Simulations Plus, Inc. (SLP)·Q1 2025 Earnings Summary

Executive Summary

• Q1 FY2025 revenue rose 31% year-over-year to $18.9M, driven by 41% software growth; services grew 19% but declined 9% organically due to client-driven data delays shifting project starts to Q2 .
• Diluted EPS was $0.01 (vs. $0.10 prior year); adjusted diluted EPS was $0.17 and adjusted EBITDA was $4.5M (24% margin), reflecting higher amortization from Pro-ficiency and capitalized development costs compressing software margins to 75% and total margins to 54% .
• Management reaffirmed FY2025 guidance: revenue $90–$93M, software mix 55–60%, adjusted EBITDA margin 31–33%, adjusted EPS $1.07–$1.20; Q2 expected to account for ~24% of FY revenue with 18–22% YoY growth .
• Backlog increased 22% sequentially to $17.3M, with strong bookings in CPP and Medical Communications; ~90% is expected to convert within 12 months, positioning services for sequential improvement .

What Went Well and What Went Wrong

• What Went Well

  • Software accelerated: “Software revenue grew 41%…MonolixSuite increasing by 43% including a large pharma client fully committing to PK Analytics” .
  • QSP momentum: “QSP Software revenue grew by 40% and we added model licenses for psoriatic Arthritis and Crohn’s disease” .
  • Commercial traction and renewals: 12 new software customers, 9 upsells; renewal rate 95% (fees) / 83% (accounts); average revenue per customer rose to $94K .

• What Went Wrong

  • Services softness: Services down 9% organically; PBPK −9%, CPP −6%, QSP −14% on organic basis due to client data delays and calendar year budget depletion .
  • Margin compression: Total gross margin fell to 54% from 62% YoY; software margin to 75% (from 87%) and services margin to 26% (from 36%), driven by amortization of capitalized development and Pro-ficiency developed technology, and fixed services costs vs lower organic revenue .
  • EPS decline: GAAP diluted EPS dropped to $0.01 from $0.10 a year ago despite adjusted EBITDA improvement, reflecting higher costs and amortization .

Financial Results

Segment mix (Q1 2025):

KPIs and balance sheet:

Operational highlights and drivers:

• Software growth: MonolixSuite +43% and QSP +40% in Q1; GastroPlus +4% YoY; Asia market +30% growth led by Japan; pricing increases mid-single digits .
• Margin drivers: Software margin decline attributed to increased amortization (capitalized development and Pro-ficiency technology); services margin impacted by lower organic revenue against relatively fixed cost base .

Guidance Changes

Note: Subsequent to Q1, FY2025 guidance was updated at Q3 to revenue $76–$80M and adjusted EPS $0.93–$1.06; not part of Q1 guidance, but relevant to trend context .

Earnings Call Themes & Trends

Management Commentary

• “We’re off to a strong start in 2025. Total revenue increased 31% year-over-year… Diluted EPS was $0.01. Adjusted diluted EPS was $0.17 and adjusted EBITDA was $4.5 million or 24% of revenue.” — CEO Shawn O’Connor .
• “Software revenue grew 41%… MonolixSuite increasing by 43%… a large pharma client fully committing to PK Analytics.” — CEO Shawn O’Connor .
• “We ended the quarter with $18.2 million in cash and investments… We remain well capitalized with no debt and strong free cash flow to execute our growth strategy.” — CFO/COO Will Frederick .
• “We are reaffirming our fiscal year 2025 guidance… Total revenue $90M–$93M… Adjusted EBITDA margin 31%–33%… adjusted diluted EPS $1.07–$1.20.” — CEO Shawn O’Connor .

Q&A Highlights

• Software momentum and pricing: Organic software growth rebounded (vs. −6% prior quarter), driven by MonolixSuite and QSP; pricing increases are mid-single digits, consistent with history .
• GastroPlus performance and Asia mix: GastroPlus +4% YoY; Asia growth led by Japan, with China smaller; pipeline healthy though new logos waited for 2025 budgets .
• Services timing: Data delays and depleted 2024 client budgets pushed project starts to Q2 and later; ~90% of backlog realizable within 12 months, visibility improving .
• Pro-ficiency (ALI/MC) contributions: Q1 software ~$1.8M and services ~$1.9M; both tracking to FY contribution of $15–$18M .
• Back-half cadence: Q2 expected ~24% of FY revenue (vs. historical ~26%); revenue more evenly split between Q3 and Q4 as services projects ramp .

Estimates Context

• Wall Street consensus (S&P Global) for Q1 FY2025 EPS and revenue was unavailable due to SPGI access limitations during retrieval; therefore, we cannot conclusively assess beats/misses versus consensus for this quarter [GetEstimates errors].
• Implication: Focus estimate revisions on forward commentary and bookings/backlog; monitor upcoming periods (management guided Q2 to ~24% of FY with +18–22% YoY growth) for potential re-rating catalysts .

Key Takeaways for Investors

• Software strength is the core driver: +41% YoY with MonolixSuite +43% and QSP license wins; renewal rates and ARPC up—supports recurring revenue and visibility even in cautious macro conditions .
• Services poised for sequential improvement: Backlog rose 22% sequentially to $17.3M; bookings strong in CPP/MC; watch Q2 execution and ramp timing (data delays easing as CY2025 budgets launch) .
• Margin watch: Gross margin compressed to 54% on amortization impacts; adjusted EBITDA margin 24% this quarter—tracking toward FY31–33% guidance hinges on mix and services utilization .
• Guidance reaffirmed in Q1: FY revenue $90–$93M, adjusted EPS $1.07–$1.20; near-term catalyst is Q2 delivery (~24% of FY revenue). Note later FY guidance was reduced at Q3—keep risk management tight around services starts and macro sensitivity .
• Regional upside: Asia +30% with Japan leading; continued international adoption of GastroPlus and MonolixSuite can diversify growth streams .
• Pro-ficiency integration: ALI/MC contributions in line; cross-selling opportunities expanding TAM and providing additional services visibility—monitor large MC engagement ramp in 2H FY2025 .
• Trading implications: Near-term focus on Q2 print and services conversion from backlog; medium-term thesis centers on software durability, AI-enhanced product pipeline (GastroPlusX, Monolix R24, ADMET Predictor 12), and disciplined cost execution supporting margin targets .