Simulations Plus Reports Third Quarter FY2007 Financial Results

Keywords: financial results, gross profit, net income
Division: PBPK

Simulations Plus, Inc. (AMEX: SLP), a leading provider of simulation and modeling software for pharmaceutical discovery and development, today reported financial results for the third quarter of its 2007 fiscal year (3Q07) ended May 31, 2007.

 

Ms. Momoko Beran, chief financial officer of Simulations Plus, stated: “This quarterly report has come together more quickly than is customary.Part of the reason is that some information we need is now available more quickly in electronic format, while another part is that due to my travel schedule and also the schedule of our auditors, extra effort was made to complete certain tasks early.The result is that we were able to complete the 10Q much faster than normal.I hope future 10Q’s will be released earlier than they were in the past, but I cannot guarantee it.Our next report will be our annual report, which requires considerably more preparation than the quarterly reports, so I don’t think it will be released much earlier than it has been in the past.”

 

Ms Beran continued: “I’m very pleased to report that consolidated revenues for 3Q07 set a new record for any quarter at $2,631,000, an increase of 47.1% from $1,788,000 in the third quarter of fiscal year 2006 (3Q06). The previous record for any quarter was last quarter (2Q07).Revenues in that quarter were $2,534,000, which included large pharmaceutical software licenses from two customers that accounted for about $1 million in revenues. In contrast, 3Q07 did not include any such large orders.Revenues from pharmaceutical software and services were up 51.3% to $1,659,000 from $1,097,000 in 3Q06.Revenues for our Words+ subsidiary also set a new record for any quarter at $972,000, an increase of 40.6% from $692,000 in 3Q06.Consolidated gross profit increased 53.6% to $2,080,000 in 3Q07 from $1,355,000 in 3Q06.R&D expense increased 91.0% to $227,000 in 3Q07 from $119,000 in 3Q06, primarily due to expansions within our Life Sciences staff.Consolidated SG&A increased 11.3% to $885,000 in 3Q07, compared to $796,000 in 3Q06; however, as a percentage of sales, SG&A decreased from 44.5% to 33.6%. Major expense increases were selling expenses, such as commissions to dealers and trade shows, investor relations, accrued bonus to officers, salaries, and payroll-related expenses such as health insurance and payroll taxes, which outweighed decreases in equipment rental and professional fees .

 

“Net income before taxes for 3Q07 more than doubled, with an increase of 118% to $1,003,000 from $460,000 in 3Q06.Third quarter earnings were impacted by a provision for income taxes of $221,000 that will not actually be paid, but rather will be a write-off from our deferred tax asset.Consolidated net earnings for the quarter also more than doubled with an increase of 103% over last year’s third quarter to $782,000, or $0.09 per diluted share based on 9,180,629 shares, as compared to $386,000, or $0.05 per diluted share for 3Q06, based on 8,266,066 split-adjusted shares.Thus, earnings per share increased by 80%, even with the increase in number of fully diluted shares of almost 12%. Cash at the end of the third quarter was $3,038,000, with accounts receivable of almost another $3 million. Current assets were about $6.4 million, and current liabilities were less than $0.9 million, for a very healthy current ratio of about 7.3.”

 

Ms. Beran continued: “For the first nine months of FY2007, consolidated revenues set a new nine-month record at $6,622,000, an increase of $2,533,000 or 61.9% from $4,089,000 in the first nine months of FY2006.These nine-month revenues exceed any previous entire fiscal year.Revenues from pharmaceutical software and services were nearly doubled, up 96.9% to $4,291,000 from $2,179,000 in the first nine months of FY2006.Revenues for our Words+ subsidiary increased 22.0% in the first nine months, to $2,330,000 from $1,910,000.In the first nine months, consolidated gross profit increased over $2 million, or 72.7% to $5,072,000 from $2,937,000; R&D expense increased 86.7% to $627,000 from $336,000, primarily due to expansions within our Life Sciences staff, and SG&A increased 22.1% to $2,578,000, compared to $2,112,000; however, as a percentage of sales, SG&A decreased from 51.7% to 38.9%. Major expense increases were for the same reasons described above for the third quarter .

 

“Net income before taxes for the first nine months of FY2007 more than tripled, with an increase of 276% to $1,953,000 from $519,000.The first nine months’ earnings were impacted by a provision for income taxes of $430,000 that will not actually be paid, but rather will be a write-off from our deferred tax asset.Consolidated net earnings also more than tripled, with an increase of 249% to $1,523,000, or $0.17 per diluted share based on 8,893,882 shares, as compared to $436,000, or $0.05, based on 8,104,960 split-adjusted shares in the first nine months of FY2006. Shareholders’ equity at the end of the first nine months was $7,682,000, an increase of 36% in the first nine months from $5,669,000 at the beginning of the fiscal year.”

 

Walt Woltosz, chairman and chief executive officer of Simulations Plus, said: “When we reported the record second quarter, I wondered if we’d be able to beat it in the third quarter, knowing that we would not have the benefit of the two large orders that came in during the second quarter.I’m happy to report that not only did we beat it, but after three quarters, revenues are already almost a million dollars more than all of last fiscal year. Our cash position remains excellent and we continue to be debt-free. We’re actively seeking acquisition opportunities; however, there can be no assurances that we’ll proceed with any of them.We have received our first SBIR grant in the life sciences, and we have another proposal in review now.”

 

Woltosz continued: “Simulations Plus is strong and getting stronger. We are experiencing continued growing demand for our products and services, and we continue to enjoy an outstanding reputation for high quality and attention to customers’ needs. Our trailing twelve months revenues are now $8.4 million, and trailing twelve months earnings are over $0.19 per share. We expect to provide updated revenue guidance in our conference call, which will be on Thursday, July 5, 15 minutes after the market closes.”

 

SIMULATIONS PLUS, INC. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEET

at May 31, 2007

(Unaudited)

ASSETS
Current assets
Cash and cash equivalents $3,038,178
Accounts receivable, net of allowance for doubtful accounts
and estimated contractual discounts of $57,233 2,864,436
Contracts receivable, net of discounts of $360 92,020
Inventory 260,568
Prepaid expenses and other current assets 47,082
Current portion of deferred tax 190,034
Total current assets 6,492,318
Capitalized computer software development costs ,
net of accumulated amortization of $2,751,515 1,447,448
Property and equipment , 102,922
net of accumulated amortization of $540,625
Customer relationships, net of accumulated amortization of $51,990 76,052
Deferred tax 480,800
Other assets 18,445
Total assets $8,617,985
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Accounts payable $88,738
Accrued payroll and other expenses 505,861
Accrued bonuses to officers 165,949
Accrued warranty and service costs 39,626
Current portion of deferred revenue 73,333
Total current liabilities 873,507
Deferred revenue 62,501
Total liabilities 936,008
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
20,000,000 shares authorized
7,845,150 shares issued and outstanding 4,197
Additional paid-in capital 5,763,960
Retained Earnings 1,913,820
Total shareholders’ equity 7,681,977
Total liabilities and shareholders’ equity $8,617,985

CONSOLIDATED STATEMENTS OF OPERATIONS

for the three and nine months ended May 31,

(Unaudited)

Three months ended Nine months ended
2007 2006 2007 2006
Net sales $ 2,631,225 $ 1,788,284 $ 6,621,512 $ 4,088,890
Cost of sales 550,786 433,496 1,549,328 1,152,160
Gross profit 2,080,439 1,354,788 5,072,184 2,936,730
Operating expenses
Selling, general, and administrative 885,352 795,547 2,578,243 2,112,040
Research and development 226,749 118,707 626,808 335,642
Total operating expenses 1,112,101 914,254 3,205,051 2,447,682
Income (loss) from operations 968,338 440,534 1,867,133 489,048
Other income (expense)
Interest income 35,377 4,447 76,186 13,549
Miscellaneous income 25 58 383 108
Interest expense (4) (40) (4) (40)
Gain on sale of assets – 4,613 3,102 7,739
Gain on currency exchange (798) 10,076 6,229 8,727
Total other income (expense) 34,600 19,154 85,896 30,083
Income before provision for income taxes 1,002,938 459,688 1,953,029 519,131
Benefit from (provision for) income taxes
Provision for income tax (220,646) (73,550) (429,666) (83,061)
Change in valuation allowance – – – –
Total benefit from (provision for) income taxes (220,646) (73,550) (429,666) (83,061)
Net income $782,292 $386,138 $ 1,523,363 $436,070
Basic earnings per share $0.10 $0.05 $0.20 $0.06
Diluted earnings per share $0.09 $0.05 $0.17 $0.05
Weighted-average common shares outstanding
Basic 7,718,180 7,391,542 7,561,624 7,344,018
Diluted 9,180,629 8,226,066 8,893,882 8,104,960
* The number of shares at May 31, 2006 have been retroactively restated to reflect a 2-for-1 stock split that occurred on August 14, 2006.