Simulations Plus Inc (SLP, Financial) released its 8-K filing on January 7, 2025, reporting financial results for the first quarter of fiscal 2025, which ended on November 30, 2024. The company, a leader in the software industry, specializes in developing software for pharmaceutical research and providing consulting services. It operates primarily through its Software and Services segments, with the majority of its revenue generated from the software segment in the USA, followed by EMEA and Asia Pacific.
Performance Overview
Simulations Plus Inc (SLP, Financial) reported a 31% year-over-year increase in total revenue, reaching $18.9 million, surpassing the analyst estimate of $18.81 million. This growth was primarily driven by a 41% increase in software revenue, which totaled $10.7 million and accounted for 57% of the total revenue. Services revenue also grew by 19% to $8.2 million, representing 43% of the total revenue.
Despite the strong revenue performance, the company reported a net income of $0.2 million, with diluted earnings per share (EPS) of $0.01, falling short of the analyst estimate of $0.09. This represents a significant decline from the previous year's net income of $1.9 million and diluted EPS of $0.10.
Financial Achievements and Challenges
The company's gross profit for the quarter was $10.2 million, with a gross margin of 54%. Adjusted EBITDA was reported at $4.5 million, representing 24% of total revenue, compared to $3.4 million or 23% of total revenue in the same quarter last year. Adjusted net income was $3.4 million, with an adjusted diluted EPS of $0.17, slightly down from $0.18 in the previous year.
“We are off to a strong start to fiscal 2025 with total revenue increasing by 31% in the first quarter,” said Shawn O’Connor, Chief Executive Officer of Simulations Plus. “Our team delivered 41% growth across our software platforms. MonolixSuite™ was a meaningful contributor with a 43% growth rate this quarter.”
However, the company faced challenges in its services segment due to client-driven data delays, which postponed the ramp-up of certain projects. These challenges highlight the potential risks associated with project timelines and client dependencies in the services sector.
Key Financial Metrics
| Metric | Q1 2025 | Q1 2024 |
|---|---|---|
| Total Revenue | $18.9 million | $14.5 million |
| Software Revenue | $10.7 million | $7.6 million |
| Services Revenue | $8.2 million | $6.9 million |
| Net Income | $0.2 million | $1.9 million |
| Diluted EPS | $0.01 | $0.10 |
Analysis and Outlook
The significant growth in software revenue underscores the company's strength in its core segment, driven by increased adoption of its MonolixSuite™ and Quantitative Systems Pharmacology (QSP) solutions. However, the decline in net income and EPS highlights the impact of increased operating expenses and challenges in the services segment.
Looking ahead, Simulations Plus Inc (SLP, Financial) expects momentum to build in the latter half of fiscal 2025, with revenue guidance set between $90 million and $93 million, representing a growth of 28% to 33%. The company anticipates a software mix of 55% to 60% and an adjusted EBITDA margin of 31% to 33%, with adjusted diluted EPS projected between $1.07 and $1.20.
Overall, while the company faces challenges in aligning project timelines and managing costs, its strong software growth and strategic initiatives position it well for future success in the biopharma sector.
Explore the complete 8-K earnings release (here) from Simulations Plus Inc for further details.
