Simulations Plus Q3 Earnings Exceed Expectations, Sales Rise Despite Lowered View, Stock Gains Despite Restructuring and Investment

Simulations Plus, Inc. reported Q3 FY25 adjusted earnings of 45 cents per share, up 66.7% YoY, and revenues of $20.4 million, a 10% YoY increase. Organic revenue fell 4% due to reduced software sales and biosimulation services revenue. The company completed a strategic reorganization and announced a $1 million investment in Nurocor, a clinical development software company.

Simulations Plus, Inc. (Nasdaq: SLP) has released its financial results for the third quarter of fiscal 2025, ended May 31, 2025. The company reported adjusted earnings per share (EPS) of 45 cents, an increase of 66.7% year-over-year (YoY), and total revenues of $20.4 million, marking a 10% YoY increase. However, organic revenue fell by 4% due to a decline in software sales and biosimulation services revenue. The company also completed a strategic reorganization and announced a $1 million investment in Nurocor, a clinical development software company.

Key Financial Highlights:

- Revenue: Total revenue increased to $20.4 million, a 10% YoY increase. Software revenue grew to $12.6 million, representing 62% of total revenue, while services revenue reached $7.7 million, accounting for 38% of total revenue.
- Gross Profit and Margin: Gross profit was $13.0 million, with a gross margin of 64%.
- Net Loss and Diluted Loss per Share: The company reported a net loss of $67.3 million and a diluted loss per share of $3.35, primarily due to a one-time non-cash impairment charge of $77.2 million.
- Adjusted EBITDA and EPS: Adjusted EBITDA was $7.4 million, and adjusted diluted EPS was $0.45.

Management Commentary:

Shawn O’Connor, Chief Executive Officer of Simulations Plus, commented, "Our revenue grew by 10% in line with our preliminary revenue. Our software revenue continued to perform well, increasing 6%, mainly driven by our ADMET Predictor® software and modest growth in our GastroPlus® and MonolixSuiteTM software. Services revenue for the third fiscal quarter grew by 17%, primarily driven by solid performance in our Medical Communications services."

The company also recognized a one-time non-cash impairment charge of $77.2 million, reflecting a commitment to transparency and streamlining its operating structure for greater efficiency. Additionally, Simulations Plus completed a strategic reorganization, transitioning from a business unit structure to a functionally-driven operating model.

Investment in Nurocor:

Simulations Plus announced a $1 million investment in Nurocor, a clinical development software company. This investment underscores the company's commitment to innovation and its strategy to expand its value proposition through advanced technologies like AI.

Fiscal 2025 Guidance:

Simulations Plus updated its full fiscal year 2025 guidance to revenue between $76 to $80 million, with a revenue growth of 9% to 14%. The company expects an adjusted EBITDA margin of 23% to 27% and adjusted diluted EPS of $0.93 to $1.06.

References:

[1] https://www.biospace.com/press-releases/simulations-plus-reports-third-quarter-fiscal-2025-financial-results