• Total Revenue: Increased 18% to $70 million for fiscal year 2024.
• Organic Revenue Growth: 14% excluding the fourth quarter contribution from Pro-ficiency.
• Software Revenue: Grew 12% for the fiscal year, representing 59% of total revenue.
• Services Revenue: Increased 26% for the fiscal year, representing 41% of total revenue.
• Net Income: $10 million, representing 14% of revenue for the fiscal year.
• Diluted EPS: $0.49 for the fiscal year, exceeding the high end of guidance.
• Adjusted EBITDA: $20.3 million, representing 29% of revenue for the fiscal year.
• Gross Margin: 62% for the fiscal year.
• Cash and Investments: $20 million at year-end, with no debt.
• Fiscal 2025 Revenue Guidance: $90 million to $93 million, with year-over-year growth of 28% to 33%.
• Adjusted Diluted EPS Guidance for Fiscal 2025: $1.07 to $1.20.

• Warning! GuruFocus has detected 4 Warning Signs with SLP.

Release Date: October 23, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Simulations Plus Inc (NASDAQ:SLP) reported a strong revenue increase of 18% year-over-year, with organic growth at 14%, surpassing the previous year's growth rate.
• The company successfully integrated its largest acquisition, Pro-ficiency, which doubled its total addressable market to $8 billion, enhancing its market opportunities.
• The release of new software versions, such as Monolix Sweet 2024 and ADMET Predictor version 12, improved user experience and predictive accuracy, supporting drug discovery efforts.
• The company's services segment saw a significant revenue growth of 26% for the fiscal year, with strong performance in the CPP and QSP business units.
• Simulations Plus Inc (NASDAQ:SLP) maintained a high software customer renewal rate of 93% based on revenue, indicating strong customer retention and satisfaction.

Negative Points

• The spending environment for pharma and biotech remains constrained, impacting client budgets and potentially limiting growth opportunities.
• Software revenue growth was lower than expected in the fourth quarter, with a 6% decrease on an organic basis, partly due to challenges in the Asian market.
• The company's gross margin declined year-over-year, primarily due to reclassification of operating expenses and additional expenses from acquisitions.
• Pro-ficiency's contribution to fourth-quarter revenue was below expectations, affected by project timing delays and recognition issues.
• The company faces ongoing challenges with client source data delays, impacting the initiation of contracted projects in the PBPK business unit.

Q & A Highlights

Q: Can you provide an update on staffing and services, particularly regarding attrition rates and hiring plans for 2025? A: Shawn O'Connor, CEO: Our profitability in Q3 and Q4 was impacted by lower-than-expected attrition rates, which pressured margins. We've adjusted our recruiting plans and expect to align capacity with revenue streams in the first half of fiscal 2025. Improvement will be gradual, with margins expected to improve throughout the year, reflected in our 31% to 33% EBITDA margin guidance.

Q: How does Pro-ficiency's competitive position look, especially with more trials being run by CROs? A: Shawn O'Connor, CEO: Pro-ficiency supports pharma clients and their clinical trials alongside CROs. It offers unique training modules and a software platform that enhances clinical trial adherence. An uptick in clinical trials in 2025 would benefit Pro-ficiency, which operates in a market alongside and sometimes in competition with CROs.

Q: How much did Immunetrics and Pro-ficiency contribute to total sales in Q4, and what is the breakdown between software and services? A: Shawn O'Connor, CEO: Pro-ficiency contributed about $2.1 million to $2.2 million in Q4, slightly below expectations due to project timing and delays. Immunetrics' contribution is integrated with our operations, so a specific breakout isn't available. We expect Pro-ficiency to contribute $15 million to $18 million in 2025.

Q: Can you explain the EPS guidance for next year and the adjustments made? A: William Frederick, CFO: Our adjusted diluted EPS guidance now aligns with adjusted EBITDA adjustments, including depreciation, amortization, and stock compensation. This standardization simplifies comparisons with industry peers. We don't assume any M&A expenses in the guidance, and the adjustments primarily reflect increased intangible amortization from the Pro-ficiency acquisition.

Q: What are your expectations for organic growth in 2025, and how does the biotech market factor into this? A: Shawn O'Connor, CEO: Our guidance for 2025 is conservatively set at 10% to 15% organic growth, similar to last year. While we see positive indicators and discussions around client budgets, we remain cautious. The biotech market's recovery is hoped for but not assumed in our guidance.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.