Earnings call transcript Q3 2023

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Operator

Greetings, and welcome to the Simulations Plus Third Quarter Fiscal 2023 Financial Results Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, John Wilfong from Financial Profiles. you. Thank Mr. begin. may you Wilfong,

John Wilfong

afternoon, everyone. fiscal Plus quarter the Welcome financial results to XXXX Simulations conference third Good call.

Officer With me Will Simulations Financial and Executive Chief Plus. of today are Frederick, Shawn our O'Connor, Officer, Chief

-- have serve will supplement we that a note we our presentation, as remarks. quarterly prepared today's updated to which earnings Please

we on call the for You presentation Relations at open our can access www.simulations-plus.com. will page Investor the After management's commentary, questions.

believe, and expect today may anticipate include statements uncertainties. reminder, Words best a risks like no -- our this information discussed to no there As of can actually will call. and take these are that refer forward-looking as be involve estimates that place. assurances There

factors future So Commission. company's these differ the Further and is quarterly results and from annual risk with significantly Exchange contained could and our the Securities reports in information actual statements. filed company's on the

With will O'Connor. that said, I Shawn? over the Shawn to call turn

Shawn O'Connor

and our us afternoon, joining thank Good for John. quarter you, third everyone, Thank you discuss XXXX to today results.

I off, our systems Immunetrics, simulation of and a is am with start or core quantitative rapidly and With can diseases. To the into pharmacology, areas expand therapeutic of acquisition expertise highly oncology, and QSP. This acquisition strength in well-respected company. to we team's Immunetrics, fast-growing autoimmune our modeling successful complementary pleased immunology

Plus. reputation excited leading growing therapeutic forces, welcome joining a strong and these very the rapidly in brings can to By a the we to technology, market Simulations are scientific proven in We Immunetrics team areas. we QSP that position establish incredible believe talent

to an development compelling market and and especially from is with use advancements achieve innovative expanding technology, conditions, time vital higher costly continues impactful market as ROIs grow, new fast-growing biosimulation value being current consuming need know, that the cases. you operate to drug delivers that The on in to we in proposition process. Moving driven the by and

environment the macroeconomic after is these challenges immune guidance XX% previous we revenue as this year our However, of challenging. not when 'XX. and 'XX past delivering growth I've industry anticipated calls, pressures XX% fiscal in is October current to to mentioned in revenue fiscal our We XX% provided growth

good During several will for we smaller large so, perform healthcare biotech, from positive eventually CRO software biotechs. price cautious the demonstrate current faster, services. which The ways see and we near-term bring the we has market investment did there so and more great small grow been stakes this pharmaceutical of and growth and to products continues note, On within services high of pharma biosimulation customers efficacious uptake increases remained reverse. to our non-renewals our and value of continue a to provided. Even more are conditions. we guidance third quarter, hesitancy ignore We to adoption throughout believe the despite too the think drugs market. The XXXX, are needs around the to and fiscal

revenue by software third In delivered increased in XX%, last ability our was this service XX%, up top-line the profitability We results context, quarter well revenue growth a line pass a margins expectations. in which gross with over primarily year-over-year, mix price driven X% segment, to favorable our we year. on higher as as while software of which were From strong increases. strong sales delivered margin standpoint, of reflected X%

our in in our per diluted $X.XX total or more results the third Despite Will guidance. this in revenue. quarter, share. per was of we million While million the of related or carefully Adjusted M&A acquisition share, is we $X detail. of line representing delivered expenses million, EBITDA managing cover Immunetrics to incurred $X.X a $X.X quarter with third XX% will quarter expenses net priority, top this, income $X.XX

we're Overall, software a segment to third take pleased with moments I'll our how discuss during performance. few our Now quarter. performed the

XX% previously spending quarter, said, our renewals and XX revenue and As funding upsell have upsells addition and benefiting grew some biotech small from renewal good rates customers. the price impacted software opportunities. That large the mentioned, uptake our of and in of new increases, pharma constraints challenges strong

renewal contracts growth as which reaped robust benefits The for more to top-line we renewal and year, MonolixSuite, this Largely harmonization, of due minimize of year-over-year. greater grew to the software we saw goal Our some revenues create predictability smooth which is beginning from at is harmonization out our initiative, XX% this proceeding seasonality. and implemented planned. favorable initiative renewal to

dislocate categories. run, see expect short revenues from to we product can in initiative, temporarily some certain the in it While ongoing benefits harmonization our renewal

X% For we example, cycle harmonization, dislocated expect these revenues renewal timing recapture -- to of contracts. the harmonization quarter's and revenues. GastroPlus we the this capture through declined this year-over-year to due Once

data the QX, large data revenue provided -- In customers. large During retrain ionization solution growth in machine of to accuracy by Predictor, successful software an AI-powered upsells models companies constraints to unprecedented also X% measurements, agrochemical library several ADMET pKa expanded and ADMET -- has and saw predict XX,XXX our quarter, over of of customer the six their predictions. important gives our which milestone with This with models integration sorry. three to industry-leading I'm experimental constants, new pharmaceutical our learning we significantly our achieved

from able expected ADMET that the major all Predictor to in be such, in new is this quarter. advancement fourth As release Version users XX will the benefit

are go/no-go include oncology pharmacometrics, all will across focused endpoints. decision for support example synergies acquisitions. driving collaborative biomarker that to clients making based highlights platform this like develop the work our late PKPD framework and clinical very of on compounds They predict linking on software early team. our data a We're software to notable between our modeling quantitatively model Other working from services together significant experts

strong and and market the here. international products. under performer was that with from massive China a growth revenue This growth, front, anticipate On GastroPlus is Predictor continued penetrated XX% we is a mostly ADMET

XX XXX $XX than to time this million and on Services to year-over-year, our representing X% Revenues revenues. quarter, XX% total declined services performed our Moving year. services last segment. X% the during team more grew of backlog projects

revenues to gross this novel disease. contributed pharmacometric therapy expanding X%, material margin XX% modeling shift Furthermore, PKPD services services our the childhood to grew PKPD to and represented being investigated support highly-anticipated of and a rare consultants to treat a quarter our which time reflecting higher contracts, performed projects margin.

this meaningful In experts attaining drug in of meeting approval subsequently an team granted involved. are victories in personally business, to Our for accelerated preparing assisted an FDA. these resulted sponsor advisory by committee the everyone that our

would project for trial pulmonary outcomes predictive an X% In firm quarter, considerations modeling revenues business warrant This reach great the note, was market space. by predict efficacy-related was the the this up previously the conducted that analytics pharmacology of and primarily the to focused see service a financial in example and is project to how discussed. applications to clinical outside industries use beginning because we QSP/QST, were use a conditions space to outcomes This services informed best our systems interesting predicting decisions. to due firm. others. and opportunity simulation are that use for on of of solid the quantitative to some a goal investment future Of in the We modeling pharma expand

dollar drug-induced systems and early for the also abandon evaluating compound company's company capable We in multimillion development quantitative of toxicology the injury. project helped decision on candidate and pharma to issues is software a safety to a avoid a inform assignment future liver DILIsym drug platform predicting an explaining This conducted the candidate. DILIsym a liver clinical identified and safety failure with liver trials. focused

clients. in you relationships long a As outcomes way like predictive with strengthening imagine, can our this go

in the X% increased quarter. revenues PBPK

science We of have made FDA pathways. substantial grants, the progress delivered on and drugs non-oral through advanced which modeling the five simulation funded mechanistic

seven pulmonary, and we PBPK injectable Additionally, ocular, companies intraoral, dermal and quarter, in long-acting drug consulting provided pharmaceutical products. of projects generic which support and the design development the in on assisted

our revenues. from over believe goal program garnered traction We Consult the training interest of launch that Coach in-house and program our incremental The program client software provides licensing clients early learning to Coach and by access of innovative 'XX expanding cutting-edge and with in opportunities. our our software goal with expertise gain valuable adoption clients. will Consult in and end significant has the driving -- time meaningful This

and results top versus this service of our product a and simulation successfully of developed model and dissolution agency to formulation A to global criteria for the waiver GastroPlus submitted the mechanistic the are a strategy team growth was model-informed development of acceptance to support applied PBPK driving new consulting The bioequivalents. of drug define company. regulatory these growing a PBPK pharmaceutical in acceptance support costly experts the trials segment. commercial to a XX regulatory Additionally, drug delivered of applications company's analysis

work. with with of one the significant quarter third our and to We deliver clients exceptional some teams have made our in and another collaborating I'm very proud strides

create execute inorganic will our to we strategy leverage growth, operating forward, Going continue combines long-term value to that shareholders. our and for organic growth

Our smoothing renewal our timing providing contract and seasonality harmonization strategy impacts. out to benefits is significant renewal

As of we this year should we anticipated, conclude complete fiscal as seasonality 'XX. shift

Will turn to financial With that, the I'll in to review quarter results our call detail. third

Will Frederick

Shawn. you, Thank

total up quarter revenue and with X%, XX% software We X%. increasing with solid had another services up

quarter. of XX% represented Software revenue during the

growing total X% For nine and X%, X%. months, the revenue a increase increased in software of services comprised

of the Software during year. XX% revenue represented

quarter segment. services the margins declined slightly reflecting for margin XX%, our in to Gross softer

XX%, the work with came from margin lower and was on nine XX% due XX%. and gross margin XX%, margins at services margin year Software down gross software was Gross primarily margin in flat XX% margin last months services to for at at slightly XX% to at grants.

was the software Now represented XX% other quarter. was and MonolixSuite software Predictor X%. XX%, turning revenue, XX% to GastroPlus software for was ADMET

ADMET XX% and GastroPlus represented XX%, was For nine months, of the was software MonolixSuite other Predictor revenue, was software XX% X%.

prices quarter, accounts. Average customer reflect program, XX% to biotech renewal offset of and XX% on some with ongoing smaller in Generally, These our as slightly based business. was with non-renewals by During increases harmonization our customer to our impact per software smaller the non-renewals revenue fees the the the rates renewal mainly due rates. reflected customer seasonality customers. offset revenue positive on $XX,XXX, were higher rate price and higher fee-based in increased based

to revenue on harmonization through with to expect expectations We prior program. comparisons seasonal fluctuate periods new QX quarterly based our our

year. XX% For customer the renewal rate was and revenue last per customer increased fiscal on XX% $XXX,XXX, based fees accounts. nine on Average our from up based $XXX,XXX to months,

from X% revenue PBPK other revenue Shifting The services XX% to services, X% and PKPD from breakdown months from XX% provide was regulatory and services was services. for the requirements. help services breakdown consist the services The services, of quality nine from for them from services from QSP/QST XX% from and XX% customers services, QSP/QST business. services, from our the Other quarter services. global we primarily regulatory services services, compliance XX% PKPD meet XX% other PBPK to

comprehensive help of variety succeed. provide a services training with to also simulation modeling options and customers learning We focused on our

backlog and year primarily QSP/QST worked during by services million Total on The to decreased the million. to X% increased was projects compared last $XX quarter year decrease business. backlog services last approximately the $X to from due

adjustments. an the costs in $X.X Turning compensation to to for version an Total $X.X R&D saw to $X.X income million personnel increased due compared expenses consolidated compared increase last the of and million primarily million quarter. $X.X market R&D costs our was year. GastroPlus newest to increase GPX, costs total $X.X in from million, of R&D $X.X in the version statement to quarter million or from the development compared XX, were million. to R&D capitalized and We

demand business million million increase adjustments This in growing driven to or compared $X.X attract area. in was retain $X.X $X.X XX% total this by increased XX% meet talent services expense market increase million for compensation to and to headcount with an year. our along to by our last SG&A

Additionally, and acquisition merger costs. we $X.X million incurred in

investment Interest was was $X.X other Income million compared margin operating quarter, an from and million to XX% expense the operations $X.X $X.X due returns year. XX% balance. last million on from interest to our rates this year last income to versus quarter decreased higher in while XX% of portfolio

tax income was XX% $X.X effective this expense to last quarter quarter, XX% million of compared $X.X million, tax compared year. reflecting the For to an rate

to M&A $X.XX. share. remained Net were from the income revenue impact decreased per X% at Expenses quarter million. exchange earnings for during was earnings share diluted currency the $X.X per foreign quarter and The $X.XX in related about to diluted $X million

EBITDA to adjusted EBITDA adjusted of year. Adjusted and was last XX% million EBITDA margin $X.X $X.X million was or compared margin XX%

adjusted our a income of net We calculate operating by other release back to M&A to metric compensation provide in expenses non-GAAP and we expenses GAAP metric stock-based our relevant reminder, non-cash a or on As adding earnings and reconciliation to expenses. EBITDA this related website.

to months. income statement consolidated for Turning our the nine

XXXX of RX million last the both R&D and costs million development was year. the $X.X were version million of to $X.X $X.X in expenses million to was Our market year. to of Capitalized to or compared GPX, $X.X or $X newest MonolixSuite revenue million total of R&D compensation along compared with personnel costs XX% revenue $X.X XX% R&D due million The from an primarily compared version year. increase were increase last adjustments. last

increased nine employee XX% or million $XX.X the This SG&A and or million by a of due revenue last of months, XX% For year. labor-related million increase was XX% expense in primarily $XX.X to compared increase to to expenses. revenue $X.X

costs Additionally, we million. acquisition and $X.X of merger incurred

decreased to year, from $X.X XX% Income an $X to year. interest year tax million, reflecting rates. year. effective $X.X interest by driven XX% year, million million operating to of similar last the last compared XX% operations margin expense while income was to Interest Income rate of amount was $X.X increase tax of last versus and million last to this due million, compared income XX% a other was nominal $X.X

effective range of in to to rate We expect fiscal the the XX%. our be for XX% tax year

decreased share related $X.XX revenue in income diluted from nine and earnings M&A to during earnings were Net foreign to year $X.X $X.XX. to decreased share. months for diluted the was impact $X.X million the XX% million. per currency Expenses about per exchange The

million compared XX% EBITDA Adjusted margin adjusted EBITDA to was EBITDA XX% margin was or of $XX.X and $XX.X adjusted last million year.

Morgan We repurchased to the Stanley cost for average million sheet. our retired flow, treated as The shares quarter of the quarter and ended addition our per driven with concluded year ASR The short-term turning from an cash less repurchase. $XX.XX. of by in share and payments investments. $XXX.X free with million shares. We were of million Now the received accelerated XXX,XXX and in million during the total change a in at $X.X was $XX share authorized last and balance cash primarily dividend unissued shares $XX.X

amount to Immunetrics. acquired hold-back a through the $XX.X the million future the agreed earlier, aggregate earnout of recently the two million performance plus consideration XX, the discussed of terms up closing to the Immunetrics Immunetrics of we Shawn under shareholders revenue million, agreement, at including of pay December As And we of cash on in XXXX. in payments $X $X.X based amount

seek be and continue partnerships. opportunities We well strong cash have and strategic capitalized, free to flow for investments, acquisitions,

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

Shawn O'Connor

Thank you, Will.

delivered solid team a environment. results challenging quarter Our this despite operating

result, cash We strong are have been profitable executing growth, as our generating on returns delivering and, our for strategic a shareholders. and priorities

stated XXXX, XX% growth between $XX.X in well goals fiscal revenue to which million; of software remain range include: positioned XX%; we XX% XX%; such, We As of to including incurred quarter. between have year-over-year diluted the $X.XX expense not impact in mix to meet total XX% from the our services Through revenue for to third XX%; and mix and to revenue $XX.X an revenue activity. of anticipate $X.XX. announced $X.XX EPS the end M&A expenses October range of M&A we quarter, M&A fourth this the additional of $X.XX in any million

its historical XX% is acquisition to the will positive, but Immunetrics accretive in close limited. operating overall contribution guidance. to and be Immunetrics' upon growth seasonality, This revenue the QX contemplated quarter revenue timing contribution will the earnings. revenue results our be Immunetrics' acquisition, of Regarding XX% based fourth

We conjunction will fiscal for guidance our in Immunetrics provide 'XX. the fiscal with business 'XX year our at for the year end entire of guidance

improving and our innovative treatment conclusion, our transforming using development for customers is drug to patient options R&D, optimizing In by solutions ability value create lives.

to see reduce we across industry. As of a continue costs result, time greater the our to adoption save solutions and

Thank call your the session. that, to turn operator over and question-and-answer for With time you I'll the attention. for the

Operator

with the be your comes Instructions] at Please [Operator question. gentlemen, question-and-answer will time, from with a Thank Matt you. Craig-Hallum. line of Ladies first Our proceed Hewitt conducting and this question we session.

Matt Hewitt

Thank regarding the taking afternoon. all, first you that the the an acquisition, acquisition Maybe something years. couple questions. I congratulations. Immunetrics know of up, for it's of close, Good to you've first trying for last is been

here some in So I'm expands you it's you we see particularly quickly that something a get do even But ready? get up look bit the it's integrated it take cross-selling could opportunities fourth to across curious, you teams one the the kind think markets, oncology And nice going see see obviously, little just Is we line. to opportunity, into that Or everything quarter? to do able being and get the you to area. how and closed? goal this anticipate get of some sales in at as new longer

Shawn O'Connor

Yes, operational from a Matt. the some on part in commenced development anticipating discussions, business They've closed. one. Thanks somewhat on finally to point line towards is revenue process a is view, as of across for an know has that them distracted outlook the board, deal everyone ago business, pipeline here. time And revenue the from the they at into come during we commenced of anticipation the transaction pleasure the of an complement. full driving I nicely. point have a integration been Great expectation. get teams Interaction quite and their acquisition internal acquisition speed closing very between with while Integration are acquisition now closing. and of view, moving focused the finish of

that including models, already will derived their say from, are be I portfolio built. opportunities, Cross-selling of would which

day beyond should tailoring cycles that happen opportunities, that are before place. in new clients sales bring That are quite in the space. for cycles itself these the in them development model see as or models are, saw generation, they require business areas, what XX lead Sales some onboard, new quickly. cross-selling, being is this to strategic opportunity they therapeutic them not already key but areas So we these effort may leading

as that see some take to So place, closing fiscal deal year the it us to for but project enter into of will certainly take scoping accrue generation could lead we 'XX. time to we to

the the can table, slim comes business not forward. of the in to CEO, to board book development that marketplace development in area. we our company, have they knock team can Much opportunities of them on the relatively that in with generate with their close like quickly. But and continues clients. certainly we we assist business that that Steve acquisition the just a has that some which the those the to here the but business, our previous the forward going bring Lixoft, leads small on, of Looking resources that terms pretty coverage marketplace business key relationships team and doors and we forward -- the going expand he of Chang,

Matt Hewitt

there's here helpful. maybe landscape, here you if read separate then, in to anything kind maybe Thank calendar of there see to shorter large, the little or over dig will, there's is you longer in of some customers a issues these something Or out get some kind customer maybe of those you line a duration? pricing And into we nuance bit of remainder Is of bit question there do how anticipate the playing beyond regarding it very large little get maybe with dynamics that's goal maybe you. customers? the up that funding like year? taking signed. Small sounds more anything really whether a across and that the a And dynamic? Is the a those holding maybe is changes bit That's versus little new a some if you. that just could competitive the to deeper. of Thank contracts

Shawn O'Connor

the eight basically quarters since talked occurred biotech, certainly quarters, for here. in cliff mean, that which for segments Small maybe funding Look, marketplace the two we're we've about talking about Yes. segment. of I multiple

people in the getting be of gone has as not And funding it there upon such and uptick of years been disruption to to now. where ago. here segment opportunities eight yourself, little it term seems biotech back the terms has ago, thereof, but certainly two that of long Based from input so quarters an was I'm bit to market

the So business last see in for that usual hopefully, it we quarters. been on future. eight has there as upswing the But as the

fiscal year in their mean, fiscal necessarily, but We more that year terms of and budgetary of -- well, funding causing cycle prudent them October, of coming into as not November we their cautious last their to began budgets as calendar Renewal their in sort be that's that quarter macroeconomic year year, saw Pharma in for as at Large time market. -- we the that a point 'XX. year. reasons, different conditions played of the of it's changed saw at don't I to the be of slow of hence is year, that of our would I here third beginning reduced and anticipated. midpoint out think calendar the guidance our challenging fiscal

ground and will whether to will in be see next the long year the opportunity think how medium I or be that change for November budgets and fallout stalking will see following October those as prepare start see them dynamic near, their we the next term. to the

biosimulation I into pace, has impact to of is strong. the the been we'd more to very a by run, I'm this couple proud a know continue results the very in this expectations grow. It's and is robust, they not industry environment to our see year. one the delivered future a bit team. and We've to that operating more today, the wayside, in the it at of go and albeit we'll like three a to are And in lesser They've are environment challenging grow for growing or for the And opportunities long while in going here the little the as quarters we anticipated. -- them

Matt Hewitt

Thank That's helpful. very Thanks. you.

Shawn O'Connor

Take care, Matt.

Operator

Our with proceed of Larsen next question. the Please comes question BTIG. line David from with your

David Larsen

little good Based Can you bit channel a hearing Hi. more Obviously, lot checks, could about for a Congratulations there's of the opportunity on Simulations area oncology a maybe good our that Plus. investment talk the we're on be space. oncology into quarter. Immunetrics?

Immunetrics focuses share maybe that can that thoughts or much of be Any would or color any they of different a Just on many around helpful. brings you annually how color like, customers around, there around the very areas Immunetrics or how have? lot. sort anything like any Thanks oncology more revenue

Shawn O'Connor

of in long name, immunology, for real its it's a it's -- strength, based is focused Immunetrics upon oncology areas Yes, tenure. David. been its and Sure, and just

of large flow that models models are many well mechanistic data with engagement QSP these built years these over client so tuned models. and they've And

the fast development QSP build] growing (ph) QSP is in space clients in the areas by most industry. of acquisition acquisition models, Oncology are And [and in relevant a this where area or bill focus entity, ongoing drug oncology a typically certainly fits clients just an And not single in it's of characteristic. drug programs. typically candidate. that and multiple It's -- not have a a the the

And of the an which a over that environment their mechanistic development time so period can the most a that is investment makes longer-term in large in program model guide sense.

So it is brings what longer-term in that model is to attractive on quickly. our as The part of to of us to opposed get the space. internally acquisition there those more the quickly build Immunetrics very

the payments In quarter. pointed their terms projection accretive that the improve 'XX bottom-line targets the earnout in the efficiencies calendar their payments, mean, go earnout achieve and of the family. revenue calendar the best with of we which size, characteristics, probably I should there'll move first, $X the year the in their will in million revenue profitability entity, it's terms their Plus for they within earnout in is year let's million year profile Most forward, as revenue it's immediately, top-line, -- fiscal 'XX. importantly, Simulations on Pleased from the be company be of And their which the $X the to fourth some yeah, get XX they to month approximately payments. -- earnout for called of 'XX

of been all past paid our acquisitions, but maybe, acquisitions. to happily full the our have in little earnouts A aggressive

have August targets. the working It's necessarily key little with of quarter the company to the tough with close them those for the be the to an the we'll achieve they're part milestone past. year-end, them of wasn't a into to going here, adjust calendar transaction quarter. They're with to a So fact which in public that short

-- to transition revenue positioned fiscal 'XX. get So We'll give fourth better be a into and year They guidance it will we'll accretive. make contribute and fiscal the XX months end be here longer-term for year our quarter. when guidance the to to the of in for the will we

David Larsen

Thanks. XQ you great. software XQ that relative very terms especially there maybe sorry, seems XX% shows -- very fiscal then, frankly. good think, were about Okay, And XX uptick, upsells, of GastroPlus talk year-over-year I Can -- helpful. growth, quite I That's just very 'XX. I'm to good in up, -- think, XX% me a of to a bit around

the of harmonization had comp for a much You a period. that obviously And in good GastroPlus, from year-ago year-ago sort quarter growth renewal came how process? tough quarter of then, very And along year? the in Thanks. harmonization Are that fiscal XX% end like how way by the of renewal far will are the you it of And in through it? you be through you the process? the

Shawn O'Connor

from lot benefit of dislocating they quarter a to and little fourth GastroPlus, we will Yes, had quarter. renewed, when quarter, up in is quarter. fourth unlike the of third from fair out quarter, process more question. be second fourth on quarter here focal where from third they the more so that of teed the saw quarter growth the harmonization and the with the quarter bit dates by we forward with into the saw seeing contrast XX%-plus and Monolix GastroPlus licenses side third that a in for their harmonization license great those benefited dislocate renewals first benefit, a of that the Monolix That's see of

So from some good but performance, statistics customers, from the price the has a harmonization perspective, quarter. perspective, increase new GastroPlus scenario, a cross-selling the terms into of upsell revenue fourth in from pretty pushed

in in and But new is other I harmonization. product market -- GastroPlus some the quarter we logos -- logos said, upsells a is mean, lines? third the [indiscernible] would to primary larger growing more and this some like was seen that The again, have year. impact Sure. being little lesser

David Larsen

I XQ would be question. last my pretty especially the side. just software then Is And great. revenue Okay, sounds it visibility fiscal that correct? like high, on guess into

Shawn O'Connor

dates process, book in licenses predictability -- harmonization, or around. plus renewal. renewal been a moved we've the in of We've software renewal revenue good of We've -- terms which have the view Yes. quarter pretty our of our XX% has from good business. license minus to those had always given good any comes

as disruptive, can pretty the to business. good which backlog the but the fourth start So getting quarter. expectations The support business, the in summer eyesight good service months, into software coming to be of terms in we with quarter

pretty is visibility good this quarter year. Our fourth

David Larsen

Okay. And then the just past flow that quarters? a quick best Will, of one cash was for see seven did Will. this the quarter I

Will Frederick

cash mentioned pretty But free mean, the out dividends flow free continue flow I for standpoint, cash from. year. paying we we the cash have a that we're flow to From good

David Larsen

queue. hop appreciate it. I the Thanks. Okay. I'll in back

Will Frederick

Thanks.

Operator

Yuan Zhi question comes from with Riley. your Our question. the of line next with B. proceed Please

Yuan Zhi

the congrats right. quarter, Will, question. on Shawn for and taking thank and our All you

one from Are the Does provide more more sense time-sensitive? million those mean Just Thank Can backlog you. us. $XX that to make consultants or on hire sooner? to clarity you it complete it does project backlog?

Shawn O'Connor

you. one to expected exceeds pretty months' most comes And that deliverable Thank amount good. the much is There timeframe is There's really sure. backlog transition these of of the for terms is are still example, upfront of contracting because is of month made here, that term. not time those within that amount. high the post-COVID three reduction contracts performance. in window that Backlog is eliminated XX metric the is backlog cancellation, that And six opposed -- XX in business is there much it is quality months. in shorter and through discussion large the really this initial that that backlog the in a drug factor. of contracting of stronger. content in stages transition often a benefit We've Yeah, to pieces as multiple and that The a

quarter term, out a of required headcount next expectation of to we expectation that closely, addressable prepare we add something our good had I little year to that consultants quarter. seven have needs. terms backlog, to on, on terms We've sort In we we've to a the that eight certainly near of to our deliver on hand got look our to fourth always now. this short-term needs beyond in process bringing bit horizon, short-term it's the in in think, to to ought it's time the have of year capacity right deliver of the sort continuous for of to managing a in manage be And but the as team. capacity It's new or capacity

Yuan Zhi

insight. Thank Thanks it. Got for you. the

Shawn O'Connor

Take care.

Operator

Our next proceed Please Oppenheimer. line with from question. Brisebois your of Francois comes the question with

Francois Brisebois

question. thanks the for Hi,

to clear year it, include acquisition, just be in you guidance just the correct? clear 'XX but the So there, fiscal guidance does Immunetrics mentioned, to the think on be I

Shawn O'Connor

stub Their us in is keep XX% fourth into quarter Yes. the XX% contribution window to that range. but be to of still positive, the it'll going

Francois Brisebois

And then you And software completely at the with guys, business mix of of does if of discussed software services you integrated have the in on you that its Okay. Immunetrics change that of once kind services? terms maybe and all own? to -- mix and

Shawn O'Connor

in-house Immunetrics XX%, the asking service-based And and QSP revenues, client using our similar projects for of Yes, who revenue us it's much the business. are to perform them. it brings business lifting do model and that heavy and client business, very like is generated which the licensing a QSP delivers XX% existing XX/XX the and it; those split: uses maybe our of existing very models, between

in where change change? during Quite the we'll that time. it a essentially frankly, in fees don't of model license more that them been learn They've change But think I to are of will regard. service don't with from client they've giving something there's mix bit it'll projects the project the little XX/XX. Maybe that Will window some engagements. technology established successful I arrangements think dramatically.

Francois Brisebois

lastly one then And here. Great. last just --

business I there? in XX% In the terms color color about your from And percentage pharma the versus headwinds, relation the stickiness? a biotech? of of business that do you had any stickiness. the Any disclose think added of funding of all to talked the we kind percentage, your comes just percentage on small

Shawn O'Connor

I you we the where it's you Frank. do is bit world mean, biotech. line, where the Amgens a small small biotech, draw do where out mean, I and and just stumble the draw identify Genentechs of line and Yes, the weed

funding as but that issues a I it to these exist out of label players know do business, those So large there. overall maybe that XX% represents that aren't again biotech our subject includes

in something total of it's So the less much segment. that than terms

of the the the one's mid-XX%s. that of we've ones for number renewal churn from of the in end, the mid-XX%s, XX% increases. the between reflective shortfalls the churn down with by we more that down means in there of on account the high of any In mid-XX%-s, That's renewal which, that come sort that see not But steady, overcome And maybe fee incremental the held to typically fee biotechs you and accounts in just price not differential basis. in yeah, can terms biotechs, smaller the a these new are one certainly terms see rate renewal of the redoing. smallest rates, that's as most pretty are the in

Francois Brisebois

Thank you.

Shawn O'Connor

Frank. good, Very

Operator

Mr. no back queue. the are There to in for hand I'd questions to O'Connor like further closing remarks. call

Shawn O'Connor

earnings everyone to care, look you Take thank speaking and our joining call, due fourth quarter for here in in us again here quarter racing on third Well, everyone. time October. through and the forward

Operator

and Ladies your conclude does today's Thank teleconference. this participation. you gentlemen, for

disconnect lines wonderful at your and a have may time, You this day.

Simulations Plus (SLP) 6 Jul 232023 Q3 Earnings call transcript