Simulations Plus, Inc. Q4 FY2024 earnings call

• Strong 2024 Results: Total revenue increased 18% year-over-year and 14% organically. Full year diluted EPS of $0.49 exceeded guidance. - Product Upgrades: Major upgrades across PBPK, PK/PD, and drug discovery platforms, including GPX for GastroPlus, Monolix Sweet 2024, and ADMet Predictor version 12. - Acquisitions: Completed Immunetrics integration (57% growth in '24) and acquired Pro-ficiency (doubling TAM to $8B). - Pro-ficiency Integration: Formed business units, ongoing go-to-market strategies, and back-office integration for efficiencies. - Macro Environment: Pharma/biotech spending constrained, but some positive budget discussion for 2025 with cautious optimism.

Software Segment: Fiscal year '24 software revenue grew 12% (9% organic), with 6% growth in Q4 and -6% organic growth. GastroPlus was 49% of software revenue in Q4, 53% for the year; MonolixSuite was 17% in Q4, 20% for the year; ADMet Predictor was 18% in Q4, 18% for the year. Fourth quarter software revenue was impacted by renewal slippages and Asian market challenges. Services Segment: Fiscal year '24 services revenue grew 26% (21% organic), with 39% growth in Q4 (21% organic). CPP grew 19% for the year and 28% in Q4; USP grew 57% for the year and 32% in Q4; PBPK decreased 5% for the year and 6% in Q4; Medical Communications was $1.1M in Q4. Pro-ficiency's integration is tracking ahead of plan, with two business units formed: adaptive learning and insights, and Medical Communications.

• Fiscal 2025 organic growth expected 10%-15%. - Pro-ficiency acquisition expected to contribute $15M-$18M. - Total revenue between $90M-$93M, year-over-year growth 28%-33%. - Software mix 55%-60%. - Adjusted EBITDA margin 31%-33%. - Adjusted diluted EPS $1.07-$1.20. - First fiscal quarter historically lowest revenue due to seasonality, but remaining quarters expected to be more profitable.

• Client spending uncertainties and market environment fluctuations. - Renewal slippages and challenges in the Asian market. - Integration challenges of acquisitions, including impact on margins. - Therapeutic area concentration risks in some segments, though Pro-ficiency has a diversified portfolio.

Q: Update on staffing and services attrition?

A: Attrition impacted margins in back half of 2024; recruiting plans adjusted, expecting improvement in first half of 2025.

Q: Pro-ficiency's competitive moat?

A: Pro-ficiency's offering is unique in clinical trial training and software platform, favorable with clinical trial uptick in 2025.

Q: Contribution of Immunetrics and Pro-ficiency to Q4 sales?

A: Pro-ficiency contributed ~$2.1M-$2.2M in Q4, Immunetrics contribution not broken out for Q4.

Q: EPS guidance for 2025?

A: Adjusted diluted EPS $1.07-$1.20, based on consistent approach with adjusted EBITDA reconciliation.

Q: Software revenue growth and expectations?

A: Software revenue down 6% organically in Q4, impacted by renewal slippages and Asian market; 12% growth for year, 9% organic.

Q: Service gross margin and Pro-ficiency's impact?

A: Service margin impacted by re-class adjustments and Pro-ficiency's software and service mix; improving through 2025.

Q: Organic growth guidance for 2025?

A: Organic growth expected 10%-15% based on current market conditions, with potential to grow with improvement.

Q: GastroPlus renewal slip color?

A: Renewal slip due to timing issues, not nonrenewal, related to client consolidation and fiscal year timing.

Q: TAM doubling and acquisitions?

A: Pro-ficiency acquisition doubled TAM, acquisitions continue to be a part of strategy, with focus on integration of recent acquisition.

Q: Pricing and operating expenses?

A: Price increase historically ~5%, operating expenses investments paying off, expecting leverage in 2025 to reach historical profitability levels.