Simulations Plus, Inc. SLP reported second-quarter fiscal 2025 adjusted earnings of 31 cents per share, which fell 3% year over year. However, the figure surpassed the Zacks Consensus Estimate of 25 cents per share.

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Quarterly revenues jumped 23% year over year to $22.4 million, driven by increasing momentum across its software and services business segments. The growing uptake of its flagship solutions, including GastroPlus, MonolixSuite and ADMET Predictor, fueled the top-line expansion. The Adaptive Learning & Insights (“ALI”) and Medical Communications (“MC”) business units, acquired through the Pro-ficiency buyout in June 2024, contributed $3.3 million in the fiscal second quarter.

The top line surpassed the Zacks Consensus Estimate by 3.1%. SLP’s organic revenue growth during the quarter was 5%.

However, the broader biopharma industry continues to experience cost pressure and funding challenges, adversely impacting investment in R&D and software adoption.

SLP’s Quarter in Details

Fiscal second-quarter revenues from Software (60% of total quarterly revenues) rose 16% year over year to $13.5 million, driven by new customer wins and increasing sales with existing customers of GastroPlus, MonolixSuite and ADMET Predictor offerings. GastroPlus, MonolixSuite, ADMET Predictor, Pro-ficiency and Others contributed 46%, 23%, 17%, 7% and 7%, respectively, to total software revenues. SLP added 10 new customers and had seven upsells in the fiscal second quarter for ADMETPredictor.

The renewal rate for commercial customers was 90% (based upon accounts) and 84% (based on fees) compared with 94% and 85% in the prior-year quarter, respectively.

Simulations Plus, Inc. Price, Consensus and EPS Surprise

Simulations Plus, Inc. price-consensus-eps-surprise-chart | Simulations Plus, Inc. Quote

Services’ revenues (40%) improved 34% to $8.9 million but remained flat year over year on an organic basis. This segment was driven by strong results in the Clinical Pharmacology & Pharmacometrics (CPP) and MC business units. CPP services revenue grew 19%, while MC services brought in $2.3 million.

However, sales of Physiologically Based Pharmacokinetics and Quantitative Systems Pharmacology saw declines of 23% and 7% year over year, respectively.

The total value of services projects handled during the quarter was $203 million. Healthy bookings in both the CPP and MC units contributed to a 13% year-over-year increase in the company's backlog, which was $20.4 million at the end of the reported quarter.

SLP’s Operating Details

The gross margin in the quarter under review was 59% compared with 72% in the prior-year quarter. The Software segment’s gross margin was 81% compared with 88% a year ago. Services’ gross margin was 25%, down from 44%.

The drop in total gross margin was mainly due to a $4.2 million rise in the cost of revenues. Software costs increased by $1.2 million, including $0.8 million from Pro-ficiency amortization and $0.4 million from higher capitalized software amortization. Services cost of revenues rose by $3 million, mainly due to higher costs from the acquired MC unit and moving some expenses from G&A to cost of revenues after last year’s reorganization.

Total operating expenses, as a percentage of revenues, were 46% compared with 48% a year ago.

Income from operations was $2.7 million compared with $4.4 million a year ago. Adjusted Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) margin was 29%, a decrease from 39% in the prior-year quarter.

SLP’s Balance Sheet

As of Feb. 28, 2025, cash and short-term investments were $21.4 million compared with $18.2 million as of Nov. 30, 2024.

SLP Reiterates Fiscal 2025 Guidance

SLP expects strong momentum in the second half of fiscal 2025.

Simulations Plus expects revenues to be between $90 million and $93 million. This indicates an increase of 28-33% from fiscal 2024 revenues. In addition, the Pro-ficiency acquisition is expected to contribute an additional $15-$18 million to revenues.

The company expects the Software segment mix to be 55-60% of total revenues. SLP estimates adjusted earnings per share to be between $1.07 and $1.20 and adjusted EBITDA margin between 31% and 33%.

SLP’s Zacks Rank

Currently, Simulations Plus carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Recent Performance of Other Companies in Tech Space

BlackBerry Limited BB reported the fourth quarter of fiscal 2025 non-GAAP earnings per share (EPS) of 3 cents. The figure was better than the company’s estimate of a loss of 1 cent to EPS of 1 cent. In the year-ago quarter, it reported a non-GAAP EPS of 3 cents. The Zacks Consensus Estimate was pegged at 2 cents per share.

BB’s shares have gained 11.3% in the past year.

Ciena Corporation CIEN reported first-quarter fiscal 2025 (ended Feb. 1) adjusted EPS of 64 cents, which surpassed the Zacks Consensus Estimate of 39 cents. However, the bottom line declined 3% year over year.

Shares of CIEN have soared 18% in the past year.

Descartes Systems DSGX reported fourth-quarter fiscal 2025 non-GAAP EPS of 43 cents, which met the Zacks Consensus Estimate. The bottom line expanded 16% year over year and 2% sequentially.

Shares of DSGX have gained 12.3% in the past year. 

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