8-K
Simulations Plus, Inc. (SLP)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
January 11, 2021
(Date of the earliest event reported)
Simulations Plus, Inc.
(Exact name of registrant as specified in its charter)
| California | 001-32046 | 95-4595609 |
|---|---|---|
| (State or other jurisdiction of incorporation) | (Commission File Number) | (I.R.S. Employer Identification No.) |
42505 10^th^ Street West, Lancaster, California 93534-7059
(Address of principal executive offices) (Zip Code)
661-723-7723
Registrant's telephone number, including area code
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐ Soliciting material pursuant to Rule 14z-12 under Exchange Act (17 CFR 240.14a-12)
☐ Pre-commencement communications pursuant to Rule 14d-2(b) under Exchange Act (17 CFR 240.14d-2(b))
☐ Pre-commencement communications pursuant to Rule 13e-4(c) under Exchange Act (17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
|---|---|---|
| Common Stock, par value $0.001 per share | SLP | The Nasdaq Stock Market LLC |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging Growth Company □
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. □
| Item 2.02 | Results of Operations and Financial Condition |
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On January 11, 2021, Simulations Plus, Inc., a California corporation (the "Company"), issued a press release announcing financial results for its first quarter of fiscal year 2021 ended November 30, 2020. The press release is furnished as Exhibit 99.1 to this Current Report on Form 8-K (this “Report”).
| Item 7.01 | Regulation FD Disclosure |
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On January 11, 2021, as part of the press release above, the Company announced that its board of directors has declared a quarterly cash dividend of $0.06 per share of common stock, payable on February 1, 2021 to shareholders of record on January 25, 2021.
In addition, on January 11, 2021, the Company held an investor conference call reporting its financial results for its first quarter of fiscal year 2021 ended November 30, 2020. The PowerPoint presentation, which was used for this investor conference call, is attached herein as exhibit 99.2 to this Report.
In accordance with General Instructions B.2 of Form 8-K, the information in this Report, including Exhibits 99.1 and 99.2, is being furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liability of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, whether made before or after the date hereof, except as expressly set forth by specific reference in such filing to this Report.
CAUTION REGARDING FORWARD-LOOKING STATEMENTS
This Report, including the disclosures set forth herein, contains certain forward-looking statements that involve substantial risks and uncertainties. When used herein, the terms "anticipates," "expects," "estimates," "believes" and similar expressions, as they relate to us or our management, are intended to identify such forward-looking statements.
Forward-looking statements in this Report or hereafter, including in other publicly available documents filed with the Securities and Exchange Commission (the "Commission"), reports to the stockholders of Simulations Plus, Inc., a California corporation (the "Company" or "us," "our" or "we") and other publicly available statements issued or released by us involve known and unknown risks, uncertainties and other factors which could cause our actual results, performance (financial or operating) or achievements to differ from the future results, performance (financial or operating) or achievements expressed or implied by such forward-looking statements. Such future results are based upon management's best estimates based upon current conditions and the most recent results of operations. These risks include, but are not limited to, the risks set forth herein and in such other documents filed with the Commission, each of which could adversely affect our business and the accuracy of the forward-looking statements contained herein. Our actual results, performance or achievements may differ materially from those expressed or implied by such forward-looking statements.
| Item 9.01 | Financial Statements and Exhibits |
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(d) Exhibits
| Exhibit No. | Description |
|---|---|
| 99.1 | Press release issued on January 11, 2021. |
| 99.2 | PowerPoint presentation used at the Investor Conference Call on January 11, 2021. |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| SIMULATIONS PLUS, INC. | |
|---|---|
| Dated: January 11, 2021 | By: /s*/ Will Frederick* |
| Will Frederick | |
| Chief Financial Officer |
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Exhibit 99.1
For Further Information:
Simulations Plus, Inc.
42505 10^th^ Street West
Lancaster, CA 93534-7059
CONTACT:
| Simulations Plus Investor Relations | Hayden IR |
|---|---|
| Ms. Renee Bouche | Mr. Cameron Donahue |
| 661-723-7723 | 651-653-1854 |
| renee@simulations-plus.com | slp@haydenir.com |
For Immediate Release:
January 11, 2021
SimulationsPlus Reports Record First Quarter FY2021 Financial Results
Firstquarter revenue of $10.7 million, reflecting 14% year-over-year growth
Boardof Directors announces quarterly dividend of $0.06 per share
LANCASTER, CA, January 11, 2021 – Simulations Plus, Inc. (Nasdaq: SLP), a leading provider of modeling and simulation solutions for the pharmaceutical, biotechnology, chemicals, and consumer goods industries, today reported financial results for its first quarter of fiscal year 2021.
Financial highlights compared with the corresponding period last fiscal year:
| · | Revenue increased 14% to $10.7 million |
|---|---|
| · | Gross profit increased 22% to $8.3 million |
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| · | Gross margin was 77%, up from 72% |
| --- | --- |
| · | Net income increased 21% to $2.5 million |
| --- | --- |
| · | Diluted earnings per share increased 9% to $0.12 |
| --- | --- |
Shawn O’Connor, chief executive officer of Simulations Plus, said: “Our first quarter financial results were in line with our expectations highlighted by strong, double-digit revenue growth and increased profitability, despite a challenging comparison to the first quarter of fiscal 2020 that benefited from unusually strong results in our DILIsym division. The strategic investments in our sales and marketing infrastructure, and a growing reliance on modeling and simulation in the drug development ecosystem continue to facilitate strong revenue growth, as Simulations Plus bolsters its already strong position in the marketplace. The acquisition of Lixoft has meaningfully expanded our addressable market. In addition, this acquisition has had the desired impact of increasing the mix of software revenue, helping expand our overall profitability.”
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“We recently signed a large COVID-19-related consulting services project with a large pharmaceutical client, validating the resources we devoted to our COVID-19 initiative and demonstrating the increasing value we play in support of our clients,” added Mr. O’Connor. “We also signed a new three-year project with a large private foundation as well as three new projects with a large non-profit biotechnology institute. Looking ahead, demand for our consulting services remains strong and next generation releases of several of our software products that are scheduled for fiscal 2021 reinforce our confidence in delivering another year of organic growth of 15% to 20% in fiscal 2021.”
Quarterly Dividend Declared
The Company’s Board of Directors has declared a cash dividend of $0.06 per share of the Company’s common stock payable on February 1, 2021, to shareholders of record as of January 25, 2021. 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.
Investor Conference Call
The Company has announced an investor conference call that will be webcast live at 1:15 p.m. PST/4:15 p.m. EST on Monday, January 11, 2021. The live webcast/teleconference will be accessible by here or by calling 1-201-389-0879. Please join 5 to 10 minutes before the scheduled start time. The call will be simulcast live on the Internet, and the webcast will be available on the Investors page of the Simulations Plus website under Conference Calls & Presentations. A replay of the webcast will be available on the website approximately one hour following the call.
About Simulations Plus, Inc.
Simulations Plus, Inc., is a leading provider of modeling and simulation software and consulting services supporting drug discovery, development research, and regulatory submissions. With our subsidiaries, Cognigen, DILIsym Services, and Lixoft, we offer solutions which bridge 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, chemical, consumer goods companies and regulatory agencies worldwide. For more information, visit our website at www.simulations-plus.com.
Safe Harbor Statement Under the PrivateSecurities Litigation Reform Act of 1995 – With the exception of historical information, the matters discussed in this press release are forward-looking statements that involve a number of risks and uncertainties. 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 our new software products as well as 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, 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.
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SIMULATIONS PLUS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
| (Audited) | |||
|---|---|---|---|
| (in thousands, except share and per share amounts) | August 31, | ||
| ASSETS | |||
| 2020 | |||
| Current assets | |||
| Cash and cash equivalents | 27,651 | $ | 49,207 |
| Accounts receivable, net of allowance for doubtful accounts of 50 and 50 | 7,331 | 7,422 | |
| Revenues in excess of billings | 2,837 | 3,093 | |
| Prepaid income taxes | 560 | 970 | |
| Prepaid expenses and other current assets | 1,738 | 1,596 | |
| Short-term investments | 91,115 | 66,804 | |
| Total current assets | 131,232 | 129,092 | |
| Long-term assets | |||
| Capitalized computer software development costs, | |||
| net of accumulated amortization of 13,906 and 13,582 | 6,490 | 6,087 | |
| Property and equipment, net | 596 | 438 | |
| Operating lease right of use assets | 768 | 927 | |
| Intellectual property, net of accumulated amortization of 5,444 and 5,087 | 11,541 | 11,898 | |
| Other intangible assets, net of accumulated amortization of 1,779 and 1,642 | 6,871 | 7,008 | |
| Goodwill | 12,921 | 12,921 | |
| Other assets | 51 | 51 | |
| Total assets | 170,470 | $ | 168,422 |
| LIABILITIES AND SHAREHOLDERS' EQUITY | |||
| Current liabilities | |||
| Accounts payable | 332 | $ | 351 |
| Accrued payroll and other expenses | 2,300 | 2,251 | |
| Current portion - contracts payable | 2,000 | 2,000 | |
| Billings in excess of revenues | 206 | 141 | |
| Operating lease liability, current portion | 395 | 463 | |
| Deferred revenue | 244 | 300 | |
| Total current liabilities | 5,477 | 5,506 | |
| Long-term liabilities | |||
| Deferred income taxes, net | 2,401 | 2,354 | |
| Operating lease liability | 376 | 463 | |
| Payments due under contracts payable | 4,185 | 4,064 | |
| Total liabilities | 12,439 | 12,387 | |
| 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, 19,958,760 and 19,923,277 shares issued and outstanding | 129,253 | 128,541 | |
| Retained earnings | 28,720 | 27,436 | |
| Accumulated other comprehensive income | 58 | 58 | |
| Total shareholders' equity | 158,031 | 156,035 | |
| Total liabilities and shareholders' equity | 170,470 | $ | 168,422 |
All values are in US Dollars.
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SIMULATIONS PLUS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
For the three months ended November 30,
| (in thousands, except per common share amounts) | 2020 | 2019 | ||||
|---|---|---|---|---|---|---|
| Revenues | $ | 10,701 | $ | 9,401 | ||
| Cost of revenues | 2,433 | 2,643 | ||||
| Gross margin | 8,268 | 6,758 | ||||
| Operating expenses | ||||||
| Selling, general, and administrative | 4,408 | 3,514 | ||||
| Research and development | 809 | 526 | ||||
| Total operating expenses | 5,217 | 4,040 | ||||
| Income from operations | 3,051 | 2,718 | ||||
| Other income (expense) | ||||||
| Interest income | 61 | 11 | ||||
| Change in value of contingent consideration | (121 | ) | – | |||
| Income on currency exchange | 5 | 4 | ||||
| Total other income (expense) | (55 | ) | 15 | |||
| Income before provision for income taxes | 2,996 | 2,733 | ||||
| Provision for income taxes | (517 | ) | (675 | ) | ||
| Net income | $ | 2,479 | $ | 2,058 | ||
| Earnings per share | ||||||
| Basic | $ | 0.12 | $ | 0.12 | ||
| Diluted | $ | 0.12 | $ | 0.11 | ||
| Weighted-average common shares outstanding | ||||||
| Basic | 19,930 | 17,609 | ||||
| Diluted | 20,799 | 18,307 |
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Exhibit 99.2
Earnings Call – Q1 FY21 Shawn O’Connor, CEO William Frederick, CFO January 11, 2021 (NASDAQ:SLP)
2 With the exception of historical information, the matters discussed in this presentation are forward - looking statements that involve a number of risks and uncertainties . The actual results of the Company could differ significantly from those statements . Factors that could cause or contribute to such differences include, but are not limited to : continuing demand for the Company’s products, competitive factors, the Company’s ability to finance future growth, the Company’s ability to produce and market new products in a timely fashion, the Company’s ability to continue to attract and retain skilled personnel, and the Company’s ability to sustain or improve current levels of productivity . Further information on the Company’s risk factors is contained in the Company’s quarterly and annual reports and filed with the Securities and Exchange Commission . Safe Harbor Statement
Quarter Highlights ● Good start to the new fiscal year ● Revenue growth, although impacted by a tough year - over - year comparison for our DILIsym division, was otherwise strong and in line with expectations ● Our profitability remains solid and improved with continued favorable revenue mix toward increased software contribution ● Increasing sales pipeline and bookings reflect momentum in our marketplace still effected by COVID - 19 ● We continue to leverage key regulatory and large pharma relationships to enhance the value we provide to our clients with enhanced software and service capabilities 3
Revenue Mix (in millions) Total • 14% Y/Y growth • 1% Y/Y growth (excl. Lixoft) • 28% Y/Y growth (excl. DILIsym services) Software • 35% Y/Y growth • 9% Y/Y growth (excl. Lixoft) • 58% of total revenue Services • 6% Y/Y decline • 15% Y/Y growth (excl. DILIsym services) • 42% of total revenue 4 $4.1 $4.6 $6.2 $3.4 $4.8 $4.5 1Q19 1Q20 1Q21 Software Services 55% 45% 51% 49% 58% 42% $7.5 $9.4 $10.7
Growth & Profitability Metrics * Pro forma non - GAAP numbers 5 7% 25% 14% 36% 36% 36% 43% 61% 50% 71% 72% 77% $0.09 $0.11 $0.12 1Q19 1Q20 1Q21 Revenue growth % EBITDA % of revenue Rule of 40 Gross Margins Diluted EPS
Software Revenue by Product 6 55% 19% 19% 7% GastroPlus ADMET Predictor Monolix Suite Other Software 1Q21 Software Products as % of Software Revenue
Software Highlights • Client Success – New GPX funded collaborations with FDA and Roche initiated – AIDD lead optimization project with large pharma partner initiated with 70 molecules moved to synthesis and testing phase • New Products & Releases – GastroPlus V9.8 released – APX and AIDD released – Monolix Suites R2020 released – DILIsym V10 nearing completion – IPF Model and RENAsym nearing completion and availability for mid - year • Other – 23% increase in Monolix customers vs 1Q20 7
Software Performance Metrics Avg. Revenue per Customer (in thousands) 8 $38 $44 $54 $52 $59 $74 1Q19 1Q20 1Q21 All Companies Commercial Companies Renewal Rates 95% 97% 92% 83% 85% 88% 1Q19 1Q20 1Q21 Fees Accounts
Services Revenue by Type 9 21% 25% 54% PBPK QSP/QST PKPD 1Q21 Services Types as % of Service Revenue
Services Highlights • Client Success – Remdesivir at Liver tox meeting – OEHHA review of Acetaminophen • New Services – Large COVID related project signed with large pharma client – 3 - year project with large private foundation – 3 new projects with large non - profit biotechnology institute 10
Services Performance Metrics 11 43 56 64 17 27 12 37 42 50 97 125 126 1Q19 1Q20 1Q21 Total Projects During Qtr. PKPD QST/QRP PBPK Backlog $14.0 $10.5 $12.0 1Q20 4Q20 1Q21 Backlog (in millions)
Q1 Performance & FY21 Outlook • Total Revenue Growth – Q1 performance: 14% growth – Full - year target range: 15 - 20% organic growth plus 3 - 5% from Lixoft • Software Revenue Growth – Q1 performance: 35% growth – Full - year target range: 20 - 25% growth • Services Revenue Growth – Q1 performance: 6% decline – Full - year target range: 25 - 30% growth • M&A Effort – Acquisitions would be incremental to revenue growth targets above – Focus: • Companies that extend our product portfolio • Companie s that provide new service capabilities/capacity • Companies that expand our geographic coverage 12
Financial Results
14 Income Statement Summary (in millions) 1QFY21 % of Rev 1QFY20 % of Rev Revenue $ 10.7 100% $ 9.4 100% Revenue Growth 14% 25% Gross Margin $ 8.3 77% $ 6.8 72% SG&A $ 4.4 41% $ 3.5 37% R&D 0.8 8% 0.5 6% Total operating exp 5.2 49% 4.0 43% Income from operations 3.1 29% 2.7 29% Other income (expense) (0.1) (1)% 0.0 0% Income before income taxes 3.0 28% 2.7 29% Income taxes 0.5 5% 0.7 7% Effective tax rate 17% 25% Net income 2.5 23% 2.1 22% Diluted earnings per share (in dollars) $ 0.12 $ 0.11 EBITDA $ 3.9 36% $ 3.4 36%
Gross Margin Trend * Pro forma non - GAAP numbers 15 79% 82% 85% 61% 62% 66% 71% 72% 77% 1Q19 1Q20 1Q21 Software Consulting Total
16 Balance Sheet Summary (in millions, except where indicated) November 30, 2020 August 31, 2020 Cash and short - term investments $ 118.8 $ 116.0 Total current assets 131.2 129.1 Total assets 170.5 168.4 Current liabilities 5.5 5.5 Long - term liabilities 6.9 6.9 Total liabilities 12.4 12.4 Shareholders’ equity 158.0 156.0 Total liabilities and shareholders’ equity 170.5 168.4 Current ratio 24.0x 23.5x
Conclusion ● Q1 revenue growth and profitability in line with FY21 outlook ● Underlying sales activity appears to be moving back towards historical trends despite continued COVID - 19 disruptions ● Sales investments in resource and infrastructure positively impacting strategic sales strategies and price/discounting programs ● Continued progress in our M&A efforts 17
Selected Financial Information Nasdaq SLP Cash and short - term investments $119 M Borrowed Debt Outstanding $0 Market Capitalization (a/o 1/05/21) $ 1.5B Fully Diluted Shares Outstanding 1Q21 20.8M Average Daily Trading Volume (current 30 day - a/o 1/05/21) ~198,000 18
19 Thank you! https://www.simulations - plus.com