Greetings, and welcome to the Simulations Plus First Quarter Fiscal 2022 Financial Results Conference Call. At this time, all participants are in a listen-only mode. As a reminder, this conference is being recorded. It is now my pleasure to introduce Brian Siegel from Hayden IR. Thank you, Mr. Siegel. You may now begin.

Good afternoon, everyone. Welcome to our first quarter of fiscal 2022 financial results conference call. Hosting the call today are Simulations Plus' CEO, Shawn O'Connor; and CFO, Will Frederick. An opportunity to ask questions will follow today's presentation. Moving to Slide 2. Before beginning, I would like to remind everyone that except for historical information, the matters discussed in this presentation are forward-looking statements that involve a number of risks and uncertainties. Words like believe, expect and anticipate mean that these are our best estimates at the time but that 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 acquisition on terms favorable to the company and a sustainable market. Further information on the company’s risk factors is contained in the company’s quarterly and annual reports filed with the Securities and Exchange Commission. With that said, I'd like to turn over the call to Shawn O'Connor. Shawn?

Thank you, Brian. We began the first fiscal year with an excellent first quarter, as both segments of our business delivered solid growth leading to total revenue growth of 16%. Our software business was up 19% year-over-year in the first quarter. And we continue to see strengths across each of our three core product lines with bookings exceeding expectations, and significant cross-selling progress. From an innovation standpoint, we continued to release new versions that we believe will continue to build on our leadership positions. Our service business returned to positive growth up 13% year-over-year. This portion of our business also continued to grow its backlog recovering from the pandemic impacted challenges of the second half of last year. Diluted EPS grew at a faster pace than revenue up 25% from last year driven by mix and the operating leverage inherent in our model. Overall, this was a strong start to the new fiscal year. As I mentioned, our software business had a strong quarter. GastroPlus revenue increased 19% year-over-year this quarter, we had 16 new customers spending over $100k in the quarter, and nine new small biotech pharma companies, CROs, and incubators. This is a rapidly growing segment of the market and we are experiencing robust growth in this area. We also saw customer success with 21 upsells to existing customers in the quarter. A significant accomplishment that we announced during the quarter was the award from the FDA to enhance and validate mechanistic in vitro, in vivo correlation methods for long-acting injectable formulations to accelerate innovator and generic product development and regulatory assessment. This is a joint proposal with the University of Connecticut Department of Pharmaceutical Services. And we are now engaged with the FDA on four different funded programs, validating the widespread embracing of modeling and simulation technology as an important tool in drug development. Monolix sales continue to set the pace for our software segment. Sales of this product increased 35% this quarter. Our efforts to expand the addressable market for MonolixSuite in Asia are starting to bear fruit, as we signed our first deals in China and added Northern Science Consulting in Japan as a distributor. Renewals for the MonolixSuite remain robust. And our recently released updates received more than 1000 downloads in the first 10 days. As I mentioned on prior calls, we believe MonolixSuite is taking market share, and we are confident in our ability to innovate and maintain our technological advantages. ADMET Predictor delivered 24% revenue growth in the quarter. During the quarter, we released a new version of the product, APX 3, which is generating increased demand from our customers. We also closed two artificial intelligence drug design module deals with customers. The Phase II of our AIDD collaboration continues to be successful, attracting greater interest from current and potential customers. Turning to our services offering. Our PK/PD services revenue this quarter increased 4% as the relatively high number of project disruptions that impacted the business during the second half of last fiscal year are returning to normalized levels. While PK/PD bookings were still slower than prior quarters, as the industry continues to navigate the pandemic and its impact on the FDA pipeline, we entered the second quarter with a robust pipeline of sales opportunities for this business. We had some meaningful accomplishments for the quarter that I'd like to highlight with the following two examples. First, we helped a Fortune 100 pharma client develop a treatment for patients with COVID-19. Our work involved performing a population analysis, using data collected in healthy individuals and in patients with the virus. Our goal was to identify and quantify the effects of patient factors on drug exposure in order to confirm and support dose selection for the next phase of development, and determine whether dose adjustment was required in any specific population. These analyses were helpful in supporting the achievement of regulatory milestones in obtaining emergency use authorization for the compound. Second, we supported a biotech company by helping them to gain greater understanding and insight into the risk profile for their compound, which is intended to treat patients with Type 2 diabetes and inadequate glycemic control. We developed a population model and used the resulting estimates of individual patient's drug exposure to explore relationships between exposure and efficacy, as well as between drug exposure and the occurrence of a particular type of adverse event. This understanding was used to support the need for dose adjustments in special populations and to assist in preventing these particular adverse events. These are just two of many examples of the important work we do for customers, large and small, advancing their drug development and regulatory approval efforts. Our QSP, QST revenue was up 31% for the quarter. Even with this strong growth, our backlog increased by 124%, giving us confidence in this business over the next few quarters. During the quarter, we've released RENAsym version 1A, the novel quantitative systems toxicology software for predicting and investigating drug-induced kidney injury. The information from RENAsym modeling will help guide no-go decisions on drug development projects, potentially avoiding the disastrous financial effects of failed clinical trials or better providing assurances of a path to FDA approval. RENAsym was developed with funding from the National Institutes of Health. During November, we presented breakthrough scientific data at a top liver disease conference, helping to explain the relatively high positive response rates in placebo cohorts related to potential treatments of non-alcoholic steatohepatitis, or NASH. Our research found that small changes to the diet patterns and patient behavior can lead to reductions in fibrosis scores, a key metric of efficacy for NASH treatments. This insight can help NASH clinical scientists better understand the clinical trial results and should keep potential treatments on track to be delivered to patients in short order. Finally, our PBPK revenue was also up 37% this quarter and backlog increased by 56%. Of note, we announced a new grant from the FDA to enhance the transdermal compartmental absorption in transit model in GastroPlus. Overall, our services revenue grew 13% and backlog increased 31% during the quarter. Good progress in moving beyond the disruptions from the second half of last year. Looking to our fiscal year 2022 outlook, we are maintaining our guidance for the fiscal year. Our software business continues to deliver accelerated growth rates and we're seeing continued recovery in our consulting business. Accordingly, we should exit fiscal year 2022 at a pace that supports our longer-term expectations for 15% or better organic growth with any acquisitions incremental to this number. With respect to M&A, we continue to look for strategic opportunities to increase our total addressable market and accelerate our growth rates. Let me now turn the call to our CFO, Will Frederick to discuss the financial results.

Thank you, Shawn. As you may have seen in our press release earlier today, we have expanded our financial disclosures to give a more complete picture of the business by providing adjusted EBITDA. While this isn't a metric we've previously provided, it has become commonplace among companies in our sector, and we felt it appropriate to provide this for our current and prospective investors. Our adjusted EBITDA is currently calculated by adding back stock-based compensation expense. In the future, we'll add back any expenses related to M&A or other non-cash, non-operating expenses that may occur. We provide a reconciliation of this non-GAAP metric to net income to the relevant GAAP metric in the press release announcing our results, and it can be found on our website as well. Our total revenue growth rate was 16% in the quarter. The strong growth of 19% in our software business positively impacted our mix, which was at the high end of our 55% to 60% guidance range for the fiscal year. Our services business grew at 13% and its share of the mix was at the lower end of the 40% to 45% guidance range. Our software gross margin was 90% for the quarter, up from 87% last fiscal year due to increased revenue and slightly lower cost of revenue. Our services margin was 60%, down from 64% last fiscal year due to increased salaries and an increase in lower margin services projects, including training and international workshops in China and Brazil. Our total gross margin increased slightly year-over-year to 78% as a result of the improving software revenue mix. We continue to enjoy a diverse mix of software revenue in the quarter with solid growth across our entire product portfolio. For the quarter, GastroPlus represented 54% of our software revenue, MonolixSuite was 21%, ADMET Predictor was 20%, and other software was 5%. This quarter, we saw MonolixSuite climb to our second highest revenue software product. For the quarter, our renewal rate for commercial customers was 96% based on fees and 93% based on accounts. As a reminder, our renewal rates fluctuate quarter-to-quarter due to customers who either renew early in the quarter before their license term ends or late in the following quarter after their license term ends. Renewal rates for commercial customers on average continue to be in line with historical rates in the mid-90s. We saw a slight decline in our average revenue per customer this quarter compared to the prior year quarter; this change reflects our normal price increases and ongoing upselling efforts, offset by changes to our discount structure for multi-year deals. We now have 92 university plus customers in 26 countries. The university plus program offers free access to our software for students and educators, as part of our ongoing support of academic research, training, and collaborations. We believe this program will help prepare the next generation of scientists and contribute to the rapid development of safer, lower-cost treatments for patients worldwide. Let me shift now to our services business. For the quarter, our services revenue breakdown was as follows: 46% from PK/PD services, 29% from QSP, QST services, 17% from PBPK services, and 8% from other services. With regard to a couple of key service metrics, total service projects increased 48% this quarter and we ended the quarter with $15 million in backlog, up $3 million from the prior year quarter. Now turning to our consolidated income statement. Total R&D costs for the quarter were $1.7 million or 14% of revenue compared to $1.5 million, also 14% of revenue in the same period last fiscal year. R&D expenses for the quarter were $0.9 million or 7% of revenue compared to $0.8 million or 8% of revenue in the same period last fiscal year. Capitalized R&D for the quarter was $0.8 million or 7% of revenue compared to $0.7 million or 6% of revenue in the same period last fiscal year. SG&A expense for the quarter was $5 million or 40% of revenue compared to $4.4 million or 41% of revenue in the same period last fiscal year. The increase in SG&A expense was primarily due to higher payroll costs, increased insurance expenses, and increased commission costs. Income from operations was $3.8 million, an increase of 24% and operating margin expanded to 31% from 29% last fiscal year. Income tax expense was $0.8 million for an effective tax rate of 22%, compared to last fiscal year's income tax expense of $0.5 million and an effective tax rate of 17%. We saw a lower effective tax rate last fiscal year, primarily driven by the tax benefit associated with disqualifying dispositions. Net income increased 22% to $3 million compared to $2.5 million for the same period last fiscal year. Diluted earnings per share increased 25% to $0.15, compared to $0.12 for the same period last fiscal year. Expenses for interest, income taxes, depreciation and amortization, and non-cash stock-based compensation included in our net income were $2.3 million, compared to $1.8 million for the same period last fiscal year. Adjusted EBITDA excluding these amounts was $5.3 million or 42% of revenue, compared to $4.3 million or 40% of revenue for the same period last fiscal year. We continue to have a strong balance sheet with significant cash reserves to support our continued expansion through internal investment and potential M&A activity. At the end of the quarter, our cash and short-term investments balance grew to $124.3 million and we continue to have no debt. I'll now turn the call back to you, Shawn.

Thank you, Will. In conclusion, this quarter demonstrates improved momentum relative to the end of fiscal 2021. Our bookings generally exceeded expectations. We grew revenue double-digits for both software and services, and we expanded our services backlog, supporting future growth. Our investments in business development are paying off, helping us to capture market share, expand to new regions, and more effectively cross-sell solutions across our installed base. Recent successful releases of new software and service achievements demonstrate our scientific leadership. Overall, we are well-positioned for continued organic growth. Additionally, strategic M&A remains an important path to augment our organic growth, and with a strong balance sheet and a growing leadership position in the industries we serve, we continue to evaluate potential acquisitions. With that, I'll be happy to take your questions. Operator?

Our first question is from Francois Brisebois with Oppenheimer.

Thanks for taking the questions and congratulations on a very nice quarter here. The first question I had was just, your quarter here that you reported ended in November, a lot of people are announcing quarters here for the fourth quarter and calendar year ending in December. In December, we've had a lot of fun with this Omicron variant. So, I'm just kind of wondering on your end, in terms of guidance, it was a strong quarter. Can you just talk about maybe how you have seen the variant affect different parts of your business, if at all, in this case?

Obviously, the results in terms of our booking sales revenue drive were great in the quarter ended November. So I can't point to any Omicron impact in that timeframe, which built up since that point in time in December and here into January. I think we're waiting to see what the impact is; back to a year and a half ago, with other peaks of the virus we saw slowdowns in terms of our client companies and their hiring and the need for more software, more licenses impacting terms of FDA processes and the speed with which clinical trials were concluded. Some of that impact may be yet to be seen here in the coming months but to date not a lot of impact in terms of November.

That's helpful. And then maybe help us understand, last time there was an issue, and you guys have rebounded very well from on the services side in terms of relationship to the pandemic. But I just wanted to make sure we understand here that what happened is it wasn't that there was not necessarily enough backlog, but was it just the timing of the cancellation of certain products and it was difficult to get the backlog involved? Or what was the reason, again, for the service issue?

The primary source of the problem, Franc, was the number of delays in cancellation and holds that came up during the quarter, especially in the third quarter, right towards the end of the quarter, the last half of the quarter, which didn't allow us to reach into backlog and other projects forward to move our staff to other engagements of the projects that would maintain the lower revenue there. Our backlog is a mix of projects that some can be moved forward, many can't be moved forward because it's waiting on data that comes from the client or a CRO on the conclusion of the clinical trial. If that backlog is bigger, as we talked about before, then there's more probability, more opportunities to move some of those projects forward. Our backlog was short and the number of cancellations in that third quarter were significantly above what our normal experience is. It happens every quarter. But the nine that we incurred in the third quarter of last year was well above what would be considered normal. We've seen cancellations this past quarter, but they were not as significant or numerous, and therefore, it didn't impact us quite significantly.

Okay, great. Lastly, at a high level, we discussed the significant shift in the use of biosimulation with the FDA. Can you talk about how the FDA is accepting biosimulation? Has the pandemic accelerated this process? I understand it’s logical to save time, especially concerning the EUA you were involved with. However, have you encountered challenges due to the FDA being overwhelmed by the pandemic, possibly delaying the acceleration of biosimulation more than you anticipated? Or does it seem that they fully support this initiative?

If anything, we see the impact in terms of their processes around the review of drug candidates and submissions. No impact certainly in a negative way on their endorsement and use – their own use of modeling and simulation and endorsement of the industry's usage can areas of expanding application of biosimulation techniques. Their acceptance, bioequivalents, waivers, etc., continue to expand. So pandemic can be impactful in terms of the flow or workflow but certainly it doesn't slow the rapid adoption of biosimulation and supporting that from the FDA. Impact through this process, modeling and simulation techniques have been used in some of the COVID treatments available that have been in the review process and their core more opportunity to expand its application into areas such as vaccines.

Our next question is from Matt Hewitt with Craig-Hallum.

Congratulations on the good start to the year. I have a two-part question. We've heard a lot about the great resignation that took place late last year, particularly in Q3 and Q4, with many people switching jobs. I'm curious about the impact this has had on your customers. Have they experienced this type of employee migration? How has it affected your sales? Additionally, at Simulations Plus, how is your hiring process going? Have you been able to find qualified candidates to fill the roles as you continue to grow?

Well, the first part of your question in terms of the activity in the industry and our clients, I don't have a measurement as to comparison to prior times in volume. My sense is that itself, like it is in a lot of industries, that the movement of staff is more active now as we came out of earlier phases of COVID. There are a number of drivers in terms of the movement there, some impact in terms of the flow of new sales must come from that as they're losing people and/or searching for other people. Generally, quite frankly, it's a positive thing for us. When someone at Simulations Plus moves from Company A to Company B, oftentimes that creates a new sale opportunity for us, both on the software side as that individual is accustomed to using the tools at their prior job, and they need them in a new position as well as on the service side. They are in a position to control the acquisition of service engagements, delivering those or acquiring them from consulting firms like ourselves. There have been fans of our team previously, and that often translates to a new opportunity at the company that they've moved to; mostly a positive impact. It also creates an opportunity for the company that is losing people, where they need to continue to meet deadlines and may create a need to go outside to Simulations Plus to get work done that they might have otherwise done in-house. So overall, it tends to be a bit of a positive. In terms of its impact on our own environment, this has been a very competitive marketplace for talent. Historically, demand has exceeded supply in general for computational biologists and scientists that work in this field, and it continues through today. We have pretty good historical retention rates in terms of our employees. It's not 100% retention. There are people that we lose from time to time. Often, it is a consultant that may have come out of a post-doc environment into a company like Simulations Plus and without any direct pharma experience wants to go get that experience on their resume, and in fact, they then become even better consultants down the road with that experience on their resume, and we look forward to them coming back at some point. On the recruiting side, we have a very competitive market, but we've generally been able to keep pace with our hiring plan. It is a very competitive market, and it’s something that we pay close attention to because our scientific staff and their contributions are the lifeblood of the business, both on the software side as well as the consulting side; a key ingredient of our success.

That's really helpful. I guess reaching out or kind of touching base on the Asia Pacific region, where you are making a little bit more of an effort there. Where do you see that business going, given, I guess, kind of the market there has been growing robustly for the past few years? And I'm just curious, can that become 10% of revenues in a couple of years? Where do you see that going over the mid and long term?

Yes. Generally, the Asian market has been contributing about 15% of our revenue. We've got a good presence there historically with the GastroPlus ADMET Predictor products, especially in Japan, where our long-standing relationship with our distributor there has driven very good revenue growth for many years. Our expansion into other areas in terms of Korea, China, India, those marketplaces are a little bit less developed for ourselves, and we see more opportunity and expect more opportunity there. And finally, I'd say that actually in Asia, while it is fast-growing, it was probably the most disrupted through COVID. The start-stops in terms of business activity were probably more impactful there than anywhere geographically. That said, we've added a new independent Chinese distributor for the Monolix product several months ago and the start-up period is complete. We began this past quarter with the first licenses through the new distributor and very recently put the Monolix product into the portfolio of products that are Japanese distributor reps for us in that marketplace. So expect some uptick there on the Monolix side, which has done some business, but not proportionately appropriate for their overall mix of business. We expect that to be a good growth area for Monolix, and in general, will contribute to at that 15% level or I think a little better than that as we move forward.

Our next question is from Dane Leone with Raymond James.

Congratulations on the results. Could you provide more details about the competitive share gains you mentioned related to Monolix? Specifically, where these gains are coming from and which products are considered competitive? Additionally, could you share your thoughts on your ability to drive organic growth and pursue acquisitions, either in services or software, throughout 2022?

Sure, Dane. I'll go backwards in terms of the M&A question. We are actively searching out there in terms of ways in which we can contribute to our TAM in the long run by adding incremental products and services. We've got a strict criteria that we've applied in our previous acquisitions and there's a lot of activity in that regard. Earlier in the year, we commented on the fact that valuation was a challenge in the marketplace for us but that has opened up a bit. It's always a challenge that never goes away, but I think that barrier has improved. We're certainly looking at a number of potential candidates that are out there, and while unpredictable, I would hope that we are able to find and come to an agreement in terms of an acquisition in this timeframe. It's got to be the right set, meet our criteria both in terms of product fit and cultural fit as well as being accretive and appropriate valuation. And those opportunities do exist out there. I'm confident that we will, at some point, achieve that. First question, in terms of Monolix and our market share gain there. The LME modeling tool market is dominated by one long-term player that introduced early product modeling and simulation over 20 years ago, with the largest installed base in that software segment. We believe we are taking market share based upon our growth at 30-plus percent in Monolix, which is much higher than the overall market growth rate for that product area.

Our next question is from Mitra Ramgopal with Sidoti.

Congrats on the great quarter. Just a couple of questions. First, I was just curious, the balance sheet is very strong. As you're building cash, absent acquisitions, could you just let us know how you're prioritizing capital allocation as it relates to R&D or expanding sales, etc.?

Sure, Peter. We certainly are focused in terms of capital allocation first and foremost on finding an acquisition opportunity to utilize those funds in that direction. R&D investment investments in our business organization are certainly investments that we're making. We are making those investments under the profile of our traditional allocation of expenses to our income statement and maintaining our profitability with them maintaining our investments in business development and R&D within that profitability profile. We are confident that M&A opportunities will exist near term, and we'll translate those funds into more revenue-generating assets.

Okay. Regarding the growth of new customers, most of our efforts are still concentrated in the U.S. However, as we consider expanding into Europe and Asia, has the pandemic or the Omicron variant impacted your plans for overseas expansion?

Well, I think we're all hoping that this wave passes quickly. Is it impacting us now? To a certain degree, business activity and flow starts to be impacted as people shut down, depending on how drastic each geography implements their response. Generally, I think the world has improved their ability to continue workflow in these environments. But it is disruptive, and we've managed our way through today without a significant impact. But we've got to wait and see. That's been the challenge of the impact of COVID throughout; it rises and flows up and down.

Our next question is from David Larsen with BTIG.

Can you talk about the rebound in professional service revenue? What drove that? And really, what are your expectations for that line item going forward? With respect to Omicron and the clinical trial activity, it's my understanding that Omicron has a much shorter duration. When you look at data from South Africa, it looks like maybe one month compared to Delta, which was like four months. Have you heard of clinical trials being stalled, delayed or shut down at all?

Sure, sure. No, we haven't gotten big signals where we would see the impact. The impact would be evident in our delays, cancellations, and holds in terms of workflow on the service side. They existed at some level but came down this past quarter. Now will we see an uptick in the second quarter? More relevant in the timeframe to Omicron increasing, perhaps, we are in a little bit better position to respond to that with our backlog, having grown quite significantly versus where it was at the midpoint of last year. I think we'll be able to respond to that a little bit better. But no big signals as yet. As you say, the duration of the impact based upon South Africa's experience looks to be favorable but will likely be more short-lived and lesser in terms of its impact. Service revenues in general, the three sources of our service business, PK/PD, QSP, QST, and PBPK all stepped up in terms of their revenue growth compared to the latter part of last year. The step-up to positive service growth was really on the back of QSP and QST engagements where we saw quite significant growth and backlog growth of 124%. The flow of both projects as well as QSP projects both saw improvement versus the latter part of last year. Our backlog pickup gives us a little more confidence in terms of their ability to continue to grow quite nicely and certainly much better than they did last year. The PBPK business grew as well. The PK/PD side turned the corner and improved in terms of their growth rate but probably lags in terms of the increase in sales activity and backlog growth compared to the other two. But we're seeing a pretty full pipeline right now in that area and anticipate that will contribute to more success in the second quarter from their rebound. Overall, after a couple of quarters of negative growth, getting to 13% growth in the first quarter is a very good sign and gives us confidence as we move into the remaining parts of fiscal year '22.

That's fantastic, and that's encouraging. Just one other question for me. The EBITDA margin looked really good. Was that 42%? What are your expectations for your EBITDA margin both in the near term and in the longer term?

Yes, it's not a line item we give guidance on, but the business has been pretty consistent in terms of its EBITDA percentage over time, a little fluctuation here and there, but we feel very good in terms of the fast-paced growth of our software side, which contributes to a positive push to our profitability and EBITDA percentage. With the software business growing at a pace faster than service growth, I think we could see some continued leverage resulting from that.

Our next question is from David Windley with Jefferies.

Shawn, there have been several new companies formed within your biotech target customer base, and they are receiving funding to move forward. Is there a specific size or level of maturity that makes them ideal targets for your sales team and software sales? Or is any company a potential target? I'm curious about the maturity level they need to reach before they are ready to invest in your software.

Yes, good question. We saw in this first quarter some increase in terms of the biotech companies, the segment of our sales as well as incubator sales, which was pleasing to see. I think it's indicative of the adoption of modeling and simulation in those early stages, which historically hasn't been that great. When do they become a candidate for a software sale? Well, they need to have someone hired and brought on board to operate the software. So that's where the revenue starts in terms of whether we send a software expertise, business development person, or a service business development person to the account. But we've been very pleased to see their use of modeling and simulation picking up. That often begins with service engagements, but they are more quickly in their timelines hiring modeling and simulation personnel into the group. We see to the earlier question on the call here, a good flow of large pharma modeling and simulation scientists stepping out of large pharma to become part of the modeling and simulation department at earlier-stage smaller biotech companies, and that's a good sign. An example is where, as I mentioned before, the movement of a good Simulations Plus user into a smaller organization creates a very positive sales opportunity for us.

Great. I appreciate that answer. Another question, kind of a slightly different access around growth is I'm wondering, thinking about the phases of the molecule's development lifecycle. Where is the peak intensity of the use of your products and maybe it's different by product? But more importantly, to the question, are there areas of the lifecycle where there are use case opportunities, but the intensity of modeling really hasn't picked up yet that you see as, I'll call it, a next frontier, although that's maybe a little too Pollyanna, but the next frontier for the intensity of modeling to really increase?

Yes, it's a fair question. Our products and services span from discovery to submission and approval. It's sort of anecdotal in terms of the use of our products. The discovery space is very fast-growing in terms of its adoption of modeling and simulation. We're seeing a lot of new biotechs. I think that's where those start. There's robust growth in that phase of development. Translation into the clinic is one of the pain points in the drug development process regarding being more predictive of successful candidates and improving the average of those that began the clinical process and succeed. Modeling and simulation is a primary tool in terms of improving that average and selection of candidates to move into the clinic while identifying through clinical trial phases and looking for improved dosing regimens for patient populations. We're developing drugs that apply to smaller markets and modeling and simulation have great applications in that regard, improving the success of clinical trials where the disproportionate amount of drug development expenditure takes place. That translates into the biggest opportunity to save money. If you take the right candidate into Phase III, you design the trial appropriately. Results of that clinical trial need to be fashioned in a way that improves the probability of FDA approval afterwards. We see growth in all areas and modeling and simulations applications in each space.

There are no further questions at this time. I would like to turn the floor back over to Mr. Shawn O'Connor for closing comments.

Very good. I appreciate you joining us today and hearing our news and look forward to updating you again in a few months with our second quarter results. Take care, everyone.

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.