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Simulations Plus, Inc. (SLP)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 FY2025 revenue was $22.4M (+23% y/y), with software +16% and services +34%; GAAP diluted EPS was $0.15 and adjusted diluted EPS was $0.31, driven by strong QSP model licensing and MC services, while gross margin fell to 59% on higher cost of revenues .
  • Results were above S&P Global consensus on revenue ($22.43M actual vs $21.92M*) and adjusted EPS ($0.31 actual vs $0.123*), a broad-based beat despite lumpy QSP and delayed service project ramps; GAAP diluted EPS $0.15 compares to adjusted consensus conventions* .
  • FY2025 guidance was reaffirmed at revenue $90–$93M, adjusted EBITDA margin 31–33%, and adjusted diluted EPS $1.07–$1.20; management also guided Q3 to ~25% of FY revenue and y/y growth 21–25% .
  • Catalyst: MC signed “just over $5M” multi-drug speaker bureau/training engagement that ramps in 2H FY2025 and into CY2025, supporting services backlog ($20.4M, +13% y/y) and cross-sell narrative .

What Went Well and What Went Wrong

What Went Well

  • QSP software revenue surged 89% on an atopic dermatitis model license; CHEM +8% and CPP +9% on software, reflecting broad platform execution .
  • Services revenue +34% y/y with MC at $2.3M and very strong bookings; backlog ended at $20.4M (+18% q/q, +13% y/y), with >94% expected to convert within 12 months .
  • Quote: “We delivered strong performance… total revenue growing by 23%… we are well-positioned to maintain our momentum and are on track to achieve our stated guidance.” .

What Went Wrong

  • Total gross margin fell to 59% (vs 72% in Q2 FY2024) as cost of revenues rose $4.2M; services gross margin fell to ~25% and software gross margin to ~81% on higher amortization and reclassification of costs .
  • Fee-based software renewal rate slipped to 90% (from 94%) due to one large renewal closing in Q3; accounts-based renewal rate was 84% .
  • Clients paced services project starts later into the year, pushing revenue to back half; PBPK services –23% and QSP services –7% in Q2, highlighting sensitivity to macro funding and scheduling .

Financial Results

Quarter-over-Quarter and Year-over-Year Comparison

MetricQ4 2024Q1 2025Q2 2025
Revenue ($USD Millions)$18.7 $18.9 $22.4
GAAP Diluted EPS ($)$0.04 $0.01 $0.15
Adjusted Diluted EPS ($)$0.06 $0.17 $0.31
Gross Margin (%)37% 54% 59%
Operating Margin (%)-6.2% 0.7% 12.1%
Net Income ($USD Millions)$0.843 $0.206 $3.074

Q2 2025 Actual vs Consensus (S&P Global)

MetricConsensusActualSurprise
Revenue ($USD Millions)$21.92*$22.43 +$0.51M / +2.3%*
Primary EPS ($)$0.123*$0.31 +$0.187*

Values retrieved from S&P Global.*

Segment Mix and Product Contribution – Q2 2025

SegmentRevenue ($M)Mix (%)
Software$13.48 60%
Services$8.95 40%
Software Products (% of Software Revenue)Q2 2025
GastroPlus46%
MonolixSuite23%
ADMET Predictor17%
Pro-ficiency7%
Others7%
Services Business Units (% of Services Revenue)Q2 2025
CPP39%
MC25%
QSP19%
PBPK17%

KPIs and Operating Metrics – Q2 2025

KPIQ2 2025
Software renewal rate – Fees90%
Software renewal rate – Accounts84%
Avg. software revenue per customer$124k
Services backlog$20.4M
Total services projects (quarter)203
Software gross margin81%
Services gross margin25%
Effective tax rate (quarter)12%

Guidance Changes

MetricPeriodPrevious GuidanceCurrent Guidance (Q2)Change
Total RevenueFY2025$90–$93M $90–$93M Maintained
Adjusted EBITDA MarginFY202531–33% 31–33% Maintained
Adjusted Diluted EPSFY2025$1.07–$1.20 $1.07–$1.20 Maintained
Software MixFY202555–60% 55–60% Maintained
ALI + MC ContributionFY2025$15–$18M $15–$18M Maintained
Effective Tax Rate (Outlook)FY2025N/A21–23% New detail
Revenue cadenceQ3 FY2025N/A~25% of FY revenue; +21–25% y/y New detail
Total RevenueFY2025 (Subsequent Update, June 11)$90–$93M $76–$80M Lowered

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 FY2024)Previous Mentions (Q1 FY2025)Current Period (Q2 FY2025)Trend
AI/Tech initiativesPlatform upgrades across GastroPlus, MonolixSuite, ADMET Predictor Releases: GastroPlus X, Monolix R24, ADMET Predictor v12; USC NIH AI collaboration Continued focus; roadmap for accelerated delivery and AI advancements Increasing product enhancement and AI integration
Macro/fundingConstrained pharma/biotech funding; cautious outlook Ongoing funding challenges; services headwinds Customers remain cautious/cost-conscious; services starts slow Persistent headwinds
Services bookings & timingStrong services; exceeded expectations Strong bookings; data delays pushed ramps to Q2 Strong bookings; project initiation paced to H2 FY2025 Pipeline improving; later starts
Regulatory/legalN/ANIH AI grant; ESG updates Minimal NIH funding risk; FDA disruption not expected to slow biosimulation adoption; supports FDA roadmap (Apr 21 PR) Supportive for biosimulation
Product performanceSolid growth; MonolixSuite +20% FY2024 MonolixSuite +43% Q1; QSP +40% model licenses QSP +89% from AD model license; GastroPlus renewals slipped but closed in Q3 QSP lumpy; GastroPlus renewals normalizing
R&D execution/marginsTarget adj. EBITDA 35–40% LT Integration of Pro-ficiency progressing; margin focus Reaffirm margin target; expense discipline; use of AI in services and Pro-ficiency modules Ongoing integration and margin focus

Management Commentary

  • “Total revenue increased 23% year-over-year and 5% on an organic basis… adjusted diluted EPS was $0.31 and adjusted EBITDA was $6.6 million or 29% of revenue.” .
  • “We see minimal risk related to NIH… our software is provided free of charge to academic institutions, so we have no revenue risk associated with potential federal funding reductions.” .
  • “QSP… revenue surged by 89%, largely driven by a model license for atopic dermatitis… GastroPlus had some renewal slippage… deferred renewals have already closed in the third quarter.” .
  • “We are reaffirming our fiscal year 2025 guidance… total revenue $90–$93 million… adjusted EBITDA margin 31–33%… adjusted diluted EPS $1.07–$1.20… Q3 revenue ~25% of FY; y/y growth 21–25%; sequential step-up in Q4.” .

Q&A Highlights

  • Renewal dynamics and organic growth: Fee-based renewal rate fell to 90% due to one large renewal slipping into Q3; organic software growth was ~8% excluding ALI/MC .
  • Services pacing vs software resilience: Clients maintain software “infrastructure” spend while flexing service budgets; contracts now signed for work starting later in the year .
  • Tariffs/macro: Global pharma manufacturing could be subject to tariffs; adds to client caution amid IRA and other pressures .
  • MC engagement: Multi-drug speaker bureau/training contract is just over $5M, ramps in H2 FY2025 and into CY2025; enhances backlog and cross-sell .
  • Seasonality shift: Consolidation of ALI/MC changes historic seasonality—now more level across Q2–Q4 with potential uptick in Q4 .
  • EBITDA cadence: With linear expenses, rising revenue in H2 should flow through to EBITDA .

Estimates Context

  • Q2 FY2025: Revenue beat (+$0.51M/+2.3%) and adjusted EPS beat (+$0.187), with 7 revenue estimates and 4 EPS estimates contributing to consensus; GAAP diluted EPS is $0.15, while SPGI “Primary EPS” aligns to adjusted EPS conventions* .
  • Q1 FY2025: In-line to slight beats (actual revenue $18.92M vs $18.80M*; adjusted EPS $0.17 vs $0.048*), reflecting software-led strength amid services delays*.
  • Q2 FY2024 baseline: Actual revenue $18.31M vs $17.29M*; adjusted EPS $0.32 vs $0.19*, showing sustained outperformance*.

Values retrieved from S&P Global.*

Key Takeaways for Investors

  • Broad-based beat: Revenue and adjusted EPS exceeded consensus, anchored by QSP licensing and strong MC services, despite gross margin compression—supportive for near-term sentiment .
  • Watch margin mix: Rising cost of revenues (amortization, services mix and reclassification) compressed margins; H2 revenue cadence should provide EBITDA leverage as volumes ramp .
  • Services timing risk: Robust bookings and $20.4M backlog support visibility, but project starts remain H2-weighted—key for Q3/Q4 execution .
  • Renewal normalization: GastroPlus renewal slippage already closed in Q3; renewal rates remain healthy, underpinning software stability .
  • MC cross-sell expanding: The $5M multi-drug engagement validates MC capability and cross-sell strategy; expect revenue ramp through H2 FY2025 and CY2025 .
  • Guidance watch: Q2 reaffirmed FY2025 guidance; subsequent June update lowered full-year revenue to $76–$80M, introducing downside risk tied to macro headwinds—monitor Q3 print and cadence .
  • Medium-term thesis: Mission-critical biosimulation “infrastructure” supports resilient software growth; margin targets (35–40% adj. EBITDA) depend on mix, cost discipline, and AI-enabled efficiency in services .

Additional Sources and Press Releases

  • Q2 FY2025 earnings press release and 8-K: detailed financials, non-GAAP reconciliations, and guidance .
  • Q2 FY2025 earnings call deck: product/segment mix, KPIs, and reconciliations .
  • Q1 FY2025 earnings press release and deck: prior-quarter performance and guidance baseline .
  • Strategic collaboration with Enabling Technologies Consortium to enhance GastroPlus ACAT model (PBPK/PBBM)—supports tech leadership .
  • Company support for new FDA roadmap to reduce animal testing (regulatory narrative) .