SLP stock rose in after-hours trading on January 9, 2020, after the company reported strong financial results.
Simulations Plus, Inc. (Nasdaq: SLP), the leading provider of modeling and simulation solutions for the pharmaceutical, biotechnology, chemicals, and consumer goods industries, today reported financial results for its first quarter of fiscal year 2020, the period ended November 30, 2019 (1QFY20).
1QFY20 highlights compared with 1QFY19:
- Net revenues increased 24.8%, or $1.9 million, to $9.4 million from $7.5 million
- Gross profit increased 26.7%, or $1.4 million, to $6.8 million from $5.3 million
- Gross profit as a percentage of revenues increased to 71.9% from 70.8%
- SG&A was $3.5 million, an increase of 29.2%, or $794,000, from $2.7 million
- SG&A as a percentage of revenues increased to 37.4% from 36.1%
- R&D expense decreased slightly to $526,000 from $530,000
- Income before taxes increased to $2.7 million from $2.0 million
- Net income increased $522,000, or 34.0%, to $2.1 million from $1.5 million
- Diluted earnings per share increased $0.02 to $0.11 from $0.09 per share
Shawn O’Connor, chief executive officer of Simulations Plus, said: “This was a very strong start to our fiscal year thereby demonstrating the effects of our investments in sales and marketing and scientific consulting resources to accelerate our revenue growth above historical levels. The quarter also benefitted from our consulting team’s response to accelerated project delivery requests from two clients in support of critical development and regulatory strategies. This underscores the value we provide our customers and the dedication of our scientists to support our client’s success. We continue to expect full-year growth in the 15-20% range.”
John Kneisel, chief financial officer of Simulations Plus, added: “Simulations Plus continues to generate strong revenue growth which produced an increase in fully diluted EPS of $0.02. Net cash provided by operations remains solid at $2.6 million this quarter. During the quarter, we adopted the provisions of ASC 842, Leases. Under the standard we have recognized operating leases as Right-of-Use assets, with a corresponding lease liability. As of the beginning of this fiscal year, we increased assets and liabilities by approximately $903,000 which will be taken to expense over the life of the respective leases. The effect on operating income was not significant as the amount expensed approximates the rental commitments; moreover, we do not anticipate any material effect on operating earnings going forward.”
On January 6, 2020, Craig-Hallum analyst Matt Hewitt initiated coverage of Simulations Plus with a Buy rating and $40 price target. The analyst believes Simulations Plus provides investors with the opportunity to gain broad-based exposure to pharma/biotech at a time when the company is undergoing positive change. While its flagship software product is widely viewed as the “gold standard” in pharmacokinetic modeling, the company’s new CEO has been able to accelerate growth to 15% through greater emphasis on sales and marketing, he adds. With numerous changes still being made and the FDA taking steps to encourage greater use of modeling/simulation, Hewitt believes the recent acceleration can continue.
On December 5, 2019, Simulations Plus, Inc. (Nasdaq: SLP) announced that it has entered into a new collaboration agreement with Bayer AG to advance its ADMET Predictor® machine learning software for use within integrated drug discovery workflows. With the drugmaker’s input, Simulations Plus will develop improved structure and tautomer handling capabilities that will support data integrity across the different Bayer discovery platforms.
“We have partnered with Bayer on several scientific projects in the past and are pleased to announce this new collaboration supporting machine learning in drug discovery activities,” said David Miller, Director of ADMET Cheminformatics at Simulations Plus. “With so many packages used in large pharmaceutical R&D organizations, it is important to ensure data integrity and prevent information loss across platforms. This is especially critical in an environment where our tools are used as part of integrated research workflows. The outcome from this collaboration will do just that and lead to improved efficiencies as compound libraries are virtually screened using our top-rated ADMET models.”
John DiBella, Lancaster division president for Simulations Plus, added: “This agreement is a prime example of a funding mechanism targeted to the specific advancement of customized software solutions essential to a client. Bayer will benefit from direct input into our R&D process, with accelerated delivery, while Simulations Plus maintains the right to license the new functionality to all clients. In the end, these enhancements will be part of a fully supported platform and benefit our entire user community.”