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Simulations Plus Reports Third Quarter Fiscal 2023 Financial Results

July 7, 2023 Off By BusinessWire

Total revenue of $16.2 million and 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

LANCASTER, Calif.–(BUSINESS WIRE)–Simulations Plus, Inc. (Nasdaq: SLP), a leading provider of modeling and simulation software and services for pharmaceutical drug discovery and development, today reported financial results for its third quarter of fiscal 2023, ended May 31, 2023.


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

  • Total revenue increased 9% to $16.2 million
  • Software revenue increased 10% to $10.6 million, representing 65% of total revenue
  • Services revenue increased 5% to $5.6 million, representing 35% of total revenue
  • Gross profit increased 7% to $13.3 million; gross margin was 82%
  • Net income of $4.0 million and diluted EPS of $0.20, compared to net income of $4.1 million and diluted EPS of $0.20
  • Adjusted EBITDA of $6.5 million, representing 40% of total revenue

Nine Months Financial Highlights (Fiscal 2023 vs. Fiscal 2022)

  • Total revenue increased 4% to $43.9 million
  • Software revenue increased 2% to $27.2 million, representing 62% of total revenue
  • Services revenue increased 9% to $16.8 million, representing 38% of total revenue
  • Gross profit increased 5% to $35.7 million; gross margin was 81%
  • Net income of $9.4 million and diluted EPS of $0.46, compared to net income of $11.5 million and diluted EPS of $0.56
  • Adjusted EBITDA of $15.7 million, representing 36% of total revenue

Management Commentary

“We had a solid third quarter that delivered revenue in line with our expectations,” said Shawn O’Connor, Chief Executive Officer of Simulations Plus. “Our team continued to perform exceptionally well in an environment that remains challenged by constrained industry spending. Strong execution on our strategic priorities this quarter resulted in profitable growth that keeps us on track to meet our stated goals for fiscal 2023.

“Third quarter revenue increased 9% over the same period last year, driven primarily by MonolixSuite’s strong contribution in our software segment and growth in PKPD and PBPK revenue in our services segment. Gross margins remained strong at 82%, which reflected a favorable mix of higher margin software sales, as well as our ability to pass on price increases to our clients. Our renewal harmonization initiative to simplify and align software product renewals to provide procurement efficiencies is progressing as planned. Our clients are responding positively to this initiative, and we will continue the realignment process through the balance of 2023. During the third quarter, we also completed our $20 million accelerated share repurchase program. The total number of shares of our common stock repurchased under the ASR program was 492,041 shares, at an average cost of $40.65 per share.

“On June 20th, we announced our acquisition of Immunetrics, a modeling and simulation company. This acquisition expands our robust quantitative systems pharmacology (QSP) expertise into the fast-growing therapeutic areas of oncology, immunology and autoimmune diseases. Immunetrics brings proven QSP technology, a strong reputation in the market, and an incredibly talented team that we believe will enhance our leadership in biosimulation. I am excited to welcome the Immunetrics team to Simulations Plus.

“As we enter the fourth quarter, our performance for the nine months gives us confidence in our previously stated guidance. Our customer pipeline remains solid, our profitability is strong, and our balance sheet is sound. We remain focused on continuing to drive innovative and disciplined growth that will deliver attractive long-term returns for our shareholders.”

Fiscal 2023 Guidance

 

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 August 7, 2023, to shareholders of record as of July 31, 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 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 1-201-389-0879. 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, (gain) loss on currency exchange, and any acquisition- or financial-transaction-related expenses. 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.

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 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

For the three and nine months ended May 31, 2023 and 2022

(Unaudited)
 

 

 

Three Months Ended May 31,

 

Nine Months Ended May 31,

(in thousands, except per common share amounts)

 

 

2023

 

 

 

2022

 

 

 

2023

 

 

 

2022

 

Revenues

 

 

 

 

 

 

 

 

Software

 

$

10,632

 

 

$

9,647

 

 

$

27,193

 

 

$

26,767

 

Services

 

 

5,602

 

 

 

5,312

 

 

 

16,755

 

 

 

15,405

 

Total revenues

 

 

16,234

 

 

 

14,959

 

 

 

43,948

 

 

 

42,172

 

Cost of revenues

 

 

 

 

 

 

 

 

Software

 

 

908

 

 

 

730

 

 

 

2,636

 

 

 

2,245

 

Services

 

 

2,053

 

 

 

1,829

 

 

 

5,616

 

 

 

5,900

 

Total cost of revenues

 

 

2,961

 

 

 

2,559

 

 

 

8,252

 

 

 

8,145

 

Gross profit

 

 

13,273

 

 

 

12,400

 

 

 

35,696

 

 

 

34,027

 

Operating expenses

 

 

 

 

 

 

 

 

Research and development

 

 

945

 

 

 

655

 

 

 

3,428

 

 

 

2,439

 

Selling, general, and administrative

 

 

8,231

 

 

 

6,799

 

 

 

23,259

 

 

 

17,371

 

Total operating expenses

 

 

9,176

 

 

 

7,454

 

 

 

26,687

 

 

 

19,810

 

 

 

 

 

 

 

 

 

 

Income from operations

 

 

4,097

 

 

 

4,946

 

 

 

9,009

 

 

 

14,217

 

 

 

 

 

 

 

 

 

 

Other income (expense), net

 

 

843

 

 

 

(112

)

 

 

2,617

 

 

 

6

 

 

 

 

 

 

 

 

 

 

Income before income taxes

 

 

4,940

 

 

 

4,834

 

 

 

11,626

 

 

 

14,223

 

Provision for income taxes

 

 

(932

)

 

 

(747

)

 

 

(2,199

)

 

 

(2,701

)

Net income

 

$

4,008

 

 

$

4,087

 

 

$

9,427

 

 

$

11,522

 

 

 

 

 

 

 

 

 

 

Earnings per share

 

 

 

 

 

 

 

 

Basic

 

$

0.20

 

 

$

0.20

 

 

$

0.47

 

 

$

0.57

 

Diluted

 

$

0.20

 

 

$

0.20

 

 

$

0.46

 

 

$

0.56

 

 

 

 

 

 

 

 

 

 

Weighted-average common shares outstanding

 

 

 

 

 

 

 

 

Basic

 

 

19,972

 

 

 

20,212

 

 

 

20,123

 

 

 

20,180

 

Diluted

 

 

20,355

 

 

 

20,768

 

 

 

20,512

 

 

 

20,731

 

 

 

 

 

 

 

 

 

 

Other comprehensive income (loss), net of tax

 

 

 

 

 

 

 

 

Foreign currency translation adjustments

 

 

144

 

 

 

24

 

 

 

174

 

 

 

(251

)

Comprehensive income

 

$

4,152

 

 

$

4,111

 

 

$

9,601

 

 

$

11,271

 

SIMULATIONS PLUS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS
 

 

 

(Unaudited)

 

(Audited)

(in thousands, except share and per share amounts)

 

May 31, 2023

 

August 31, 2022

ASSETS

 

 

 

 

Current assets

 

 

 

 

Cash and cash equivalents

 

$

55,131

 

 

$

51,567

 

Accounts receivable, net of allowance for doubtful accounts of $49 and $12

 

 

10,214

 

 

 

13,787

 

Prepaid income taxes

 

 

—

 

 

 

1,391

 

Prepaid expenses and other current assets

 

 

4,730

 

 

 

3,377

 

Short-term investments

 

 

67,234

 

 

 

76,668

 

Total current assets

 

 

137,309

 

 

 

146,790

 

Long-term assets

 

 

 

 

Capitalized computer software development costs, net of accumulated amortization of $16,857 and $15,672

 

 

11,000

 

 

 

9,563

 

Property and equipment, net

 

 

701

 

 

 

632

 

Operating lease right-of-use assets

 

 

982

 

 

 

1,420

 

Intellectual property, net of accumulated amortization of $8,903 and $7,928

 

 

8,007

 

 

 

9,057

 

Other intangible assets, net of accumulated amortization of $1,943 and $2,662

 

 

7,698

 

 

 

7,560

 

Goodwill

 

 

12,921

 

 

 

12,921

 

Other assets

 

 

516

 

 

 

439

 

Total assets

 

$

179,134

 

 

$

188,382

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

Current liabilities

 

 

 

 

Accounts payable

 

$

357

 

 

$

225

 

Accrued compensation

 

 

3,818

 

 

 

3,254

 

Accrued expenses

 

 

552

 

 

 

931

 

Income taxes payable

 

 

793

 

 

 

—

 

Operating lease liability – current portion

 

 

330

 

 

 

461

 

Deferred revenue

 

 

3,172

 

 

 

2,864

 

Total current liabilities

 

 

9,022

 

 

 

7,735

 

Long-term liabilities

 

 

 

 

Deferred income taxes, net

 

 

110

 

 

 

1,456

 

Operating lease liability

 

 

612

 

 

 

943

 

Total liabilities

 

 

9,744

 

 

 

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; 19,926,819 and 20,260,070 shares issued and outstanding

 

 

143,666

 

 

 

138,512

 

Retained earnings

 

 

25,858

 

 

 

40,044

 

Accumulated other comprehensive loss

 

 

(134

)

 

 

(308

)

Total shareholders’ equity

 

 

169,390

 

 

 

178,248

 

Total liabilities and shareholders’ equity

 

$

179,134

 

 

$

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

 

Q3

 

FY

 

FY

Revenue

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Software

 

$

7.4

 

 

$

9.8

 

 

$

9.6

 

 

$

5.9

 

 

$

6.1

 

 

$

10.5

 

 

$

10.6

 

 

$

32.7

 

 

$

27.2

 

Services

 

 

5.0

 

 

 

5.0

 

 

 

5.3

 

 

 

5.8

 

 

 

5.9

 

 

 

5.3

 

 

 

5.6

 

 

 

21.2

 

 

 

16.8

 

Total

 

$

12.4

 

 

$

14.8

 

 

$

15.0

 

 

$

11.7

 

 

$

12.0

 

 

$

15.8

 

 

$

16.2

 

 

$

53.9

 

 

$

43.9

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross Margin

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Software

 

 

90.0

%

 

 

92.0

%

 

 

92.4

%

 

 

86.1

%

 

 

85.4

%

 

 

92.0

%

 

 

91.5

%

 

 

90.6

%

 

 

90.3

%

Services

 

 

60.0

%

 

 

59.3

%

 

 

65.6

%

 

 

68.2

%

 

 

69.7

%

 

 

66.2

%

 

 

63.4

%

 

 

63.5

%

 

 

66.5

%

Total

 

 

77.8

%

 

 

80.9

%

 

 

82.9

%

 

 

77.2

%

 

 

77.7

%

 

 

83.4

%

 

 

81.8

%

 

 

79.9

%

 

 

81.2

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income from operations

 

$

3.8

 

 

$

5.5

 

 

$

4.9

 

 

$

0.7

 

 

$

0.9

 

 

$

4.0

 

 

$

4.1

 

 

$

14.9

 

 

$

9.0

 

Operating Margin

 

 

30.6

%

 

 

37.0

%

 

 

33.1

%

 

 

5.9

%

 

 

7.3

%

 

 

25.6

%

 

 

25.2

%

 

 

27.7

%

 

 

20.5

%

Net Income

 

$

3.0

 

 

$

4.4

 

 

$

4.1

 

 

$

1.0

 

 

$

1.2

 

 

$

4.2

 

 

$

4.0

 

 

$

12.5

 

 

$

9.4

 

Diluted Earnings Per Share

 

$

0.15

 

 

$

0.21

 

 

$

0.20

 

 

$

0.05

 

 

$

0.06

 

 

$

0.20

 

 

$

0.20

 

 

$

0.60

 

 

$

0.46

 

Adjusted EBITDA

 

$

5.2

 

 

$

7.1

 

 

$

6.5

 

 

$

2.5

 

 

$

3.0

 

 

$

6.2

 

 

$

6.5

 

 

$

21.2

 

 

$

15.7

 

Cash Flow from Operations

 

$

3.6

 

 

$

2.6

 

 

$

3.8

 

 

$

7.9

 

 

$

4.7

 

 

$

5.5

 

 

$

8.5

 

 

$

17.9

 

 

$

18.8

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue Breakdown by Region

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Americas

 

$

8.5

 

 

$

9.7

 

 

$

11.2

 

 

$

8.4

 

 

$

8.5

 

 

$

10.6

 

 

$

10.8

 

 

$

37.7

 

 

$

29.9

 

EMEA

 

 

3.0

 

 

 

3.7

 

 

 

1.9

 

 

 

1.7

 

 

 

2.1

 

 

 

3.6

 

 

 

3.4

 

 

 

10.4

 

 

 

9.1

 

Asia Pacific

 

 

0.9

 

 

 

1.4

 

 

 

1.9

 

 

 

1.6

 

 

 

1.3

 

 

 

1.5

 

 

 

2.1

 

 

 

5.8

 

 

 

5.0

 

Total

 

$

12.4

 

 

$

14.8

 

 

$

15.0

 

 

$

11.7

 

 

$

12.0

 

 

$

15.8

 

 

$

16.2

 

 

$

53.9

 

 

$

43.9

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Software Performance Metrics

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average Revenue per Customer (in 000s)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial

 

$

71.0

 

 

$

101.0

 

 

$

95.0

 

 

$

65.0

 

 

$

68.0

 

 

$

110.0

 

 

$

97.0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Services Performance Metrics

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Backlog

 

$

15.4

 

 

$

17.0

 

 

$

16.7

 

 

$

15.9

 

 

$

15.8

 

 

$

15.4

 

 

$

15.7

 

 

 

 

 
 

*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

 

Q3

 

FY

 

FY

Net Income

 

$

3.0

 

 

$

4.4

 

 

$

4.1

 

 

$

1.0

 

 

$

1.2

 

 

$

4.2

 

 

$

4.0

 

 

$

12.5

 

 

$

9.4

 

Excluding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income and expense, net

 

 

(0.1

)

 

 

(0.1

)

 

 

(0.1

)

 

 

(0.4

)

 

 

(0.8

)

 

 

(1.0

)

 

 

(1.1

)

 

 

(0.7

)

 

 

(2.9

)

Provision for income taxes

 

 

0.8

 

 

 

1.1

 

 

 

0.7

 

 

 

(0.1

)

 

 

0.4

 

 

 

0.9

 

 

 

0.9

 

 

 

2.6

 

 

 

2.2

 

Depreciation and amortization

 

 

0.8

 

 

 

1.0

 

 

 

0.9

 

 

 

0.9

 

 

 

0.9

 

 

 

0.9

 

 

 

0.9

 

 

 

3.6

 

 

 

2.8

 

Stock-based compensation

 

 

0.6

 

 

 

0.7

 

 

 

0.7

 

 

 

0.7

 

 

 

0.9

 

 

 

1.2

 

 

 

1.1

 

 

 

2.7

 

 

 

3.1

 

(Gain) loss on currency exchange

 

 

(0.1

)

 

 

(0.1

)

 

 

0.2

 

 

 

0.2

 

 

 

—

 

 

 

—

 

 

 

0.3

 

 

 

0.2

 

 

 

0.3

 

Mergers & Acquisitions expense

 

 

—

 

 

 

—

 

 

 

—

 

 

 

0.3

 

 

 

0.3

 

 

 

0.1

 

 

 

0.4

 

 

 

0.3

 

 

 

0.8

 

Adjusted EBITDA

 

$

5.2

 

 

$

7.1

 

 

$

6.5

 

 

$

2.5

 

 

$

3.0

 

 

$

6.2

 

 

$

6.5

 

 

$

21.2

 

 

$

15.7

 
 

*Numbers may not add due to rounding

 

Contacts

Investor Relations Contacts:

John Wilfong

Financial Profiles

310-622-8248

[email protected]

Renee Bouche

Simulations Plus Investor Relations

661-723-7723

[email protected]