SLP - Earnings call transcript Q1 2020

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Cameron Donahue

Good afternoon, everyone. On behalf of Simulations Plus, I welcome you to our First Quarter Fiscal Year 2020 Financial Results Conference Call and Webinar.

Hosting the call today is Simulations Plus’ CEO, Shawn O’Connor; and the company's CFO, John Kneisel. An opportunity to ask questions will follow today's presentation.

You may send written questions using the questions pane on the control panel or you may use the hand raising icon on your control panel to ask your questions directly. enter call. audio to you displayed sure the join be the pin unique when Please

I'd for but to in that statements. beginning, of the historical to the ability forward-looking ability demand a current the products, Before company like to contribute that competitive growth, can not company's retain risks company's information, are exception with continued statements productivity. limited differences significantly actual such the of the produce cause of to and the level in could company's uncertainties. factors, the or attract ability and matters sustain new skilled to results a differ the or company's Factors to, discussed involve this to The are remind presentation timely fashion, products include, number future everyone personnel improve of finance continue that company's those and and from ability to market the

the is with the risk on filed Exchange Commission. Further factors and and the contained company's and reports Securities information company's quarterly annual in

turn said, call like to O’Connor. the that With Shawn to the Shawn? I’d CEO,

Shawn O’Connor

deliver accelerated Thank on on our a start top line client-driven strong per earnings you, several $X.XX benefitted share execution in year. Simulations and to our represents unanticipated strong projects quarter. Cameron. continued objectives plan exceeded The XX% Plus from growth our to targets first that timing the growth fiscal and

a to XX% we initiatives, investments our last the increasing with to yielded we quarters most rate goal marketing results XXXX. over have and several growth our sales the as know, you historical navigated XX% encouraging six range of XX%. most fiscal of notably investments increased XX% As in These key of to of

revenue XXXX XX%. several acceleration growth improved fiscal year full delivered projects first For XX% our North was Carolina result was to that in quarter fourth the the higher revenue of the we operation due resulting our largely quarter This on further first growth expected of rate delivering the growth. in quarter. and in in We XX% than the at XXXX,

are not expectations XX% of levels maintain these full fiscal results we to While to growth XXXX, anticipating for validate year. these growth the our XX% throughout

growth software driven both our increased by revenue businesses. consulting and been has Our

XX% quarter for quarter and XX% in at first with strong grew first on of of during remain revenues margins Gross the XX%, Software margins the growth slightly quarters XXXX, the and consulting respectively. XX%. at fiscal fourth gross up XX%

revenues in mix margin richer revenues and gross which low carry to despite division our margin of or price maintain in our cost belief quarter result the personnel This higher of efficiencies. for operational achieved the was pass-through very margins. usual in revenue overall This addition through mix and we consulting improve RTP CRO management lower changes than can that despite supports

prior across opportunities and more more strong on our our Demand consulting helping additional is senior our remains capture a Through array that consulting built recruiting competencies. of software recent focus Cognigen services. us our as acquisitions scientific and DILIsym we products beyond expertise have as historical consultants, of comprehensive more well

for product highlight fatty of liver injury DILIsym, we liver drug-induced to NAFLDsym, of XX of When staff. acquired model product was fiscal revenue our consisted Systems nonalcoholic in only its DILIsym disease portfolio a Toxicology achievement the quarter this progress assessment model. XXXX, appropriate division. the Quantitative for in year-over-year and the a division Its the for is It growth made an incredible RTP XX%, quarter

syndrome. drug-induced RENAsym, fibrosis a funding radiation for and and idiopathic kidney that sourced pharmaceutical model expand RADAsym, our company From model group. to a revenue and systems to with coverage we of sources quantitative from expertise leveraged internal, have this starting and our grant-based IPFsym, therapeutic are pulmonary point, significantly model revenue a efforts model injury; from pharmacology assess acute billing additionally for Today,

expansion market the expertise. opportunity This into our for taken areas us QSP expanding therapeutic customers new new and has

revenues the mature, supplement the are from consulting the licensing opportunities software the models models more service will on horizon. As therapeutic revenues expansion and

specifically SG&A X% investments, the quarter marketing, spending percentage and sales dollars. in in SG&A the Due revenue fiscal first as to XXXX increased absolute our have the quarter was fiscal and in growth, XXXX. expenses quarter fourth of declined ongoing higher Our the versus of a first revenue up of from

as these of year revenues the seasonality XX% to expenses fluctuate of SG&A quarterly about XX% will forecast revenue. percentage based our revenue. our total expenses towards back expense full of at moving revenues. time, at revenue historical we continue We approximately to anticipate of a of SG&A upon percentage Over XX%

our to up Lancaster XX% our for revenue division, In results was quarter quarter. Turning overall first the by division.

for Software the XX% X% versus XX% consulting. to our metrics, grew were quarter last down versus from revenue from XX% revenues slightly and quarter year. from new renewals; the With Consulting licenses XX% was detailed of year. Lancaster's last for revenue regard

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

projects of industry. and the were units license XXX fiscal we have year, funded We differentiate commercial companies XX the nonprofit collaborations. within beginning Our us companies expand up of currently year-over-year. We XX groups. projects and XX% our with significant have XX the funded X added and software new of announced the These further offerings collaborations. functionality five Since

to across for advance First, software into and tautomer learning Bayer structure with integrated Predictor with the workflows. support agreement that use machine handling different ADMET discovery Bayer capabilities will entered will new we Collaboratively, we integrity improved data the develop drug a platforms. collaboration discovery

to software. and several to support the where enhance we into process followed as pharmacokinetics/toxicokinetics the evaluated collaboration program collaboration data modeling new their global internal that with rigorous a partner Simulations Second, platform entered Plus PKPlus pharmaceutical pharmaceutical competitors funded PKPlus ultimately selecting a teams. the connects This large a the company

new pharmaceutical model a in funded into an into support funded a model entered collaboration mechanistic gastrointestinal modify Fourth, new intra-articular with we GastroPlus stage to to delivery Third, in with partner collaboration GastroPlus. absorption large a the research. develop oral clinical we a company entered to disease biotech

reduce history GastroPlus. new input entered we collaborations These finally, with virtual to and a And overall the products. revenue module funding trial our the large first collaboration and costs continue partner collaboration year-to-date agreement Despite R&D confidence in pharmaceutical in targets. industry-leading with service enhance to leveraging a software client quarter, of division provide for flat our in simulator develop year closures the associated the revenues our full the bioequivalence achieving funded maintaining

one XX time from with the last up at four revenue growth quarter the full ended Buffalo, XX% in In achieved prior XX our XX quarter for division, we the quarter. Lancaster We up from and employees year.

consulting has fiscal have in high fiscal with in As XXXX to quarter. that marketplace. offer XXXX type a remains of X% the Demand reminder, we increased growth and at the XX% this in fiscal we division XXXX started from solid services PK/PD for Buffalo a

a In to support five staff, our the adding consulting quarter with new growth of of one for successful a the expectations employees attrition. recruiting four year, fiscal we net had

we the XX are Buffalo meet quarter We and client prior associated positioned our at While up quarter onboarding growth our demand from recruiting XX for to this expectations the and costs believe time employees impacted XX the division, in ended from up profitability full we year. division’s year. last with well and quarter, the fiscal

the Our delivered revenue RTP growth for XX% quarter. division that

DILIsym meet division for and projects request The quarter. from mentioned development team accelerated regulatory above at special two earlier, beyond going needs. deserves the benefited As this and were significant who I credit to this at customer’s

other fourth I to various of at and new As addition this full division client in areas mentioned in QSP for capacity in is support large call, projects. quarter disease our in collaborations operating several platforms consulting

effort request in a comparison required plus growth our modest to consolidated forward factor This drove year to in the additional was and quarter projects XX% effort. XX% the overall. relatively a The pull and tremendous ago revenue quarter key growth two hours

at the well we we significant growth cannot expect reinforcements growth. end, and two And who continue team done seek next additional starting month do have in these RTP. that Job Carolina. While are continued expect to to for the continued additional we recruited group North to levels,

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

John Kneisel

appreciate I right. it, All Shawn.

of to year million period. division, revenues revenues to were and to million. were the fiscal million up Buffalo’s XX% the up first or million X.X consolidated year up Lancaster's X.X or prior 'XX as ago. year XX% for X.X Our XX.X% By to X.X X.X said were Shawn revenues RTP a compared net quarter XX% in the [indiscernible]

X.X due XXX,XXX to XX.X% RTP. representing of X.X compared at revenues million prior XXX,XXX last XX.X% increased quarter the of profit fiscal year labor-related margin approximately have the contract million year. expenses to by same in quarter compared and a costs of DILIsym 'XX and direct testing Gross XX,XXX of to in for gross approximately the first increased or margin to year XX.X% Cost

of XX.X% of percentage revenues fiscal down first revenues in year to cost total of compared of of to revenues, total XX.X% the a revenues slightly quarter were 'XX. As

of first increase or in were X.X XX.X% expenses SG&A quarter X.X increases first to revenue or quarter the XXX,XXX this wages and the XX.X% primarily revenue grown year, in salary revenue million an has SG&A support of company 'XX. in or the of compared of expense of costs result million growth. The to the and XX.X% of was labor-related increase as approximately in headcount

$X recent to development up Research the labor, this Of million. non-management as insurance was were fees fees, increase total, of we XXX Board made professional just paid addition and capitalized. in all quarter is fiscal and XXX for cost expensed over expenses In now an was saw directors’ most year-over-year the approximately in members. and costs

expense in quarter. of 'XX fiscal flat to ago the the was The period. by our in quarter XX,XXX XXX year we portion compared prior first to first of the spend R&D the year of XXX Overall, in compared quarter 'XX increased year roughly

However, first R&D 'XX. quarter from the as to decreased of in a revenue, X% of X.X% percentage

quarter first XX.X% X.X Income compared quarter. of for to or from in ago was year operations year XXX,XXX million, the the up million the X.X

'XX effective of income XXX, rate an of for the in to of year. an prior was first Our quarter provision compared XXX,XXX, XX% XX.X% effective for taxes the rate

tax rate our XX% year. should range expect XX% be fiscal this to in We probably for the

XXX,XXX a X.X to share income was first Net basis, per recent quarter compared share the quarter per or compared net year On ago. prior diluted to in million million to X% in XX% $X.XX a most the year. income by the increased X.X

$X.XXX If EPS rounding, prior up year. the was take you from the off

the year EPS fully up diluted over just to was ago XX%. quarter. X.X compared percentage, was in up this X.X million quarter, EBITDA XX% a As

Turning seasonality from both of shows next bars. business. illustrating and slide. Seasonality the This basis historical purple the first seen slide fiscal our revenue a be the patterns quarterly on best to year the XXXX growth to using XXXX of the 'XX, quarter quarterly can

quarter quarter months. summer slowdown with third quarter fourth Our typically with is revenue in in our our the in the purchasing decrease coincides that strongest the clients

highest historically year this to our enough trend followed the quarter quarter approximate revenue. strong upward first for third were Our again of quarter revenues and 'XX,

represent The year. as income typically a and the which slide next fourth said in lightest of first the through track illustrates third increases quarters both year-over-year with and record sequentially consistent quarter by quarter, the the I

As largely see patterns can number and quarterly you held of income years. the have from a true for operations for quarterly revenues

third net fiscal year tends 'XX benefit On of pattern we a being see that the income deferred difference. presentation of skew isolated million similar in with the strongest. since without Slide second it highlighting impact XX, to tax We’ve the a the typically of the $X.X quarter quarter

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

expected Slide As I share the on upward, quarters. the first reported then And the typical XX, fiscal trends seasonal earnings between year. again, the $X.XX 'XX $X.XX, quarter moving true over to of first per turning seasonality quarter overall as diluted patterns EBITDA hold with mentioned earlier, with fiscal were

region were next the our The slide Americas, of or majority overall in the by our XX% in business North global Americas. where revenues illustrates the America revenue XX% and Western approximately Hemisphere with the

XX% Asia total and the each for quarter. Europe represents revenue

our acquisitions next quarterly slide Turning light increase position strength this to five continues years. outflows dividends for cash and the of a of of cash over balance, with the to cash our even which in slide, illustrates view last

present fiscal per 'XX. the of illustrate payment with share a $X.XX left, blue dividend at approximately through the the quarter. approximately At increased beginning consistent our to million XXXX fiscal the returning on first million in of cash year the far the dividend X Beginning our quarter X.X bottom to quarter to payout, through shareholders bars our 'XX, fiscal XXX,XXX Board thereby the quarterly

a represent again date $X.XX the February the cash payment dividend that the Board quarterly bars sheet. and continued growth operations Cash allowed for announced has cash from the X. dividend for the maintaining with have balance acquisitions. next will flows Continuing chart, through also be we healthy us invest acquisitions to excess used with red future Today,

XX nearly our cash over million any on total to through the than taking shareholders fiscal payments dividend borrowed million through more reinvestment while also five last years without consistent Our acquisitions four XX to returning debt.

is our November compared to cash XX% slide, X/XX/XX. year next balance XX.X the of end which The was fiscal up million at end our

Our flow generation today year a balance capital. stronger is a and cash allocation earnings clearly direct ago power, of of our than result sheet as increased prudent

I will the now back you, to turn call Shawn.

Shawn O’Connor

year you, fiscal delivered In great in a our our growth summary, strong accelerated for fiscal the the team John. building new Thank we meet this to start was XXXX. adding and we are to this demand. to on solutions remains Demand

outside our United I our further in progress accelerate further the look opportunities coming to have reporting we on profitable States addition, to growth. months. the In forward

turn it and take I'd that might any have. you questions over with And to that, like

Cameron Donahue

use like your please the and sure audio be pin. you a if one Thank to using enter second telephone, panel to control Please on raising the I ask you, while Once poll your the questions. for on unique hold hand question icon Shawn. again,

As the I’ll of just we go through poll questions, some the questions. for written

The cash products? management you first one is ex the increase explain of income interest of or increased the rates interest nature different can

Shawn O’Connor

you let I’ll take John, that one.

John Kneisel

We’ve has at there. for on would We’ve year. over uses this balances. at was holding last come the cash taken interest potential point held point. a this more help bit approach muted The and company I conservative little the investments a income that fairly up in

Cameron Donahue

John, any other comments?

John Kneisel

regard, this no. in None

Cameron Donahue

be Okay. will of Matthew Hewitt be live. question The next This Craig-Hallum. question from will

Matthew Hewitt

Congratulations.

Cameron Donahue

Hi, Matt.

live. are You

Matthew Hewitt

guys you Can am. me? I hear

Shawn O’Connor

Yes, Matt.

Matthew Hewitt

questions to for a Congratulations couple Okay. start year. the A me. strong on

essentially is all, accelerated the or maybe those Maybe consulting this there. done those Are of from walk need through QX said, came we this in customer you a how hey, came us little deals, pulling quarter? a about? forward First that explanation just that and

John Kneisel

came quarters the clients in existing for. capability, accelerated us multiple results are internal by we within projects and of had anticipated our and going to and plans each run the our were forward disclosure instance, limited requested that in but up organizations, that and development drug signed through driven of Both clients Sure. of efforts their we to the regulatory delivery terms

effort that team results time up in in stood efforts importance projects I going to into if and we’re deadlines doing planned Very for group so strong client in a importance November and push short there. speaks the to proud the the and we that we by of a the want FDA stepping October, the decision a, both recognizing client fulfill queries and provides in input do of off or and The in over client. and don't either in and the in forward working – up, interactions we timeframe that work of it support in very necessary that of forward own the And which of the that you of the think in what also internal situation up terms doubled brought in It been were it order months the terms critical face also was will, on. basically to of in multiple needs directions; the really making their and window and team. of delivered response the the work have nature

Matthew Hewitt

left perspective? to That’s you how facilities. this you. go a then of a a curious number much strong great. hiring, just year adding have Thank had the from people I’m And of do at quarter yet hiring you

Shawn O’Connor

Cognigen certainly an to endeavor. needs good brought there especially ongoing going this and there Buffalo, that an terms candidates, recruiting it’s being them quarter week, take group candidates are every to month, in of Matt, our of out expectations every everyday, to able advantage process. fit is every quarter, in. the continue consistently forward, of grow out our in If But we're opportunity

balancing of them But that's work that to And front backlog $X the not to hesitate division. we us. that candidates couple will keepers, projects over the needs. so a, we in of At of million as next we have time near-term we’re quarters, look capacity upon out of are against that over forth dependent hiring should same the pursue support in our not come our effort level in

up And get and too. work so to people the a bring it position client to in consultant we’re assign effort available a certainly given takes ramp times productive, where we’ve onboard them new got

Matthew Hewitt

Got consultants. a you. continue launch? Good search it. more and for I that you to anticipate for luck as RENAsym, the last you maybe question when guess how on do progressing the is Thank me product

Shawn O’Connor

there. is RENAsym

project opportunities as consulting seeing revenues, consulting that well licensing both space. opportunities as We’re in

it’s So now. off starting kick to

Matthew Hewitt

great. again to That’s start you congratulations strong and the year. on the Thank

Shawn O’Connor

Thanks, Matt.

Cameron Donahue

of written great the occur is quarter in the next The it quantify of the Halpern Howard from you Congratulations the XXXX? was from amount And second quarter? on the questions you. expected in accelerated two Thank revenue on to Can Taglich. quarter. clients question

Shawn O’Connor

as over projects were place mentioned Howard, multiple and the I flow before, in anticipated to quarters.

Don’t it these feel. would that drawing had of range So XX% would It a from have XX% of to client Without a is gives not two streams. we have up second the some good the want a that accelerations, get into specific in range, revenue little you disclosing XX% in to quarter. bit to that so been quarter.

replaced we still that second expectation. We’re out first quarter that with is quarter of into quarter, to of what our filled hence doesn’t the XX% our year it the in at the expectations the came in scrambling be can’t and longer-term the forward in have, and being second mean backlog XX%

Cameron Donahue

results Howard. Thank improving as while you, to Does investments as maintaining gross growth the validate question the drive XXXX services Shawn. and well margins also from when quarter first revenue follow-up prior A demanded? consulting your

Shawn O’Connor

investments aside and that and their XXXX and and in growth stepping question, initiated we up in and have our We’ve I accelerated as continued capability making start the moment. think first to both fruition the tweaks as investments revenue software has to consulting in for the more a sales believe by projects several initiatives understand in organization. changes that business side that scientists come the D&A the we’re driven been in the senior I development Yes. to on well If path but the results focusing marketing little side bit hiring quarter

have that seeing are results year continue regard. that great and with we in So the started

Cameron Donahue

two you, the other What Bayer ups And of significance Shawn. from collaboration your agreement AG? is Thank with Howard. follow

Shawn O’Connor

ADMET in say on One, in are of tool angles several being I Bayer, their I the of product machine in case that secondly, software capabilities Predictor collaboration terms embeds there. should this recognized collaboration their of don’t by with in us product think to And learning there’s mining, data and sort client. to the utility this further the in a very significant choice applications. our the discovery add industry,

You software one rates quarter hands clients’ our very stickiness software of the business about. indicative, indicative renewal comes see that for very XX% our at application stickiness the this this into fees and which of on in once gets ways it industry the the our of in is is XX% is

Cameron Donahue

Thank announced progressing? quarter in we Europe And you, how had we starting I employees efforts four that the know question your three fourth the in call. are is final based Shawn. there then are I or believe

have as growth opportunity that of forward? growth just as If upon an the far far expand you going we can one future as that for discussed as areas

Shawn O’Connor

the believe project and work year the the be those Sure. tremendous integrating of four consultants with. that remain is for attendance clients this Europe. down are is themselves near as there conference road terms is with in employee entered dividends No will as paying in a this the believe this of – well yet Europe We we but in and Obviously, community fiscal in engaging strongly relationship announce at I I term. build quarter. that to fifth in the terms opportunity us still both in to that supporting

Cameron Donahue

concludes Well, thank appears further and no this there’s It you everyone. call point. This conference questions at webinar. today’s

Web in you will available presentation, part Thank simulations-plus.com. missed quarter. on forward our be replay of site, you with If to speaking any the today’s you. a Look second

Shawn O’Connor

Thanks, everyone.

Simulations Plus (SLP) 9 Jan 202020 Q1 Earnings call transcript