Simulations Plus, Inc. (Nasdaq: SLP), a leading provider of modeling and simulation software and services for pharmaceutical safety and efficacy, today reported financial results for its second quarter of fiscal 2023, ended February 28, 2023.
Second Quarter Financial Highlights (Fiscal 2023 vs. Fiscal 2022)
- Total revenue increased 6% to $15.8 million;
- Software revenue increased 7% to $10.5 million, representing 67% of total revenue;
- Services revenue increased 4% to $5.3 million, representing 33% of total revenue;
- Gross profit increased 10% to $13.1 million; gross margin was 83%;
- Net income of $4.2 million and diluted EPS of $0.20, compared to net income of $4.4 million and diluted EPS of $0.21;
- Adjusted EBITDA of $6.2 million, representing 40% of total revenue.
YTD Financial Highlights (Fiscal 2023 vs. Fiscal 2022)
- Total revenue increased 2% to $27.7 million;
- Software revenue decreased 3% to $16.6 million, representing 60% of total revenue;
- Services revenue increased 11% to $11.2 million, representing 40% of total revenue;
- Gross profit increased 4% to $22.4 million; gross margin was 81%;
- Net income of $5.4 million and diluted EPS of $0.26, compared to net income of $7.4 million and diluted EPS of $0.36;
- Adjusted EBITDA of $9.2 million, representing 33% of total revenue.
Management Commentary
Shawn O’Connor, chief executive officer of Simulations Plus, said: “We were pleased to see revenue growth return in the second quarter, increasing 6% on a reported basis and 8% on a constant currency basis, as compared to the same period last year, with higher gross margins. The renewal harmonization initiative we implemented to simplify and align software product renewals according to each customer is progressing as planned, and as a result, we are driving improved cross-selling across our organization and readjusting the seasonality impact to a more normal cadence. We also successfully navigated some extensions by certain potential customers in the sales cycle on the software side, while our services business delivered strong growth in the PBPK and PKPD segments.
“Simultaneously, we continued to grow our team during the quarter by recruiting and signing strong candidates with expertise in software and biology to help us accelerate our penetration in key markets. Our ability to successfully recruit professionals with unique and valuable skillsets, especially in this challenging labor market, is a validation of our strength and the value we bring to the industry. These expert consultants allow us to meet the robust and growing demand for our services.
“As part of our updated capital allocation strategy that we detailed last quarter, we began our $20 million accelerated share repurchase program during the quarter, which we expect to complete during our third quarter. Finally, while the global geopolitical and macroeconomic environments have impacted certain customers, our business remains strong and we remain on target to hit our full-year guidance. We expect to continue to see results from our cross-selling efforts and the streamlining of our renewal process,” concluded O’Connor.
Fiscal 2023 Guidance and Commentary
| Fiscal 2023 Guidance | Annual Increase | |
| Revenue | $59.3M – 62.0M | 10-15% |
| Software mix | 60-65% | – |
| Services mix | 35-40% | – |
| Diluted earnings per share | $0.63-$0.67 | 5-10% |
Quarterly Dividend
The company’s Board of Directors declared a cash dividend of $0.06 per share of the company’s common stock, payable on May 1, 2023, to shareholders of record as of April 24, 2023. The declaration of any future dividends will be determined by the Board of Directors each quarter and will depend on earnings, financial condition, capital requirements, and other factors.
Environmental, Social, and Governance (ESG)
We focus our Environmental, Social, and Governance (ESG) efforts where we can have the most positive impact. To learn more about our latest initiatives and priorities, please visit our ESG website.
Webcast and Conference Call Details
Shawn O’Connor, chief executive officer, and Will Frederick, chief financial officer, will host a conference call and webcast today at 5 p.m. Eastern Daylight Time to discuss details of the company’s performance for the quarter and certain forward-looking information. The call may be accessed by registering here or by calling 1-201-389-0879. The webcast will be available on our website under Conference Calls & Presentations. A replay of the webcast will be available on the website approximately one hour following the call.
Non-GAAP Definition
Adjusted EBITDA is defined as earnings (loss) before interest, taxes, depreciation and amortization, stock-based compensation, and any acquisition- or financial-transaction-related expenses. Adjusted EBITDA represents a measure that we believe is customarily used by investors and analysts to evaluate the financial performance of companies in addition to the GAAP measures that we present. Our management also believes that Adjusted EBITDA is useful in evaluating our core operating results. However, Adjusted EBITDA is not a measure of financial performance under accounting principles generally accepted in the United States of America and should not be considered an alternative to net income or operating income as an indicator of our operating performance or to net cash provided by operating activities as a measure of our liquidity. The company’s Adjusted EBITDA measure may not provide information that is directly comparable to that provided by other companies in its industry, as other companies in its industry may calculate non-GAAP financial results differently, particularly related to nonrecurring, unusual items.