciled the adjusted EBITDA or adjusted diluted earnings per share forward-looking guidance included in this press release to the most directly comparable GAAP measures because this cannot be done without unreasonable effort due to the variability and low visibility with respect to costs related to acquisitions, financings, and employee stock compensation programs, which are potential adjustments to future earnings. We expect the variability of these items to have a potentially unpredictable, and a potentially significant, impact on our future GAAP financial results.

Adjusted EBITDA

Adjusted EBITDA represents net income excluding the effect of interest expense (income), provision (benefit) for income taxes, amortization expense, intangible asset amortization, equity-based compensation expense, loss (gain) on currency exchange, goodwill impairment, change in fair value of contingent consideration, reorganization expense, acquisition and integration expense and other items not indicative of our ongoing operating performance.

Adjusted Net Income and Adjusted Diluted EPS

Adjusted net income and adjusted diluted earnings per share exclude the effect of amortization expense, equity-based compensation expense, loss (gain) on currency exchange, goodwill impairment, change in fair value of contingent consideration, reorganization expense, acquisition and integration expense and other items not indicative of our ongoing operating performance as well as the income tax provision adjustment for such charges.

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.

With more than 25 years of experience serving clients globally, Simulations Plus stands as a premier provider in the biopharma sector, offering advanced software and consulting services that enhance drug discovery, development, research, clinical trial operations, regulatory submissions, and commercialization. Our comprehensive biosimulation solutions integrate artificial intelligence/machine learning (AI/ML), physiologically based pharmacokinetics, physiologically based biopharmaceutics, quantitative systems pharmacology/toxicology, and population PK/PD modeling approaches. We also deliver simulation-enabled performance and intelligence solutions alongside medical communications support for clinical and commercial drug development. Our cutting-edge technology is licensed and utilized by leading pharmaceutical, biotechnology, and regulatory agencies worldwide. For more information, visit our website at www.simulations-plus.com. Follow us on LinkedIn | X | YouTube.

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 2024 ESG update.

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,” “will”, “can”, “expect,” “anticipate” and similar expressions (as well as other words or expressions referencing future events, conditions or circumstances) 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. Forward looking statements contained in this press release include, but are not limited to, statements about expectations for the second half of 2025 and anticipated projections for fiscal year 2025. Factors that could cause or contribute to such differences include, but are not limited to: our ability to integrate our Adaptive Learning & Insights (ALI) and Medical Communications (MC) business units, our ability to meet our stated guidance, 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, general economic, political or geopolitical conditions and changes, 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, annual and current 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 28, 2025				February 29, 2024				February 28, 2025				February 29, 2024
Revenues
Software		$	13,484			$	11,614			$	24,199			$	19,203
Services			8,948				6,691				17,157				13,602
Total revenues			22,432				18,305				41,356				32,805
Cost of revenues
Software			2,587				1,348				5,225				2,339
Services			6,718				3,736				12,786				7,397
Total cost of revenues			9,305				5,084				18,011				9,736
Gross profit			13,127				13,221				23,345				23,069
Operating expenses
Research and development			2,143				1,312				3,991				2,529
Sales and marketing			3,717				1,949				6,568				3,938
General and administrative			4,555				5,518				9,948				11,200
Total operating expenses			10,415				8,779				20,507				17,667
Income from operations			2,712				4,442				2,838				5,402
Other income			796				810				940				2,256
Income before income taxes			3,508				5,252				3,778				7,658
Provision for income taxes			(434	)			(1,223	)			(498	)			(1,684	)
Net income		$	3,074			$	4,029			$	3,280			$	5,974
Earnings per share
Basic		$	0.15			$	0.20			$	0.16			$	0.30
Diluted		$	0.15			$	0.20			$	0.16			$	0.29
Weighted-average common shares outstanding
Basic			20,097				19,975				20,082				19,961
Diluted			20,277				20,315				20,262				20,288
Other comprehensive (loss) income, net of tax
Foreign currency translation adjustments			(26	)			(15	)			(68	)			(69	)
Unrealized gains on available-for-sale securities		$	—			$	—			$	4			$	—
Comprehensive income		$	3,048			$	4,014			$	3,216			$	5,905

SIMULATIONS PLUS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS
		(Unaudited)				(Audited)
(in thousands, except share and per share amounts)		February 28, 2025				August 31, 2024
ASSETS
Current assets
Cash and cash equivalents		$	10,992			$	10,311
Accounts receivable, net of allowance for credit losses of $179 and $149			16,493				9,136
Prepaid income taxes			1,375				2,197
Prepaid expenses and other current assets			7,464				7,753
Short-term investments			10,393				9,944
Total current assets			46,717				39,341
Long-term assets
Capitalized computer software development costs, net of accumulated amortization of $20,290 and $18,727			12,452				12,499
Property and equipment, net			800				812
Operating lease right-of-use assets			827				1,027
Intellectual property, net of accumulated amortization of $7,659 and $5,490			20,961				23,130
Other intangible assets, net of accumulated amortization of $3,819 and $3,177			22,910				23,210
Goodwill			96,305				96,078
Other assets			455				542
Total assets		$	201,427			$	196,639
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable		$	1,206			$	602
Accrued compensation			4,431				4,513
Accrued expenses			1,399				2,043
Contracts payable - current portion			—				2,440
Operating lease liability - current portion			313				475
Deferred revenue			3,346				1,996
Total current liabilities			10,695				12,069
Long-term liabilities
Deferred income taxes, net			701				1,608
Operating lease liability - net of current portion			483				531
Total liabilities			11,879				14,208
Commitments and contingencies - note 4			—				—
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; 20,111,045 and 20,051,134 shares issued and outstanding			156,229				152,328
Retained earnings			33,634				30,354
Accumulated other comprehensive loss			(315	)			(251	)
Total shareholders' equity			189,548				182,431
Total liabilities and shareholders' equity		$	201,427			$	196,639

SIMULATIONS PLUS, INC. Trended Financial Information (1) (Unaudited)
(in millions except earnings per share amounts)
		FY24																FY25								FY24				FY25
		Q1				Q2				Q3				Q4				Q1				Q2				Full Year				YTD
Revenue
Software		$	7.589			$	11.614			$	11.908			$	9.913			$	10.715			$	13.484			$	41.024			$	24.199
Services		$	6.911			$	6.691			$	6.636			$	8.751			$	8.209			$	8.948			$	28.989			$	17.157
Total		$	14.500			$	18.305			$	18.544			$	18.664			$	18.924			$	22.432			$	70.013			$	41.356
Gross Margin
Software			86.9	%			88.4	%			88.2	%			72.4	%			75.4	%			80.8	%			84.2	%			78.4	%
Services			47.0	%			44.2	%			41.4	%			-4.0	%			26.1	%			24.9	%			29.7	%			25.5	%
Total			67.9	%			72.2	%			71.5	%			36.6	%			54.0	%			58.5	%			61.6	%			56.4	%
Income from operations		$	0.960			$	4.442			$	1.880			$	(1.151	)		$	0.126			$	2.712			$	6.131			$	2.838
Operating Margin			6.6	%			24.3	%			10.1	%			-6.2	%			0.7	%			12.1	%			8.8	%			6.9	%
Net Income		$	1.945			$	4.029			$	3.137			$	0.843			$	0.206			$	3.074			$	9.954			$	3.280
Diluted Earnings Per Share		$	0.10			$	0.20			$	0.15			$	0.04			$	0.01			$	0.15			$	0.49			$	0.16
Adjusted EBITDA		$	3.388			$	7.135			$	5.586			$	4.148			$	4.493			$	6.578			$	20.257			$	11.071
Adjusted Diluted EPS		$	0.18			$	0.32			$	0.27			$	0.18			$	0.17			$	0.31			$	0.95			$	0.48
Cash Flow from Operations		$	0.162			$	5.810			$	5.700			$	1.600			$	(1.274	)		$	5.669			$	13.320			$	4.395
Revenue Breakdown by Region
Americas		$	10.891			$	12.461			$	12.428			$	14.693			$	14.469			$	16.112			$	50.473			$	30.581
EMEA			2.302				4.665				4.513				2.592				2.720				4.806				14.072				7.526
Asia Pacific			1.307				1.179				1.603				1.379				1.735				1.514				5.468				3.249
Total		$	14.500			$	18.305			$	18.544			$	18.664			$	18.924			$	22.432			$	70.013			$	41.356
Software Performance Metrics
Avg. Revenue per Customer (in thousands)
Commercial		$	79.0			$	113.0			$	97.0			$	89.0			$	94.0			$	124.0
Services Performance Metrics
Backlog (in millions)		$	18.910			$	18.041			$	19.602			$	14.091			$	17.254			$	20.379
(1) Numbers may not foot due to rounding

SIMULATIONS PLUS, INC. Reconciliation of Adjusted EBITDA to Net Income (1) (Unaudited)
(in millions)
		FY 2024																FY25								FY24				FY25
		Q1				Q2				Q3				Q4				Q1				Q2				Full Year				YTD
Net Income		$	1.945			$	4.029			$	3.137			$	0.843			$	0.206			$	3.074			$	9.954			$	3.280
Excluding:
Interest income and expense, net			(1.292	)			(1.348	)			(1.522	)			(0.213	)			(0.159	)			(0.154	)			(4.375	)			(0.313	)
Provision for income taxes			0.461				1.223				0.753				0.020				0.064				0.434				2.457				0.498
Depreciation and amortization			1.091				1.105				1.263				2.206				2.265				2.274				5.665				4.539
Stock-based compensation			1.303				1.585				1.665				1.387				1.589				1.557				5.940				3.146
(Gain) loss on currency exchange			(0.044	)			0.098				(0.009	)			(0.431	)			0.015				(0.002	)			(0.386	)			0.013
Change in value of contingent consideration			(0.110	)			0.440				(0.599	)			(1.370	)			—				(0.640	)			(1.639	)			(0.640	)
Reorganization expense			—				—				—				—				0.258				0.157				—				0.415
Mergers & Acquisitions expense			0.034				0.003				0.898				1.706				0.255				(0.122	)			2.641				0.133
Adjusted EBITDA		$	3.388			$	7.135			$	5.586			$	4.148			$	4.493			$	6.578			$	20.257			$	11.071
(1) Numbers may not foot due to rounding

SIMULATIONS PLUS, INC. Reconciliation of Adjusted Diluted EPS to Diluted EPS (1) (Unaudited)
(in millions, except Diluted EPS and Adjusted Diluted EPS)
		FY 2024																FY25								FY24				FY25
		Q1				Q2				Q3				Q4				Q1				Q2				Full Year				YTD
Net Income (GAAP)		$	1.945			$	4.029			$	3.137			$	0.843			$	0.206			$	3.074			$	9.954			$	3.280
Excluding:
Amortization			0.991				0.991				1.122				2.059				2.130				2.130				5.163				4.260
Stock-based compensation			1.303				1.585				1.665				1.387				1.589				1.557				5.940				3.146
(Gain) loss on currency exchange			(0.044	)			0.098				(0.009	)			(0.431	)			0.015				(0.002	)			(0.386	)			0.013
Mergers & Acquisitions expense			0.034				0.003				0.898				1.706				0.255				(0.122	)			2.641				0.133
Change in value of contingent consideration			(0.110	)			0.440				(0.599	)			(1.370	)			—				(0.640	)			(1.639	)			(0.640	)
Reorganization expense			—				—				—				—				0.258				0.157				—				0.415
Tax effect on above adjustments			(0.417	)			(0.746	)			(0.603	)			(0.554	)			(1.007	)			0.041				(2.320	)			(0.966	)
Adjusted Net income (Non-GAAP)		$	3.702			$	6.400			$	5.611			$	3.640			$	3.446			$	6.195			$	19.353			$	9.641
Weighted-avg. common shares outstanding:
Diluted			20.279				20.315				20.433				20.338				20.266				20.277				20.301				20.262
Diluted EPS (GAAP)		$	0.10			$	0.20			$	0.15			$	0.04			$	0.01			$	0.15			$	0.49			$	0.16
Adjusted Diluted EPS (Non-GAAP)		$	0.18			$	0.32			$	0.27			$	0.18			$	0.17			$	0.31			$	0.95			$	0.48
(1) Numbers may not foot due to rounding

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20250403202093/en/

Investor Relations Contact:

Lisa Fortuna

Financial Profiles

310-622-8251

slp@finprofiles.com

Source: Simulations Plus, Inc.

FAQ

What was Simulations Plus (SLP) revenue growth in Q2 2025?

SLP's total revenue grew 23% year-over-year to $22.4 million in Q2 2025.

How much did SLP's software and services revenue increase in Q2 2025?

Software revenue increased 16% to $13.5 million, while services revenue grew 34% to $8.9 million.

What is Simulations Plus (SLP) full-year 2025 revenue guidance?

SLP maintains full-year 2025 revenue guidance of $90-93 million, representing 28-33% growth.

How did SLP's net income change in Q2 2025 compared to Q2 2024?

Net income decreased to $3.1 million ($0.15 EPS) from $4.0 million ($0.20 EPS) in Q2 2024.

What was SLP's services backlog at the end of Q2 2025?

The services backlog increased 13% year-over-year to $20.4 million.