TechDogs-"Simulations Plus Reports Second Quarter Fiscal 2023 Financial Results"

Software Development

Simulations Plus Reports Second Quarter Fiscal 2023 Financial Results

By Business Wire

Business Wire
Overall Rating

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

LANCASTER, Calif.--(BUSINESS WIRE)--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

Contacts

Investor Relations Contacts:
Brian Siegel, IRC, MBA
Senior Managing Director
Hayden IR
346-396-8696
brian@haydenir.com

Renee Bouche
Simulations Plus Investor Relations
661-723-7723
renee.bouche@simulations-plus.com

First published on Thu, Apr 6, 2023

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