Simulations Plus Reports Second Quarter Fiscal 2023 Financial Results

Total revenue of $15.8 million; Diluted Earnings Per Share (EPS) of $0.20;

Maintains full-year revenue guidance of $59.3 - $62.0 million (+10-15%) and EPS Guidance of $0.63 - $0.67

Simulations Plus, Inc. (Nasdaq: SLP), a leading provider of modeling and simulation software and services for pharmaceutical safety and efficacy, today reported financial results for its second quarter of fiscal 2023, ended February 28, 2023.

Second Quarter Financial Highlights (Fiscal 2023 vs. Fiscal 2022)

  • Total revenue increased 6% to $15.8 million;
  • Software revenue increased 7% to $10.5 million, representing 67% of total revenue;
  • Services revenue increased 4% to $5.3 million, representing 33% of total revenue;
  • Gross profit increased 10% to $13.1 million; gross margin was 83%;
  • Net income of $4.2 million and diluted EPS of $0.20, compared to net income of $4.4 million and diluted EPS of $0.21;
  • Adjusted EBITDA of $6.2 million, representing 40% of total revenue.

YTD Financial Highlights (Fiscal 2023 vs. Fiscal 2022)

  • Total revenue increased 2% to $27.7 million;
  • Software revenue decreased 3% to $16.6 million, representing 60% of total revenue;
  • Services revenue increased 11% to $11.2 million, representing 40% of total revenue;
  • Gross profit increased 4% to $22.4 million; gross margin was 81%;
  • Net income of $5.4 million and diluted EPS of $0.26, compared to net income of $7.4 million and diluted EPS of $0.36;
  • Adjusted EBITDA of $9.2 million, representing 33% of total revenue.

Management Commentary

Shawn O’Connor, chief executive officer of Simulations Plus, said: “We were pleased to see revenue growth return in the second quarter, increasing 6% on a reported basis and 8% on a constant currency basis, as compared to the same period last year, with higher gross margins. The renewal harmonization initiative we implemented to simplify and align software product renewals according to each customer is progressing as planned, and as a result, we are driving improved cross-selling across our organization and readjusting the seasonality impact to a more normal cadence. We also successfully navigated some extensions by certain potential customers in the sales cycle on the software side, while our services business delivered strong growth in the PBPK and PKPD segments.

“Simultaneously, we continued to grow our team during the quarter by recruiting and signing strong candidates with expertise in software and biology to help us accelerate our penetration in key markets. Our ability to successfully recruit professionals with unique and valuable skillsets, especially in this challenging labor market, is a validation of our strength and the value we bring to the industry. These expert consultants allow us to meet the robust and growing demand for our services.

“As part of our updated capital allocation strategy that we detailed last quarter, we began our $20 million accelerated share repurchase program during the quarter, which we expect to complete during our third quarter. Finally, while the global geopolitical and macroeconomic environments have impacted certain customers, our business remains strong and we remain on target to hit our full-year guidance. We expect to continue to see results from our cross-selling efforts and the streamlining of our renewal process,” concluded O’Connor.

Fiscal 2023 Guidance and Commentary

 

Fiscal 2023

Guidance

 

Annual Increase

Revenue

$59.3M - 62.0M

 

10-15%

Software mix

60-65%

 

Services mix

35-40%

 

Diluted earnings per share

$0.63-$0.67

 

5-10%

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 1, 2023, to shareholders of record as of April 24, 2023. 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 (ESG)

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 ESG website.

Webcast and Conference Call Details

Shawn O’Connor, chief executive officer, and Will Frederick, chief financial officer, will host a conference call and webcast today at 5 p.m. Eastern Daylight Time to discuss 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 1-201-389-0879. 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 Definition

Adjusted EBITDA is defined as earnings (loss) before interest, taxes, depreciation and amortization, stock-based compensation, and any acquisition or financial transaction-related expenses. 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.

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 | Twitter | 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 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, our ability to identify and close acquisitions on terms favorable to the company, 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

For the three and six months ended February 28, 2023 and 2022

(Unaudited)

 

 

Three Months Ended

 

Six Months Ended

(in thousands, except per common share amounts)

 

2023

 

2022

 

2023

 

2022

Revenues

 

 

 

 

 

 

 

 

Software

 

$

10,487

 

 

$

9,758

 

 

$

16,561

 

 

$

17,120

 

Services

 

 

5,263

 

 

 

5,038

 

 

 

11,153

 

 

 

10,093

 

Total revenues

 

 

15,750

 

 

 

14,796

 

 

 

27,714

 

 

 

27,213

 

Cost of revenues

 

 

 

 

 

 

 

 

Software

 

 

843

 

 

 

780

 

 

 

1,728

 

 

 

1,515

 

Services

 

 

1,777

 

 

 

2,050

 

 

 

3,563

 

 

 

4,071

 

Total cost of revenues

 

 

2,620

 

 

 

2,830

 

 

 

5,291

 

 

 

5,586

 

Gross profit

 

 

13,130

 

 

 

11,966

 

 

 

22,423

 

 

 

21,627

 

Operating expenses

 

 

 

 

 

 

 

 

Research and development

 

 

1,317

 

 

 

902

 

 

 

2,483

 

 

 

1,784

 

Selling, general, and administrative

 

 

7,779

 

 

 

5,584

 

 

 

15,028

 

 

 

10,572

 

Total operating expenses

 

 

9,096

 

 

 

6,486

 

 

 

17,511

 

 

 

12,356

 

 

 

 

 

 

 

 

 

 

Income from operations

 

 

4,034

 

 

 

5,480

 

 

 

4,912

 

 

 

9,271

 

 

 

 

 

 

 

 

 

 

Other income, net

 

 

1,034

 

 

 

53

 

 

 

1,774

 

 

 

118

 

 

 

 

 

 

 

 

 

 

Income before income taxes

 

 

5,068

 

 

 

5,533

 

 

 

6,686

 

 

 

9,389

 

Provision for income taxes

 

 

(894

)

 

 

(1,124

)

 

 

(1,267

)

 

 

(1,954

)

Net income

 

$

4,174

 

 

$

4,409

 

 

$

5,419

 

 

$

7,435

 

 

 

 

 

 

 

 

 

 

Earnings per share

 

 

 

 

 

 

 

 

Basic

 

$

0.21

 

 

$

0.22

 

 

$

0.27

 

 

$

0.37

 

Diluted

 

$

0.20

 

 

$

0.21

 

 

$

0.26

 

 

$

0.36

 

 

 

 

 

 

 

 

 

 

Weighted-average common shares outstanding

 

 

 

 

 

 

 

 

Basic

 

 

20,112

 

 

 

20,177

 

 

 

20,200

 

 

 

20,164

 

Diluted

 

 

20,529

 

 

 

20,745

 

 

 

20,657

 

 

 

20,738

 

 

 

 

 

 

 

 

 

 

Other comprehensive (loss) income, net of tax

 

 

 

 

 

 

 

 

Foreign currency translation adjustments

 

 

(23

)

 

 

(38

)

 

 

30

 

 

 

(275

)

Comprehensive income

 

$

4,151

 

 

$

4,371

 

 

$

5,449

 

 

$

7,160

 

SIMULATIONS PLUS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

 

 

(Unaudited)

 

(Audited)

(in thousands, except share and per share amounts)

 

February 28, 2023

 

August 31, 2022

ASSETS

 

 

 

 

Current assets

 

 

 

 

Cash and cash equivalents

 

$

39,292

 

 

$

51,567

 

Accounts receivable, net of allowance for doubtful accounts of $12 and $12

 

 

11,398

 

 

 

13,787

 

Prepaid income taxes

 

 

397

 

 

 

1,391

 

Prepaid expenses and other current assets

 

 

4,335

 

 

 

3,377

 

Short-term investments

 

 

76,052

 

 

 

76,668

 

Total current assets

 

 

131,474

 

 

 

146,790

 

Long-term assets

 

 

 

 

Capitalized computer software development costs, net of accumulated amortization of $16,455 and $15,672

 

 

10,501

 

 

 

9,563

 

Property and equipment, net

 

 

822

 

 

 

632

 

Operating lease right-of-use assets

 

 

1,190

 

 

 

1,420

 

Intellectual property, net of accumulated amortization of $8,552 and $7,928

 

 

8,358

 

 

 

9,057

 

Other intangible assets, net of accumulated amortization of $1,812 and $2,662

 

 

7,387

 

 

 

7,560

 

Goodwill

 

 

12,921

 

 

 

12,921

 

Other assets

 

 

548

 

 

 

439

 

Total assets

 

$

173,201

 

 

$

188,382

 

LIABILITIES AND SHAREHOLDERS' EQUITY

 

 

 

 

Current liabilities

 

 

 

 

Accounts payable

 

$

350

 

 

$

225

 

Accrued compensation

 

 

2,635

 

 

 

3,254

 

Accrued expenses

 

 

535

 

 

 

931

 

Operating lease liability - current portion

 

 

432

 

 

 

461

 

Deferred revenue

 

 

2,050

 

 

 

2,864

 

Total current liabilities

 

 

6,002

 

 

 

7,735

 

Long-term liabilities

 

 

 

 

Deferred income taxes, net

 

 

1,859

 

 

 

1,456

 

Operating lease liability

 

 

747

 

 

 

943

 

Total liabilities

 

 

8,608

 

 

 

10,134

 

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; 19,930,623 and 20,260,070 shares issued and outstanding

 

 

137,821

 

 

 

138,512

 

Retained earnings

 

 

27,050

 

 

 

40,044

 

Accumulated other comprehensive loss

 

 

(278

)

 

 

(308

)

Total shareholders' equity

 

 

164,593

 

 

 

178,248

 

Total liabilities and shareholders' equity

 

$

173,201

 

 

$

188,382

 

SIMULATIONS PLUS, INC.

Trended Financial Information*

(Unaudited)

(in millions except earnings per share amounts)

 

FY 2022

 

FY 2023

 

2022

 

2023

 

Q1

 

Q2

 

Q3

 

Q4

 

Q1

 

Q2

 

FY

 

FY

Revenue

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Software

 

$

7.4

 

 

$

9.8

 

 

$

9.6

 

 

$

5.9

 

 

$

6.1

 

 

$

10.5

 

 

$

32.7

 

 

$

16.6

 

Services

 

 

5.0

 

 

 

5.0

 

 

 

5.3

 

 

 

5.8

 

 

 

5.9

 

 

 

5.3

 

 

 

21.2

 

 

 

11.2

 

Total

 

$

12.4

 

 

$

14.8

 

 

$

15.0

 

 

$

11.7

 

 

$

12.0

 

 

$

15.8

 

 

$

53.9

 

 

$

27.7

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross Margin

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Software

 

 

90.0

%

 

 

92.0

%

 

 

92.4

%

 

 

86.1

%

 

 

85.4

%

 

 

92.0

%

 

 

90.6

%

 

 

89.6

%

Services

 

 

60.0

%

 

 

59.3

%

 

 

65.6

%

 

 

68.2

%

 

 

69.7

%

 

 

66.2

%

 

 

63.5

%

 

 

68.1

%

Total

 

 

77.8

%

 

 

80.9

%

 

 

82.9

%

 

 

77.2

%

 

 

77.7

%

 

 

83.4

%

 

 

79.9

%

 

 

80.9

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income from operations

 

$

3.8

 

 

$

5.5

 

 

$

4.9

 

 

$

0.7

 

 

$

0.9

 

 

$

4.0

 

 

$

14.9

 

 

$

4.9

 

Operating Margin

 

 

30.6

%

 

 

37.0

%

 

 

33.1

%

 

 

5.9

%

 

 

7.3

%

 

 

25.6

%

 

 

27.7

%

 

 

17.7

%

Net Income

 

$

3.0

 

 

$

4.4

 

 

$

4.1

 

 

$

1.0

 

 

$

1.2

 

 

$

4.2

 

 

$

12.5

 

 

$

5.4

 

Diluted Earnings Per Share

 

$

0.15

 

 

$

0.21

 

 

$

0.20

 

 

$

0.05

 

 

$

0.06

 

 

$

0.20

 

 

$

0.60

 

 

$

0.26

 

Adjusted EBITDA

 

$

5.3

 

 

$

7.2

 

 

$

6.3

 

 

$

2.3

 

 

$

3.0

 

 

$

6.2

 

 

$

21.0

 

 

$

9.2

 

Cash Flow from Operations

 

$

3.6

 

 

$

2.6

 

 

$

3.8

 

 

$

7.9

 

 

$

4.7

 

 

$

5.5

 

 

$

17.9

 

 

$

10.2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue Breakdown by Region

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Americas

 

$

8.5

 

 

$

9.7

 

 

$

11.2

 

 

$

8.4

 

 

$

8.5

 

 

$

10.6

 

 

$

37.7

 

 

$

19.1

 

EMEA

 

 

3.0

 

 

 

3.7

 

 

 

1.9

 

 

 

1.7

 

 

 

2.1

 

 

 

3.6

 

 

 

10.4

 

 

 

5.7

 

Asia Pacific

 

 

0.9

 

 

 

1.4

 

 

 

1.9

 

 

 

1.6

 

 

 

1.3

 

 

 

1.5

 

 

 

5.8

 

 

 

2.9

 

Total

 

$

12.4

 

 

$

14.8

 

 

$

15.0

 

 

$

11.7

 

 

$

12.0

 

 

$

15.8

 

 

$

53.9

 

 

$

27.7

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Software Performance Metrics

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average Revenue per Customer (in 000s)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial

 

$

71.0

 

 

$

101.0

 

 

$

95.0

 

 

$

65.0

 

 

$

68.0

 

 

$

110.0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Services Performance Metrics

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Backlog

 

$

15.4

 

 

$

17.0

 

 

$

16.7

 

 

$

15.9

 

 

$

15.8

 

 

$

15.4

 

 

 

 

 

*Numbers may not add due to rounding

SIMULATIONS PLUS, INC.

Reconciliation of Adjusted EBITDA to Net Income*

(Unaudited)

 

 

FY 2022

 

FY 2023

 

2022

 

2023

(in millions)

 

Q1

 

Q2

 

Q3

 

Q4

 

Q1

 

Q2

 

FY

 

FY

Net Income

 

$

3.0

 

 

$

4.4

 

 

$

4.1

 

 

$

1.0

 

 

$

1.2

 

 

$

4.2

 

 

$

12.5

 

 

$

5.4

 

Excluding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income and expense, net

 

 

(0.1

)

 

 

(0.1

)

 

 

(0.1

)

 

 

(0.4

)

 

 

(0.8

)

 

 

(1.0

)

 

 

(0.7

)

 

 

(1.8

)

Provision for income taxes

 

 

0.8

 

 

 

1.1

 

 

 

0.7

 

 

 

(0.1

)

 

 

0.4

 

 

 

0.9

 

 

 

2.6

 

 

 

1.3

 

Depreciation and amortization

 

 

0.8

 

 

 

1.0

 

 

 

0.9

 

 

 

0.9

 

 

 

0.9

 

 

 

0.9

 

 

 

3.6

 

 

 

1.9

 

Stock-based compensation

 

 

0.6

 

 

 

0.7

 

 

 

0.7

 

 

 

0.7

 

 

 

0.9

 

 

 

1.2

 

 

 

2.7

 

 

 

2.0

 

Mergers & Acquisitions expense

 

 

 

 

 

 

 

 

 

 

 

0.3

 

 

 

0.3

 

 

 

0.1

 

 

 

0.3

 

 

 

0.4

 

Adjusted EBITDA

 

$

5.3

 

 

$

7.2

 

 

$

6.3

 

 

$

2.3

 

 

$

3.0

 

 

$

6.2

 

 

$

21.0

 

 

$

9.2

 

*Numbers may not add due to rounding

 

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