Simulations Plus, Inc. Q1 FY2025 earnings call

• Macro Environment: Facing challenging funding and cost-constrained environment, but activity marginally better than last two years. Clients have varied activity levels from stagnant to active.
• Software Segment: Strong growth across all software solutions; CPP, QSP, CIM, and PBPK all saw growth with new customers and upsells.
• Services Segment: Services revenue growth, but impacted by data delays; strong services bookings and backlog increase.
• Financials: Total revenue $18.9M, diluted EPS $0.01, adjusted EBITDA $4.5M (24% of revenue). Software gross margin 75%, services gross margin 26%.

Software Segment: Software revenue grew 41% in Q1 2025, 18% organic. Clinical Pharmacology and Pharmacometrics (CPP) business unit led with Monolix Suite up 43%, including a large pharma client committing to PK Analytics. Quantitative Systems Pharmacology (QSP) software revenue grew 40%, adding model licenses for psoriatic arthritis and Crohn's disease. Cheminformatics (CIM) business unit software revenue grew 15% driven by ADMET Predictor. Physiologically Based Pharmacokinetics (PBPK) software revenue increased 4%. ALLIE business unit software revenue was $1.7 million, MC business unit software revenue was $0.1 million. Services Segment: Services revenue grew 19% in Q1 2025 but declined 9% organic. Impacted by client-driven data delays. PBPK, CPP, and QSP services revenue decreased. Medical communication services revenue was $1.9 million. Services backlog was $17.3 million, up 22% sequentially.

• Reaffirmed fiscal 2025 guidance: Total revenue expected $90M-$93M, ALLIE and MC to contribute $15M-$18M, adjusted EBITDA margin 31%-33%, adjusted diluted EPS $1.07-$1.20.
• Second fiscal quarter revenue expected ~24% of FY guidance range, year-over-year growth 18%-22%.

• Challenging funding and cost-constrained environment in the sector.
• Data delays impacting services ramp-up.
• Wide variance in client activity levels leading to uncertain spending plans.

Q: David Larsen asked about software revenue growth, organic growth rebound, pricing, and Asia.

A: Shawn O'Connor discussed strong software performance, organic growth, mid-single digit pricing, and Asia market with Japan as significant contributor.

Q: François Brisebois asked about major pharma commitment and services data delays.

A: Shawn O'Connor said pharma commitment was expected after hard work, and data delays are part of drug development with robust bookings.

Q: Christine Rains asked about pharma budgets, Proficiency contribution, and services margins.

A: Shawn O'Connor and Will Frederick discussed pharma budget discussions, Proficiency revenue contributions, and services margins.

Q: Scott Schoenhaus asked about organic revenue growth, Proficiency acquisition benefit, and data delays vs budgets.

A: Shawn O'Connor talked about organic growth expectations, Proficiency acquisition benefits, and data delays as part of drug development.

Q: Matt Hewitt asked about market shakeout, Proficiency acquisition budget opportunity.

A: Shawn O'Connor discussed market shakeout and Proficiency's expansion into clinical ops and medical affairs budgets.

Q: Jeff Garro asked about ALLIE/MC seasonality, integration, and macro environment trends.

A: Shawn O'Connor talked about seasonality of ALLIE/MC, integration steps, and macro environment variances by client size, therapeutic area, etc.