[ad_1]
Simulations Plus, Inc. (NASDAQ: SLP) Q2 2022 earnings name dated Apr. 06, 2022
Company Individuals:
Brian Siegel — Investor Relations
Shawn O’Connor — Chief Govt Officer
Will Fredrick — Chief Monetary Officer
Analysts:
Francois Brisebois — Oppenheimer — Analyst
Lucas Baranowski — Craig-Hallum Capital Group — Analyst
Presentation:
Operator
Greetings, and welcome to the Simulations Plus Second Quarter Fiscal 2022 Monetary Outcomes Convention Name. [Operator Instructions] As a reminder, this convention is being recorded. It’s now my pleasure to introduce Brian Siegel from Hayden IR. Thanks, Mr. Siegel, you might now start.
Brian Siegel — Investor Relations
Good afternoon, everybody. Welcome to our second quarter fiscal 2022 monetary outcomes convention name. Internet hosting the decision at the moment are Simulation Plus’ CEO, Shawn O’Connor; and CFO, Will Frederick. A chance to ask questions will comply with at the moment’s presentation.
Earlier than starting, I wish to remind everybody that aside from historic data, the issues mentioned on this presentation are forward-looking statements that contain plenty of dangers and uncertainties. Phrases like consider, count on and anticipate imply that these are our greatest estimates as of this writing, however that there might be no assurances that anticipated or anticipated outcomes or occasions will truly happen, so our precise future outcomes may differ considerably from these statements. Elements that might trigger or contribute to such variations embrace, however aren’t restricted to, our potential to take care of our aggressive benefits, acceptance of latest software program and improved variations of our present software program by our prospects, the overall economics of the pharmaceutical trade, our potential to finance progress, our potential to proceed to draw and retain extremely certified technical workers, our potential to establish and shut acquisitions on phrases favorable to the corporate, and a sustainable market. Additional data on the corporate’s danger components is contained within the firm’s quarterly and annual experiences and filed with the U.S. Securities and Alternate Fee.
With that mentioned, I wish to flip the decision over to Shawn O’Connor. Shawn?
Shawn O’Connor — Chief Govt Officer
Thanks, Brian. Second quarter was one other profitable interval for Simulations Plus. Income progress of 13% was within the higher half of our steerage vary, and we continued to make strategic and operational progress throughout each segments of our enterprise. We’re nicely positioned to attain our full yr objectives. The 13% income progress was purely natural and surpassed the 11% natural progress fee within the final yr’s second quarter. The first progress driver stays our software program enterprise, which grew 25% year-over-year organically versus natural progress of 16% final yr, excluding the contribution of Lixoft. This 9% enchancment demonstrates how highly effective the Lixoft acquisition has been for the corporate.
Income from our service enterprise declined 5%, in step with expectations. The entire backlog of our service enterprise elevated 50%, suggesting that service income will return to progress within the second half of fiscal 2022. Robust working leverage and the combination shift in the direction of software program drove 40% diluted EPS progress to $0.21 and an adjusted EBITDA margin of 48%.
Transferring to our software program highlights. GastroPlus income elevated 22% in comparison with 16% within the second quarter final yr. We signed three new industrial purchasers and had eight upsells within the quarter. China, a comparatively new marketplace for us, grew 34% off a small base, validating our choice to have interaction extra distribution to this progress market. I’d additionally be aware that GastroPlus was referenced in 18 peer-reviewed journals throughout this quarter, supporting our progress in making simulations and modeling mainstream in drug improvement.
We additionally launched MembranePlus 3.0 to drive advances for in vitro, in vivo, extrapolation for permeability, pores and skin penetration and launch assay methods.
As soon as once more, MonolixSuite income continues to set the tempo for our software program phase. Income elevated 43%, greater than double the 20% progress fee final yr, pushed by robust renewals and upsells. We signed eight new industrial purchasers and had 11 upsells through the quarter. Moreover, our efforts to broaden the addressable market geographically for MonolixSuite, embrace the distribution in China and Japan beginning to repay.
MonolixSuite gives customers with a quick, uncomplicated and highly effective suite of purposes for pharmacometrics evaluation. In January, we launched an replace that added a brand new module and a brand new mannequin editor amongst different enhancements. The general result’s improved efficiency for knowledge, libraries and algorithms, and we’re assured in our potential to innovate and develop our technological benefits resulting in additional share positive factors.
ADMET Predictor delivered 13% income progress within the quarter in comparison with 20% within the yr in the past interval. We added seven new industrial prospects and had eight upsells within the quarter. We continued to advance our AIDD collaboration.
Turning to our providers highlights. PK/PD providers income declined 14% whereas the backlog elevated 18% within the quarter. 12 months-to-date income declined 6%. The comparatively excessive variety of mission disruptions that impacted the enterprise through the second half of fiscal 2021 continues to normalize. We booked eight new tasks from 4 new prospects and from for persevering with prospects, demonstrating our robust demand and bolstering our confidence in a normalization of providers income.
Given the cadence and transferring from bookings to income, we view bookings through the first a part of the fiscal yr as a key main indicator of constructive income progress within the second half of the fiscal yr. With improved bookings and the next backlog, we’re optimistic concerning the prospects for our PK/PD providers enterprise total.
QSP/QST income declined 12% for the quarter whereas backlog elevated 78%. 12 months-to-date income elevated 4%. This service phase is returning to pre-COVID-19 [Technical Issues] with a great mixture of each efficacy and toxicology enterprise and collaborations.
Final week, we introduced that we secured a Section 2 SBIR NIH grant to develop additional and validate our BIOLOGXsym platform. This platform is the quantitative methods toxicology software program targeted on complicated macromolecule liver security. The grant gives roughly $1.7 million for inner software program improvement and moist lab work over two years via our partnership with the College of Pittsburgh Drug Discovery Institute. The institute will make the most of a next-generation organ on a chip system that compares liver toxicity in liver cells collected from wholesome donors versus these with liver illness. This permits for the screening for alerts associated to liver security mechanisms and gives this knowledge for BIOLOGXsym simulations.
As well as, we booked different necessary QSP tasks through the quarter. GOUTsym shall be a QSP mannequin of uric acid and the propensity for therapeutic candidates to forestall crystal formation in joints, which ends up in ache and irritation. COMPLEMENTsym shall be a QSP mannequin of the complement pathway to help analysis of therapeutic targets and candidate compounds for ailments impacted by the complement pathway, which incorporates many inflammatory and nervous system issues. Our PBPK income was flat this quarter and backlog elevated 113%. 12 months-to-date income elevated 15%. We’re seeing rising demand for PBPK providers because the use instances for PBPK broaden and exceed trade capability resulting in extra outsourcing.
In January, we introduced two new funded collaborations. We’re partnering with a big pharmaceutical firm to change the GastroPlus superior compartmental absorption and transit mannequin, or ACAT, in help of ongoing analysis packages for the therapy of gastrointestinal ailments. The second is with a big animal well being firm to each validate present animal PBPK fashions and so as to add crucial new species to the GastroPlus platform.
As a reminder, funded collaborations is strategically necessary to us. First, it additional solidifies our relationship with an present buyer. Second, it helps us cut back our R&D prices and be certain that our innovation is aligned with the shoppers’ quick wants. Lastly, we personal the IP that comes from these collaborations and may use it with different prospects as nicely. This confirmed technique is a crucial software for making certain GastroPlus retains its trade management.
Total, our providers backlog elevated 50% through the quarter, additional proof that the challenges and disruptions within the second half of final yr are behind us. Consequently, we count on this enterprise to return to progress within the second half of this fiscal yr.
Our fiscal year-to-date efficiency provides us confidence in our steerage. Our software program enterprise continues to ship accelerated progress charges which might be driving robust profitability. As well as, our providers enterprise is recovering and may contribute to consolidated progress within the second half of the fiscal yr. Accordingly, we must always exit fiscal 2022 at a tempo that helps our longer-term expectations for 15% or higher natural progress with any acquisitions incremental to this quantity.
With respect to M&A, we proceed to search for strategic alternatives to extend our complete addressable market and speed up our progress charges.
Let me now flip the decision over to our CFO, Will Frederick, to debate the monetary outcomes.
Will Fredrick — Chief Monetary Officer
Thanks, Shawn. Our complete income progress fee was 13% within the quarter. The robust progress of 25% in our software program enterprise positively impacted our combine, and software program was 66% of complete income this quarter. Our providers enterprise declined 5%, and it contributed 34% of complete income.
Our complete income progress fee was 14% year-to-date. Software program income progress was 23%, and providers income progress was 2%. Software program accounted for 63% of complete income, and providers contributed 37%. Our software program gross margin was 92% for the quarter, up from 89% final fiscal yr as a result of elevated income and barely decrease price of income. Our providers margin was 59%, down from 61% final fiscal yr as a result of decrease income and a rise in lower-margin QSP/QST providers tasks.
Our complete gross margin elevated year-over-year to 81% on account of the bettering software program income combine. Our software program gross margin was 91% year-to-date, up from 88% final fiscal yr as a result of elevated income and barely decrease price of income. Our providers margin was 60%, down from 63% final fiscal yr as a result of elevated salaries and a rise in decrease margin providers tasks, together with coaching and workshops. Our complete gross margin elevated barely to 79% on account of the bettering software program income combine.
We proceed to take pleasure in a various mixture of software program income within the quarter with stable progress throughout our total product portfolio. For the quarter, GastroPlus was 56% of our software program income. MonolixSuite was 23%. ADMET Predictor was 14%, and different software program was 7%. 12 months-to-date, GastroPlus was 55% of our software program income. MonolixSuite was 22%. ADMET Predictor was 17%, and different software program was 6%.
For the quarter, our software program renewal fee for the industrial prospects was 96% primarily based on charges and 87% primarily based on accounts. As a reminder, our renewal charges fluctuate quarter-to-quarter as a result of prospects who both renew early in 1 / 4 earlier than their license time period ends or late within the following quarter. We noticed a rise in our common income per buyer this quarter in comparison with the prior yr quarter. This modification displays our regular worth will increase and ongoing upselling efforts, offset by modifications to our low cost construction for multiyear offers.
12 months-to-date, our software program renewal fee for industrial prospects was 96% primarily based on charges and 90% primarily based on accounts. Renewal charges for industrial prospects, on common, continued to be in step with historic charges within the mid-90s primarily based on charges. Common income per buyer year-to-date was the identical because the prior yr interval. And we now have 124 College+ prospects in 39 international locations. We consider this program, which gives free use of our software program for college kids and educators, will assist put together the following technology of scientists and contribute to the fast improvement of safer lower-cost therapies for sufferers worldwide.
Shifting to our providers enterprise. Our second quarter providers income breakdown was as follows: 44% from PK/PD providers, 30% from QSP/QST providers, 19% from PBPK providers and seven% from different providers. Our year-to-date providers income breakdown was as follows: 45% from PK/PD providers, 30% from QSP/QST providers, 18% from PBPK providers and seven% from different providers.
Relating to key service metrics, complete providers tasks elevated 45% this quarter in comparison with the prior yr quarter, and we ended the quarter with $17 million in backlog, up $6 million from the prior yr quarter.
Now turning to our consolidated revenue assertion for the quarter. Complete R&D prices for the quarter had been $1.6 million or 11% of income in comparison with $2 million or 16% of income final fiscal yr. R&D bills had been $0.9 million or 6% of income in comparison with $1.3 million or 10% of income in the identical interval final yr. Capitalized R&D was $0.7 million or 5% of income in comparison with $7 million or 6% of income in the identical interval final yr.
SG&A expense for the quarter was $5.6 million or 38% of income in comparison with $5.4 million or 42% of income final yr. The slight improve in expense was primarily as a result of will increase in promoting and advertising prices, software program license and upkeep prices and better insurance coverage prices, partially offset by decreases in compensation prices and decrease state and native taxes.
Earnings from operations was $5.5 million, a rise of 57%. And working margin expanded to 37% from 27% final yr. Earnings tax expense was $1.1 million for an efficient tax fee of 20% in comparison with revenue tax expense of $0.2 million and an efficient tax fee of 6% final yr. Final yr, we noticed a decrease efficient tax fee, primarily pushed by the tax profit related to disqualifying inclinations.
Internet revenue elevated 37% to $4.4 million in comparison with $3.2 million final yr, and diluted earnings per share elevated 40% to $0.21 in comparison with $0.15. Adjusted EBITDA and adjusted EBITDA margin was $7.2 million or 48% in comparison with $5 million or 38% final yr. As a reminder, adjusted EBITDA is calculated by including again stock-based compensation expense and when relevant, any bills associated to M&A or different noncash nonoperating bills.
We offer a reconciliation of this non-GAAP metric to internet revenue, the related GAAP metric, in our earnings launch in addition to on our web site. For our year-to-date revenue assertion, complete R&D prices year-to-date had been $3.3 million or 12% of income in comparison with $3.5 million or 15% of income final fiscal yr. R&D bills had been $1.8 million or 7% of income in comparison with $2.1 million or 9% of income in the identical interval final yr. Capitalized R&D was $1.5 million or 6% of income in comparison with $1.4 million, additionally 6% of income in the identical interval final yr.
SG&A expense year-to-date was $10.6 million or 39% of income in comparison with $9.9 million or 41% of income final yr. The expense improve was primarily as a result of will increase in promoting and advertising prices, software program license and upkeep prices and better insurance coverage prices, offset by decreases in compensation prices and decrease state and native taxes. Earnings from operations was $9.3 million, a rise of 42%, and working margin expanded to 34% from 27% final yr.
Earnings tax expense was $2 million for an efficient tax fee of 21% in comparison with revenue tax expense of $0.7 million and an efficient tax fee of 11% final yr. As talked about, final yr, we noticed a decrease efficient tax fee, primarily pushed by the tax profit related to disqualifying inclinations.
Internet revenue elevated 31% to $7.4 million in comparison with $5.7 million final yr. And diluted earnings per share elevated 33% to $0.36 in comparison with $0.27. Adjusted EBITDA and adjusted EBITDA margin was $12.4 million or 46% in comparison with $9.3 million or 39% final yr.
This quarter, we continued to strengthen our stability sheet with money and short-term investments of $124.6 million and no debt. Consequently, we’re nicely capitalized with ample money to help our continued growth via inner funding and potential M&A exercise.
I’ll now flip the decision again to you, Shawn.
Shawn O’Connor — Chief Govt Officer
Thanks, Will. In conclusion, the primary half of fiscal 2022 provides us confidence that our enterprise stays on a constructive trajectory and that we’re nicely positioned to attain our full yr outlook. Total, we’re concentrating on continued natural progress with a stability sheet that helps M&A once we fund the best candidates.
With that, I’ll be glad to take your questions. Operator?
Questions and Solutions:
Operator
[Operator Instructions] And our first query comes from the road of Francois Brisebois with Oppenheimer. Please proceed together with your query.
Francois Brisebois — Oppenheimer — Analyst
Hello. Thanks for taking the questions and congrats on the quarter. Simply my first query right here. This quarter-ended February, so I used to be simply questioning, I feel lots of people had been questioning concerning the pandemic influence. The final quarter you had ended November, so Omicron hadn’t actually hit but. So for those who may simply possibly characterize — it looks as if there hasn’t been a lot. However do you assume possibly a few of the downturn, which appears to go in the best means on the providers aspect, may have something to do or simply any influence in any respect from Omicron?
Shawn O’Connor — Chief Govt Officer
Sure, Frank, thanks for the query. The influence, if something, was not very dramatic in complete in comparison with the place we had been within the latter a part of final fiscal yr. The variety of delays and cancellations has come again to form of the traditional degree of a pair, three of these taking place each quarter that we have to reply to versus the place we had been six months, half a yr in the past at 9 within the third quarter of final yr.
So comparatively talking, the influence of Omicron versus earlier variants was a lot much less. And definitely, on the degree of enterprise exercise with our purchasers, the uptick when it comes to the bookings within the quarter that led to the numerous improve when it comes to the backlog that we completed the quarter with, enterprise operations of our purchasers and ourselves, clearly, weren’t as impacted dramatically in any respect. Possibly there’s nonetheless some churn when it comes to medical trials and a few influence when it comes to knowledge movement, potential to start tasks, however nothing of a really dramatic nature.
Francois Brisebois — Oppenheimer — Analyst
Okay. Nice. And on the software program aspect, a powerful quarter. The addition of the 18 new prospects, are you able to simply — I feel you’ve touched on it slightly bit, I feel there’s three GastroPlus, eight MonolixSuite, however is that this one thing that stunned you? Was this anticipated? Or the place did these prospects come from?
Shawn O’Connor — Chief Govt Officer
Nicely, they arrive from a very stepped-up course of when it comes to our enterprise improvement actions, each inner and thru our distributor community. The trade is coming again to work. Staff are transferring. They’re including new scientists into their group, all of which drives a brand new license alternative for us. And so our actions when it comes to funding in enterprise improvement are persevering with to repay and dramatically as nicely when it comes to upsells. The brand new prospects’ exercise is nice. The upsell with our bigger portfolio of merchandise with the introduction of Lixoft is absolutely kicking in. 40% progress with the Monolix product is one thing that we’re very pleased with. I can’t say that we essentially focused at 40%, and we’re simply seeing the advantage of that product displacing its competitor within the market and taking each new prospects, bringing on new prospects and as nicely taking enterprise away from the put in base of the aggressive product.
The upsell program for Monolix, the standard gross sales course of there as a buyer takes a small set of license in its first chunk and will get conversant in the product and the truth that after they come again to resume, they’re nearly each time taking extra licenses to unfold them via and displace the aggressive product of their organizations speaks nicely. And that’s — that new buyer this quarter for Monolix, a yr from now will doubtless be an ideal upsell lead for us to work when it comes to rising the income for that shopper particularly.
So sure, software program is definitely performing very nicely right here throughout the board, throughout our three most vital platforms. The opposite class is rising as nicely. That different class primarily being the license of our QSP/QST fashions, which function at a decrease degree just because there aren’t that many purchasers which have the in-house functionality of working these fashions. So we’re seeing contribution from that different phase of our software program as nicely.
Francois Brisebois — Oppenheimer — Analyst
Okay. Nice. And simply possibly lastly, a small decline, however that 5% decline with the rise in backlog and every part form of normalizing. Are you able to simply assist us perceive the place — why the 5% decline right here?
Shawn O’Connor — Chief Govt Officer
Sure. Frank, the largest influence there’s {that a} reserving and new contract that we get usually is timed for work effort, mission efficiency possibly three to 6 months out, generally longer. Sure, we often get a deal that may be a response — quick response to an FDA inquiry to a shopper that we are going to signal and get began on in a short time. However as a rule, it’s for work that’s going to be carried out three to 6 months or extra on the market. And so whereas we picked up bookings within the final two quarters right here, the primary two quarters of the yr, most of that work is out in the direction of the again half of the yr.
And our trough within the third and fourth quarter of final yr, the place bookings had been low, that form of interprets to now six months later or no less than the final three to 6 months the place that hole when it comes to new enterprise and backlog was declining. That impacts income three to 6 months later, and we’re in that interval. So our 5% decline wasn’t dramatically totally different than our expectation. And we count on that the advantage of our uptick when it comes to bookings and backlog to influence us at the back of the yr — again half of the fiscal yr.
Operator
[Operator Instructions] Our subsequent query comes from the road of Matt Hewitt with Craig-Hallum Capital Group.
Lucas Baranowski — Craig-Hallum Capital Group — Analyst
That is Lucas [Phonetic] on for Matt Hewitt. I assume, our first query is you’ve obtained some authorities grants just lately. Are you able to give us a way what the cadence of the income from these will seem like?
Shawn O’Connor — Chief Govt Officer
Sure. A number of grants, collaborations with some industrial purchasers as nicely. The most important one, the one we simply introduced just lately the grants in help of the QSP platform — ought to I say, QST platform BIOLOGXsym, $1.7 million grants.
Will probably be carried out over a few two-year window of time. It isn’t completely linear. It’s as work is carried out and milestones are achieved. However kind of over the following two years, that may contribute to income.
The opposite ones that’s an unusually longer-term one — truly regular for an NIH grant, however the collaborations with industrial purchasers, the FDA grants or FDA collaborations that we’ve engaged in of latest. These can extra usually be intervals of two to 3, possibly 4 quarters.
Lucas Baranowski — Craig-Hallum Capital Group — Analyst
Thanks. That’s useful. After which geographically, are there any markets the place you had been promoting via a distributor, however you’re now going direct?
Shawn O’Connor — Chief Govt Officer
No modifications of that nature, Lucas. Over the past six months or so, we’ve added a distributor in China in help of the MonolixSuite product line. We’ve added a brand new distributor in South America for GastroPlus ADMET Predictor. So we’ve added a few new distributors.
We’re within the strategy of reviewing these relationships, not that we’ve got any underperformers, however we consider that we will enhance the income movement from these geographies by supporting these distributors in slightly totally different means. So it’s an space of focus for us, however no concern, simply a chance we predict that sits there that we will go after.
Lucas Baranowski — Craig-Hallum Capital Group — Analyst
Thanks very a lot. That’s all I had.
Operator
And there aren’t any additional questions. Right now, I’d like to show the ground again over to Mr. Shawn O’Connor for closing remarks.
Shawn O’Connor — Chief Govt Officer
Superb. Nicely, I respect everybody’s consideration on our announcement at the moment. I really feel very assured when it comes to the place we’re in to meet our expectations, the steerage and our enterprise expectations for the again half of the fiscal yr. Thanks for attending and look ahead to updating you once more quickly. Take care.
Operator
[Operator Closing Remarks]
[ad_2]
Source link
