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 fourth quarter and full-year fiscal 2022, ended August 31, 2022.

“Simulations Plus delivered a strong fourth quarter, resulting in full-year revenue growth above our guidance, which, when combined with a heavy software mix and operating leverage, led to gross margin expansion and higher income and adjusted EBITDA growth rates,” said Shawn O’Connor, chief executive officer of Simulations Plus. “Improved cross-selling and increasing industry adoption of modeling and simulation solutions contributed to sustainable growth in our software business while we built a robust backlog for services, especially for PBPK and PKPD services. In addition, we increased our global footprint by expanding our presence in Europe, Asia, and Latin America, and further penetrated smaller biotech firms with our offerings.”

Fourth Quarter Fiscal 2022 Financial Highlights (compared with the corresponding period last fiscal year):

• Total revenue increased 19% to $11.7 million;
• Software revenue increased 10% to $5.9 million, representing 50% of total revenue;
• Services revenue increased 30% to $5.8 million, representing 50% of total revenue;
• Gross profit increased 28% to $9.1 million; gross margin was 77%;
• Net income of $1.0 million, or $0.05 per diluted share, compared to net income of $0.3 million, or $0.01 per diluted share;
• Adjusted EBITDA of $2.3 million, representing 20% of total revenue.

Full Year Financial Highlights (compared with the corresponding period last fiscal year):

• Total revenue increased 16% to $53.9 million;
• Software revenue increased 18% to $32.6 million, representing 61% of total revenue;
• Services revenue increased 13% to $21.3 million, representing 39% of total revenue;
• Gross profit increased 20% to $43.1 million; gross margin was 80%;
• Net income of $12.5 million, or $0.60 per diluted share, compared to $9.8 million or $0.47 per diluted share;
• Adjusted EBITDA of $21.0 million, representing 39% of total revenue.

“Our expected revenue growth rate for fiscal 2023 is in line with our long-term organic growth rate target of 10-15%,” added Mr. O’Connor. “However, we expect seasonal revenue patterns to shift with changes in our renewal patterns due to successful and ongoing cross-selling initiatives, as well as the impact of somewhat slower renewal patterns on the part of our clients, which we have seen in the back half of fiscal 2022 and expect to continue into fiscal 2023. While this sets us up for lower-than-normal first fiscal-quarter revenue growth, roughly flat year-over-year, we do not anticipate a meaningful net impact on the full-year revenue results, and we expect full-year renewal rates to be in-line with historical patterns.”

“From a cost perspective, we are seeing a competitive market for modeling and simulation professionals, and accordingly, we expect to invest in employee growth, recruiting and retention,” concluded Mr. O’Connor. “The net impact of these investments is expected to be increased operating expense levels in fiscal 2023 as we digest these incremental costs. However, over the medium to long-term, we expect to see a return to higher levels of operating leverage and margins as we deliver on our long-term organic revenue growth targets of 10-15%.”

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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 Time to discuss details of the company’s performance for the fiscal year 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 non-recurring, unusual items.

View full results here.