SLP - Earnings call transcript Q2 2019

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Cameron Donahue

Good afternoon, everyone. Thank you for joining us. Hosting the call today is Simulations Plus' CEO, Shawn O'Connor; and the company's CFO, John Kneisel.

Before beginning, I'd like to remind everyone that with the exception of historical information the matters discussed in this presentation are forward-looking statements that involve numerous risks and uncertainties. The actual results of the company could differ significantly from those statements. products to or to, such company's continued retain productivity. factors, produce company's and improve cause fashion, the to personnel are include, their products, sustain or and can the the limited growth, not demand ability the that contribute current a company's and to in differences timely to but competitive company's Factors of to ability ability market continue future to levels finance new for skilled attract company's the ability on the company's Exchange information the and company's Further contained risk and in quarterly filed factors the Commission. Securities reports is and annual with With that the over said, to turn call our CEO, O'Connor. like I'd Shawn to Shawn?

Shawn O'Connor

end XX% another with relatively growth Cameron. consulting Plus delivered quarter. flow. business accelerated of quarter to you, after second historical high Simulations revenue for first strong range pace and our revenue profitability annual Of along XX%. organic a achieved double-digit note growth slow was the growth revenue The of with cash Thank excellent our good growth the its at quarter,

for delivered growth quarter year-over-year revenue since quarter, second Our Buffalo highest division XXXX. its XX% the growth

or of new In discussed closed after several last the in business our close right end opportunities call, addition, on the last quarter. at we our we as

agreement Specifically, DILIsym's quarter, remains three RTP first DILIsym division. we quarter for growth the the XX% build supported for of the a projects of After received services the revenue for These two pharma commenced in build an end and high approval a large of the divisions. second model. of the IPF also million for all mechanistic in across Demand SBIR of $X.X achievement platform. grant with Phase company II on the the RENAsym closed

We development on in We business our drive progress in by expertise. market, added our recruiting to growth business and hired XX% strategic the into staff practice, are investments and consulting very our resource and initiatives quarter a an business in consulting our experienced second made senior efforts additional X% success We individual software in the with good development consulting scientific organization competitive our year-over-year. a these quarter. future in making to increasing

placed have we team we Europe historical of both XX% XX% of during all good we physical key progress presence support our place. increased and market. our increasing financial quarter consultants this the in company have in XX% for range Additionally, results made encouraged a the quarter I'm for initiatives in to in With the regard and three XX%. annual Overall, on results with metrics growth the to year-to-date as our whole, the our with are in line and revenue

be and typically are year. for third strongest line we with so expectations growth in The quarters appear quarters, second our the to these

year's year's over an gross improvement gross this and quarter Our last second were and margin was XX% gross increase by gross too first of from revenues. software was consulting both XX%. margin, margin increases contributed the The which margin quarter both

at even the call. results Our and and in later speak comparisons, to benefit in after one-time marketing This adjustment level for On related revenue adjusted the that net adjusting investments up the investments our in year-over-year slightly outcome fees are expense. software coming the or business from income increased year-over-year to full will with these These making per the future will increase above not year-over-year. for resources, be quarters on to was is income is impact XXXX that of revenue our to sales our $X.XX year we're cost year year's significant our R&D to company expectation an will and position aggressive the year but more the per initial historical range. diminish in basis line consulting up $X.XX that earnings comparisons John recruitment, earnings results Europe, fiscal That of made year share in of share the fiscal support impacting reflective growth our in to of the year-over-year placement results. and full net period. said, of XXXX quarter refactoring being last second were received project investments growth staff the of in in and is tax our

this in our costs, expenses down total operating of XX% first second creeped quarter. to in revenue For XX% in had to SG&A fell first the the XX% up stepped this to from in example, quarter back quarter quarter XX% which and

consistent. quarter revenues mix Our remained the of for

Our year They at XX% quarter for software year-over-year. for second the grew revenues. XX% of revenues were fiscal XX% total represented XXXX and

Our consulting the quarter revenues year-over-year. XX% and total revenues for were grew at XX% of

Turning results were division. by our X% revenues to fiscal Lancaster this quarter division, our revenue In year-over-year and XX% division up consulting second year-over-year. software in declined

to for due to, of good division Consulting strong and continues overall revenue with was revenue milestones; to XX% metrics new down down the refactoring enjoy project XX% certain from timing the key B, from project. division, revenue Our XX% A, licenses, of renewals, line our Lancaster of from renewal rates. the seasonality growth allocation software resources in with Breaking consulting. was

were renewal rates accounts Our upon based and fees. on based XX% XX%

companies X% groups. up added Our non-profit We of year-over-year. XX XX commercial license and units XXX were new

nearly of in four the funded companies expansion XX We and work XX with U.S. collaborations. the worldwide. FDA. China top quarter organizations Overall, licenses the of with at both XX and projects was the A have XXX and pharmaceutical companies we highlight

positive companies with to software major relationships business a and established on bodies development strong bring as reminder, tool serves regulators our as them. a for with us to As move experience regulatory pharmaceutical often

can if In software simulation modeling utilizes well. pharmaceutical it a companies and as encourage our software, to regulator addition, embrace

competitive line. with since from strong the division our with a up position increased domestic advancing highlight solid XX% performance achieved licenses growth an quarter overall XXXX. through year-over-year, ended This in growth prior excess demand of Asia rate. also in customers. of important employees, this Lancaster We the We and is with consulting release the clients. product Major of XX existing and expansion multiple XX experienced in geography client new this and of and deliver sell Buffalo Asian X during growth was distributors quarter quarter version DDDPlus our Buffalo of pipeline built in its the full-time projects. to has reflects quarter XX from resources growth up year-over-year. highest revenue in We

full-time adding it capacity skill business I quarter previously was both from in our presence as up good development the sets benefiting with in and business clients, as for We with development enhances project Such Buffalo and Buffalo division, XX resources increasing in initiating mentioned, As deliver have employees prior our quarter recruiting year-over-year. XX quarter by XX a accessibility to strategically and well presence performance. the projects from new ended our the a division, Europe. up

DILIsym, division year-over-year RTP projects to The revenue aggregate closed this growth. to The quarter, was contributed the portion initiated estimated SBIR grant at which X. approved the first robust $XXX,XXX. is be XXXX Our the Phase million for initiation XX% $X.X key grant of end or RENAsym of after of approximately

project, strong impact. second our progress to new approximately with know-how XXXX. commenced quarter consistent in full-time from a expected quarter for completion the addition, for in be In our is profitability, of and therapeutic growth, areas modeling sponsored IPFsym, demonstrate This RTP at all was modeling the division, quarter. these Significantly, license our RTP employees from expand up with XX QSP the and to good organization. into by available to XX a platform during year-over-year. Simulations projects with $X.X Overall, our Plus growth mechanistic companies million, in company on We initiatives for pharmaceutical ability pharmaceutical prior this future up upon excellent quarter mechanistic progress ended up and with scale XX a to

to results. the John? over call the John me review financial turn to Let detailed

John Kneisel

year. million SG&A and were second up The higher million. expenses of wage $XXX,XXX XX% million North attendant of XX.X% XX.X% Thanks revenues in $X.X of our full-time prior XXXX gross period. RTP XXXX contracts of revenue well the were and of lower Carolina million sales on Lancaster's revenues as XX.X%, due this compared cost allocated or was XX% XX.X% $X.X million Beginning $XX,XXX SG&A year in scientific quarter salary year $X were profit the this XX.X% and from personnel the second offset up of software-related million prior saw compared XX.X% or or revenues new increase to for year employee revenues up $X.X CEO division. increased modest $X.X quarter and fiscal We up sales, Carolina's By comes increased to and of XX.X% growth CRO representing primarily up up and gross XX%. of year, for to consulting margin $X.X by revenues in the increases second are compensation, Shawn. or to consolidated XXXX. service were direct the million, the our compared quarter Consolidated were to gross XX.X% from XX.X% increase on of expenses of The salaries percentage million, This revenues and million, the stock quarter margin quarter and same as licenses slide to increased approximately million costs -- this increase there $X.X insurance-related last $X.X were quarter for year-over-year were an commissions to division, fiscal cost XX.X% in revenue fiscal to increase to second FTEs or increased $X.X from to and related year. G&A Buffalo's during of $X.X year fiscal were in to compared or contract were $XXX,XXX $XXX,XXX expenses benefits. North expenses net

expenses incurred higher than recruiting We normal period. this during also

Lancaster. $X.X in the primarily year research XX% second the quarterly compared million the XX.X% of in about to or second operations or year. period, primarily $XXX,XXX costs. was quarter last revenue revenue or $XXX,XXX we result of an of or Income was costs X.X% X.X% of of expenses year This of for compared ago quarter. million, of outpacing up was last was fiscal was increases expensed period, year expenses in $X.X quarter approximately and of about with the associated in $XXX,XXX Our incurred increase from in during of R&D development during scientific research $X.X R&D our million which increase The to $XXX,XXX result activities the revenue of XXXX

tax rate Our with effective ago, benefit taxes million tax provision benefit an year of XX.X% to compared income the was for effective showed of about which XX.X%. quarter a a for of a $X.X rate $XXX,XXX

you'll was expense a that books It this transactions that tax tax effective the account. with Deferred posted to deferred estimated be large difference XXXX. liability that EPS who became benefit difference EPS and we the place are those effective associated January quarter our that federal much year the such new will using tax from year. are of in to reflect paid this rate adjustment company to was And and liabilities tax our last tax taxes that or the $X.XX reason recorded past quarter future the year. the SLP, taxes, rate share in of attributable of followed XX% took For the and recall in the per in we the that's onetime million XXXX, resulted the current time benefit When fund the Because in posted in year, estimated to $X.X year. $X.X we of both tax so used on X, liability that were act a second up January affected we rates place our this is about An federal million X, change tax last XXXX. XX% in as that that our the credit period. The changed the to pay government the month income or six as they taxes will affected recorded last last year's income results. amount changed went recalculated in

basis in will bit and that this XX% range. on We quarter Our the basis rate the based credits anticipate permanent other a rate be tax differences to XX% an somewhere than anticipated XX% annual in lower the calculation. is on annual on the

year. was $XXX,XXX the income the was which into decrease last for would been $X.X however million, net quarter that basis, up $X.X about On per income million quarter. Taking a that $X.X a have income the posted about in $X.XX net share compared quarter share of was quarter first tax million, that for account, was net included last XX.X% the Our is X% last in diluted first million but also from an the included $X.X of the fiscal of up XXXX, that million $X.X to per in affect share year quarter tax per about $X.XX year. XXXX, benefit. the EBITDA in quarter, benefit

to XX.X% just XX% Consolidated licenses as XX.X%, up year prior about software cover when combination By Consolidated over the year slides. last a $XX come It to revenues that year-to-date and the down last we're for XX.X% million and well decreased the the to year-to-date net a the One up for were we discussed million, at is million. mentioned, million Turning was up is areas $XX.X with quarter were revenues million still compared to were up $X.X $X.X the of profit expenses the were revenues XX% tax expected more towards or by annual and it's up of $X.X year. expenses XX% quarter expectations. somewhere up were $XXX,XXX revenues software-related year. the with expecting SG&A range. prior the the million and quarter. the by on as the to X.X% service calculation. or from or the here. revenues X% XX% the prior approximately in in related XX.X% We'll the and R&D to were margins recruiting XX%. or on as for we I as on It's be X.X% of year-to-date is at XX% the to with higher year, information but were XX.X% XXXX from line year-to-date bit back X.X% Lancaster slightly benefit-related X.X%. were side, consulting up as $X some as $X.X to Gross to or salaries, for percentage RTP XX.X% months our rate provision, commissions a to was SG&A coming revenues about comment million percentage costs Buffalo in high-level up under six year. level talking end down more million, division, revenues $X.X the

a to illustrates our quarter, third typical recent drop-off and purchasing XXXX most On Turning quarter. the quarter of a This our with typically in starting and third a by being next is during quarter in of the the months. business of the slowdown revenue quarterly basis, view slide. our coinciding seasonality strongest client's the through projects with it a with summer

difference. with out income effects that year. we as without quarter third with similar We've the at to tax earlier general summertime slide, the of discussed though our our season, quarter the quarter. the lightest fourth X/XX million, of recent quarter, shaded from illustrates the QX skew Our year which is being fiscal benefit, the of record first, deferred strongest. $X.X operations performance $X.X third the year typically increases, it $X.X of last net calling slide through quarters is see the being being next at almost the the the typically presentation peak both million. quarter year-over-year, revenues the reached by slide track This is last income of million I tends In that which from pattern Data sequentially of the

slide, share follows As income. the net next per expected, pattern the diluted same and tracks on earnings with

to follows EBITDA, those same being patterns EBITDA shows on the third EBITDA seasonal seasonality highest with Going the quarter a really the bit. again,

for and for Asia we to cash see slide X.X blue and the its the but the bottom Beginning being quarter slide fiscal on XXXX quarterly $X.XX revenues XX, dividend $X.XX dividends, the share a to year the -- chart and increased quarterly per illustrate over area, on payment world. payout. sources represented, a and XXXX, up growing revenue you fiscal share, the XXXX. can of by of region On of uses cash cash our first as strongly fiscal on fiscal them the highest Europe major quarterly of view impact left, last acquisitions as the this the in year consistent and from dividend the that on board per on provide in with far years. Beginning This our cash here, company. America see outflows Moving the we is North of XX. are other balances bars

shareholders red notably our invest $XX to of four value same to We increase our the up dividends, being the Moving use through acquisition over to ability to million fiscal consistent from cash years, on to for able slide. cash the the time return past the continue chart, maintain activity. borrowed while company. through nearly most been the It's spent with represent at ample we zero for acquisitions. debt We growth five bars as amounts balance sheet of the healthy and cash

Directors another that of -- some dividend has tracked. release today, shows distribute voted slide share the of we've be announced ratios The earnings that payable quarterly Just we Xst. historically Board will May our the per next with $X.XX the to

better history. with continues On aligned and company historical these trends all as and stable calls getting profitable the its

I'll Shawn. you, to Now, turn the call back

Shawn O'Connor

for organic In was growth John. while accelerated opportunities. future strong the business and in good, at achieving annual this you, range. in and sales flow strategies in Thank presence Profitability high strong and a investments came summary, historical this the we were our end positive was support and Revenue are and especially consulting growth growth marketing, recruiting making our that international overall, cash company. quarter of

questions We'll at that midpoint our of We are up the the year. might now call you fiscal to well-positioned open have. any

Q -Cameron Donahue

by. question growth? sales Thank drive [Operator the you, Instructions] begin and are Please Hapler. to by marketing Shawn. stand Howard future We'll designed with What a initiatives

Shawn O’Connor

the course added a organization software development into the employee sales of Well, of side today, call we've business we new the there. the touched them the several side, of during on resources

profiles networking pursue and are them project and marketing component opportunities We're to on. focused coming services development of well. services up clients and business to business that is trying component business one seeing of are combined and in the for to door have of in feel We're to senior one face-to-face looking but conferences marketing clients is highlight our important, add as staff. easing market individuals, the our we've engaging identifying seniors, and into supplying opening skills well. and another operates, establishing are of for growth important located opportunities consulting consulting critical competitive that with we're the terms DILIsym and had On way clients, allow the to adding ability our the and in that an of other examples terms we're as a presenting products, of leading the side Very, bring that the and in of The some clients some that's region consulting to terms future division's the interact that our side success lines demand that the on skills, examples in some demand new to of completed on distributor with scientific to the us be an initiative forth attend some there to these business. our very services reality and in side, and of synergies the of more our the to to consultants, senior where some These they hiring and our -- pursuing opening of more Europe. consultants sales uptick, We've can business. opportunity in securing are we're endeavors Asia are division's the focus of bit presence is

percolating sales have there. that for some opportunities time the those investments been These on marketing leverage our side. examples to of and are looking So,

Cameron Donahue

is consulting of is to the next or structure with organization, evolving? addition question the the The services changing personnel

Shawn O’Connor

there’s of changes, in best referenced the structural work offered in or as opportunities say We Obviously, we operate changes of divisions. its in three Consulting for of operate, Europe bring I that at I can, leveraging opportunity organization been geographically terms still and the format. in with -- to would the together staff on if We client, of in are time, our as business. the made three-division each look out that needs more try in we but more of no no face that's way We've point major the organizational this the management -- structural consultants. terms we as to expand changes as services with question. just the evolve structure organizational that into we

Cameron Donahue

this the XX maybe but the if months. I'm And feel as that of the as you XX the question, next will XXX% the to as intention software how as not versus company look just was in internally expectation clear far of like structure services talk far the

Shawn O’Connor

Well, table at the its and its I've as that's of getting organized optimizing I at look acquisitions we and ourselves synergies and not to the the something working at think, entire looking business been to the across divisional look into a services, And leverage looking past I are business optimizing I portfolio products. exist to that identify here business a that believer of towards history from drive just but result and business side, my the forward. three think in the structure that. of those synergies we'll there. we've divisions from the as line and portfolio consulting business and of that brought its products structure, move on something software that's the Similarly, consulting new the the

Cameron Donahue

Thank you.

sales. Korea, and basically structured how India, recent progressing in growth software that is is, areas all China? for some are we've These the question growth new Next added

Shawn O'Connor

units our in had strongest in and success Asian market That's quarter is been I very We sell The we've licensing had recent of them region through more climbing several Japan success largest referenced regions, longer there had the Korean that growth units is We success products they the through curve as the region. our Indian in software during into China we've the in well. China, building of had FDA we terms and positive. of side, region. of than in market. that a pipeline historically. some FDA those there. very the looks the on the is have in success largest products of the of the term been second software is markets distributors newest, markets to which our distributor learning Indian terms some the market. growing opportunity that our organization there, And in leverageable that others.

I the is growth our success the than overall contribute continue at of to going to maybe a organization and forward. pace think Asia grow greater to going

things for to future terms bit terms look challenging. have of locally the is consulting companies a of will in Historically, of more little than presence there, have in so very we'll well. reaching with but the a moving there required the that be used to profile out the the consultants in side is certainly more business of are One large the in the challenge software U.S. consulting that market, side, and market the on that's growth

Cameron Donahue

Buffalo question next The to revenue growth for poised double-digit sustain XXXX? division of you. the Thank half second is the Cognigen

Shawn O'Connor

the this of took the quarter in capacity. of a step-up Well, great of growth quarters, a range, couple fiscal The we're and terms for in has in this hasn't challenged level. getting XX% quarter revenue I but first division we to last the And the of here year certainly growth quarter think last typically performed the double-digit year.

here really last providing to pickup support months contributed six the the recruiting growth. them over to resource Our has

there, exists. the As and services the I've market very is these types robust for demand said before, of out

allow I both of going It to grow double-digit those a hope secure them, last constrained return have digits marketing that there way. the we've be here can deliver that that at go, issues at in the in variables it have we're going that sales case impacting here you and forward? If and the double position and partially past right of would to certainly forward. six will -- certainly the the business has B, addressed staff to growth history think the them to least to Can A, I projects. and forward. the And I been secure positive going in think months them some

Cameron Donahue

okay, you, the maybe The what compared there Lancaster first half. look does question for consulting think Thank XXXX? I the is division, first second the half half the next Shawn. to compared like the service -- of pipeline to for

Shawn O'Connor

that The the -- to terms and to is more our of the we're consultants capacity. add division team area Buffalo to pipeline in and the there opportunities in for looking exists Lanc resources to increase our work

resources The utilizing is the GastroPlus that project there are internal we've of major other project some dynamic on refactoring, to called those platform. undertaken is the that we a exists which rewrite

pipeline the the back I exists. be quarter. And believe growth unlike the year half the their that step so, we're in in we The that there. positive, the down balancing two will second demands took

Third positive quarter year-over-year growth should pipeline year we the and of second where the half fourth that's and stand. support in

Cameron Donahue

you. Thank

are Cognigen the question to services gross the Next consulting you is, improve year? in looking over margin next

Shawn O'Connor

they Well, stepped improved quite the here in second nicely. up quarter and

long in aware, that I be gross target your are software consulting our margin forward. the be the businesses to margin going is, run would a you sure level and they looking that that in in all some think When themselves there. and the the going XX% A, costs timeframe are are there's than we revenue period you be consulting in come a encounter practice recruiting board. into additional the recruits margins new have integrate run, targets marketplace I'm scarce. it's Two, the less is the ramp-up enjoy. But accelerating margins in a become on achieve typically ramp-up billability which you're can resources or as those which the

recruiting but terms in fact a we'll not get expense, just market compensation. that so, of the also the of expense And some dynamic it's added

the able run, that But you gross margin state long once manageable and there's you are to the in consulting the that in on of on achieve an of we a I'd recruiting So ongoing climbed basis, business. XX% there the side margin to those be at pressures that that. the and make achieve allow -- to expect number very level. will and pressures margin up tend be a steady

Cameron Donahue

the you. the of MRI and in the The that have is we applications opportunities other Thank software status guidance, missile the is in question what next in discussed past?

Shawn O'Connor

past Yes, going AI focus quarter, I our ways minimal. in acquire our been the now. which has regard mining, that We're still company this data looking for for to capabilities forward. not right in a say progress our in would that primary But

leverage an We to point. this looking progress are capabilities, for but to our at still no opportunity report

Cameron Donahue

elaborate with far on as, you there's please SLP? could Okay. machine-learning that bit capabilities conjunction a question In question, as developed the by AI

Shawn O'Connor

the a expect margin identify I on lot it's ADMET being Well, they're capabilities and opportunity move that, space. in but for and in technically elsewhere we capabilities, a can the to we're of embedded regards, dollars place today, buzzword And There's lead looking profit of business in forward has real of before and revenues we and AI pharmaceutical been software many labels are we've commercial of hot years investment, something effort we a industry. data terms where in is what a the techniques in worked that excitements. we going products. the these and gave of many, more and that focus, and leverage now. forward. to cautious developed our many been a it And these do mining we're that right one And for field that in but at underway realistic in lot that way will our some in investment the Predictor and point right lot leaders

Cameron Donahue

you. Thank

you Could there? on Next changes seeing and competitive comment that any you're environment the question.

Shawn O'Connor

in the larger players are from out new provided nothing there on report of The the application, any niche of Simcyp small to there. side report certainly to competition players. news in new field competitors Certara of players the terms there. new that No terms that's their have We software

today. it opportunity and we certainly there consulting think better it need plenty We that out that it's I from leveraging capabilities and us terms is breadth stand do side, a in through PK/PD context of very of each there are job forward. modeling out And opportunity of it's the exists there, a of in On really out all we -- to a our in. run of capabilities a play there. stand for modeling dynamic market PBPK competitive modeling the point mechanistic leverage to of the multiple that from and view, to bidders We going out market, but of

in space. confident potential very in of view, competitive from terms line this feel competitor point ability of so our to up And a against I any

Cameron Donahue

this the you. next what question is point? The PKPLus Thank status of is at

Shawn O'Connor

is in of a -- growing. I our to growing think, small but previous on adding PKPLus quarterly a We're a very good quarter it's a licenses at base. comparison still off basis quarters,

its find growing. slowly this there, or point, a footprint see it's and continue we to significant grow. material it'll Not it so to contributor And out revenue at but

Cameron Donahue

At it point, looks this is questions. Shawn. no you, further like there Thank

Shawn O'Connor

everyone. Plus; appreciate good. great reporting end everyone's been forward at I look next quarter the progress quarter. attention. for Very a the of Well Thanks, Simulations to It's

Cameron Donahue

final the is this comment. And

close, XX be and company Before webinar. Hills, the Riley of today's and on conference concludes B. will the May presenting and conference XX at Investor we call Beverly in this

be presentation, for part Thank today. our any of you will today's us replay joining you the missed If available www.simulations-plus.com. website, at

Shawn O'Connor	Chief Executive Officer
John Kneisel	Chief Financial Officer
Cameron Donahue	Investor Relations

Simulations Plus (SLP) 9 Apr 192019 Q2 Earnings call transcript