8-K
Simulations Plus, Inc. (SLP)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
July 6, 2023
(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 10th 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
On July 6, 2023, Simulations Plus, Inc., a California corporation (the “Company”), issued a press release announcing financial results for its third quarter of fiscal year 2023 ended May 31, 2023. 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
On July 6, 2023, the Company held an investor conference call reporting its financial results for its third quarter of fiscal year 2023 ended May 31, 2023. The PowerPoint presentation, which was used for this investor conference call, is attached 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 and Exhibits 99.1 and 99.2 attached hereto, 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 reports hereafter furnished, including in other publicly available documents filed with the Securities and Exchange Commission (the “Commission”), to the Company’s stockholders 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
(d) Exhibits
| 99.1 | Press release issued on July 6, 2023. |
|---|---|
| 99.2 | PowerPoint presentation used at the Investor Conference Call on July 6, 2023. |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
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: July 6, 2023 | By: /s/ Will Frederick |
| Will Frederick | |
| Chief Financial Officer |
2
Document
Exhibit 99.1
Simulations Plus Reports Third Quarter Fiscal 2023 Financial Results
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, CA, July 6, 2023 – 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.
Investor Relations Contacts:
John Wilfong
Financial Profiles
310-622-8248
slp@finprofiles.com
Renee Bouche
Simulations Plus Investor Relations
661-723-7723
renee.bouche@simulations-plus.com
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 | $ | 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 | $ | 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 | $ | 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 | $ | 12.5 | $ | 9.4 | |||||||||||||||||||||||
| Diluted Earnings Per Share | $ | 0.15 | $ | 0.21 | $ | 0.20 | $ | 0.60 | $ | 0.46 | |||||||||||||||||||||||
| Adjusted EBITDA | $ | 5.2 | $ | 7.1 | $ | 6.5 | $ | 21.2 | $ | 15.7 | |||||||||||||||||||||||
| Cash Flow from Operations | $ | 3.6 | $ | 2.6 | $ | 3.8 | $ | 17.9 | $ | 18.8 | |||||||||||||||||||||||
| Revenue Breakdown by Region | |||||||||||||||||||||||||||||||||
| Americas | $ | 8.5 | $ | 9.7 | $ | 11.2 | $ | 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 | $ | 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 |
All values are in US Dollars.
*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
5
slpearningscalldeck233-f
1 Earnings Call – Q3 - FY23 July 6, 2023
With the exception of 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 as of this writing, 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 successfully integrate the recently acquired Immunetrics business with our own, as well as expenses we may incur in connection therewith, 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. Safe Harbor Statement 2
▪ Third quarter results in line with guidance ▪ Business Highlights ▪ Revenue seasonality impacted by shift in software renewal timing as expected ▪ Underlying market conditions continue as experienced for several quarters ◦ Small biotech pull back ◦ Large Pharma spending cautiousness ◦ CRO segment reducing costs ▪ Solid EPS and EBITDA performance ▪ Immunetrics Acquisition completed June 16, 2023, after close of third quarter Third Quarter Highlights $0.20 Diluted EPS $16M Revenue 40% Adj. EBITDA as % of Revenue $16M Backlog 3
▪ Overall software revenue growth of 10% ▪ Renewal pattern and revenue seasonality shifting as anticipated ▪ Continued market spending cautiousness ▪ University+ program has 299 individual licenses across 56 countries ▪ Good yield on price increase Third Quarter Software Highlights +84% -2% ▪ 4 new customers ▪ 13 upsells to existing customers ▪ 26 peer reviewed journal articles published in Q3 ▪ 3 new customers ▪ 6 upsells to existing customers +9% Q3 Revenue Decline Q3 Revenue Growth Q3 Revenue Growth -1% YTD Revenue Decline +14% YTD Revenue Growth -5% YTD Revenue Decline General GastroPlus® MonolixSuite® ADMET Predictor® ▪ 10 new customers ▪ 2 upsells to existing customers 4
▪ Overall services revenue growth 5% ▪ Total backlog $15.7M – projects to be performed within 12 months decreased from 80% to 77% ▪ Successful recruiting quarter (3 new hires, 10 YTD) ▪ 212 total projects worked on during the quarter Third Quarter Services Highlights +6% +2% ▪ Higher margin time and materials contracts represented 42% of business this quarter ▪ Continued momentum in this fast-growing segment+5% Q3 Revenue Growth Q3 Revenue Growth Q3 Revenue Growth +14% YTD Revenue Growth -20% YTD Revenue Decline +31% YTD Revenue Growth General PKPD QSP/QST PBPK ▪ Improved performance 5
Capital Allocation Strategy Update ▪ Product R&D ▪ Employee Recruiting and Retention ▪ Enterprise Technologies ▪ Acquisitions ▪ Strategic investments and partnerships ▪ Immunetrics acquisition consummated in Q4 ▪ Maintain current level ▪ $0.06 per share paid Feb. 6th ▪ $0.06 per share payable May 1st ▪ $0.06 per share payable August 7th ▪ $50M share repurchase program authorized ▪ $20M accelerated share repurchase (ASR) implemented and completed in Q3 INTERNAL INVESTMENT CORPORATE DEVELOPMENT DIVIDENDS PAYMENTS SHARE REPURCHASES 6
Immunetrics Acquisition | June 2023 7 Increases breadth and depth of QSP expertise and range of therapeutic applications Rationale Terms ▪ Immunetrics is a modeling & simulation company focused on accelerating drug development in oncology, immunology, and autoimmune diseases ▪ Increases offering areas among the fastest growing therapeutics ▪ Strengthens the already-robust quantitative systems pharmacology (“QSP”) expertise at Simulations Plus ▪ QSP is a rapidly growing field of biomedical research ▪ Expands the range of therapeutic areas addressed by its software and services ▪ Increases the therapeutic areas addressed by Simulations Plus QSP models by more than 50% ▪ Leverages existing infrastructure by expanding therapeutic resources into largely underserved areas, including immunology and oncology ▪ Paid Immunetrics shareholders cash consideration of $15.5 million (includes $1.8 million hold-back) ▪ Two future earn-out payments, in the aggregate amount of up to $8 million, based on revenue performance through December 31, 2024
Maintaining FY23 Guidance Total Revenue $59.3M to $62.0M Total Revenue Growth 10% to 15% Software Revenue Mix 60% to 65% Services Revenue Mix 35% to 40% Diluted EPS $0.63 to $0.67 (excl. $0.09 M&A expense) 8 (Q423 Immunetrics impact: due to timing of close and seasonality, revenue will be positive but limited and contemplated in our 10%-15% revenue guidance; operating results will be accretive to earnings)
Financial Results
64% 36% Software Services Revenue - Q3 (in millions) Software RevenueTotal Revenue Services Revenue +9% +10% +5% 3Q23 Mix 3Q22 Mix 10 $8.3 $9.6 $10.6 $4.5 $5.3 $5.6$12.8 $15.0 $16.2 Software Services 3Q21 3Q22 3Q23 65% 35% Software Services
62% 38% Software Services 63% 37% Software Services Revenue - YTD (in millions) Software RevenueTotal Revenue Services Revenue +4% +2% +9% FY23 Mix FY22 Mix 11 $22.3 $26.8 $27.2 $14.3 $15.4 $16.8 $36.6 $42.2 $43.9 Software Services FY21 FY22 FY23
Gross Margin Trends - Q3 12 90% 92% 91% 63% 66% 63% 81% 83% 82% Software Services Total 3Q21 3Q22 3Q23
Gross Margin Trends - YTD 13 89% 92% 90% 62% 62% 66% 79% 81% 81% Software Services Total FY21 FY22 FY23
Software Revenue by Product 14 Software Product as % of Software Revenue Q3 FY23 YTD FY23 57% 18% 19% 6% 55% 20% 18% 7% GastroPlus® MonolixSuite® ADMET Predictor® Other GastroPlus® MonolixSuite® ADMET Predictor® Other
Avg. Revenue per Customer (in thousands) Software Performance Metrics - Q3 Commercial Customers Renewal Rates 15 $98 $95 $97 3Q21 3Q22 3Q23 90% 87% 87% 99% 92% 96% Accounts Fees 3Q21 3Q22 3Q23
Avg. Revenue per Customer (in thousands) Software Performance Metrics - YTD Commercial Customers Renewal Rates 16 $112 $108 $118 FY21 FY22 FY23 88% 89% 83% 95% 96% 94% Accounts Fees 3Q21 3Q22 3Q23
Services Revenue by Type 17 Services Type as % of Services Revenue Q3 FY23 YTD FY23 Other 45% 23% 25% 7% PKPD QSP/QST PBPK Other 48% 20% 25% 7% PKPD QSP/QST PBPK
Services Performance Metrics Total Projects Backlog 18 45 76 76 18 21 23 33 83 67 35 16 46 131 196 212 PKPD QSP/QST PBPK Other 3Q21 3Q22 3Q23 $12 $17 $16 3Q21 3Q22 3Q23
Income Statement Summary - Q3 19 (in millions, except Diluted EPS) 3Q23 % of Rev 3Q22 % of Rev Revenue $16.2 100% $15.0 100% Revenue growth 9% 17% Gross profit 13.3 82% 12.4 83% R&D 0.9 6% 0.7 4% SG&A 8.2 51% 6.8 45% Total operating exp 9.2 57% 7.5 50% Income from operations 4.1 25% 4.9 33% Income before income taxes 4.9 30% 4.8 32% Income taxes (0.9) 6% (0.7) 5% Effective tax rate 19% 15% Net income $4.0 25% $4.1 27% Diluted earnings per share (in dollars) 0.20 0.20 Adjusted EBITDA $6.5 40% $6.5 43%
Income Statement Summary - YTD 20 3Q23 % of Rev 3Q22 % of Rev Revenue $43.9 100% $42.2 100% Revenue growth 4% 15% Gross profit 35.7 81% 34.0 81% R&D 3.4 8% 2.4 6% SG&A 23.3 53% 17.4 41% Total operating exp 26.7 61% 19.8 47% Income from operations 9.0 20% 14.2 34% Income before income taxes 11.6 26% 14.2 34% Income taxes (2.2) 5% (2.7) 6% Effective tax rate 19% 19% Net income $9.4 21% $11.5 27% Diluted earnings per share (in dollars) 0.46 0.56 Adjusted EBITDA $15.7 36% $18.7 44% (in millions, except Diluted EPS)
Balance Sheet Summary 21 May 31, 2023 August 31, 2022 Cash and short-term investments $122.4 $128.2 Total current assets 137.3 146.8 Total assets $179.1 $188.4 Current liabilities 9.0 7.7 Long-term liabilities 0.7 2.4 Total liabilities 9.7 10.1 Shareholders’ equity 169.4 178.2 Total liabilities and shareholders’ equity $179.1 $188.4 (in millions)
WELL POSITIONED TO ACHIEVE OUR FY23 GOALS Delivering on our commitment to scientific leadership Challenges being addressed 22 • Internal R&D investment • Expanding industry and regulatory partnerships • MIDD+ – 3rd annual SLP sponsored conference Enhancing our client facing capabilities Focus on Capital Allocation CONTINUED LEADERSHIP POSITION IN BIOSIMULATION MARKET Conclusion • Growth and maturity of business development team • Focus on expanding our local coverage of EU market • Focus on supporting accelerated growth in distributor network • Software renewal timing changes on track • Small biotech churn • General market dynamics: inflation, recession & forex • ASR program has been completed • Immunetrics acquisition completed in Q4
Questions 23
