SLP — Simulations Plus, Inc.

Summary of Simulations Plus (SLP) Q4 2025 Earnings Call

1. Key Financial Results and Metrics

• Q4 Revenue: Decreased 6% to $17.5 million.
• Fiscal Year Revenue: Increased 13% to $79.2 million.
• Software Revenue: Decreased 9% in Q4 (52% of total revenue), increased 12% for the fiscal year (58% of total revenue).
• Services Revenue: Decreased 3% in Q4 (48% of total revenue), increased 15% for the fiscal year (42% of total revenue).
• Adjusted EBITDA: Grew 8% to $22 million for the fiscal year, representing 28% of revenue.
• Net Loss: $64.7 million for the fiscal year, including a $77.2 million noncash impairment charge; adjusted diluted EPS was $1.03.
• Renewal Rates: 83% for Q4 and 88% for the fiscal year; impacted by client consolidations.

2. Strategic Updates and Business Highlights

• Transitioned to a unified operating model to enhance client focus and operational efficiency.
• Launched GastroPlus 10.2, integrating AI capabilities, with positive initial feedback from clients.
• Continued investment in biosimulation technologies, with a focus on AI and cloud computing to improve R&D processes.
• Strong pipeline of service projects, with a backlog of $18 million, expected to convert to revenue within the next 12 months.

3. Forward Guidance and Outlook

• Fiscal Year 2026 Guidance: Total revenue expected between $79 million to $82 million (0% to 4% growth), adjusted EBITDA margin between 26% to 30%, and adjusted diluted EPS between $1.03 to $1.10.
• Anticipated first-quarter revenue to be approximately 3% to 5% lower than the same period last year.
• Guidance assumes a stable operating environment, with cautious optimism regarding client budgeting and spending.

4. Bad News, Challenges, or Points of Concern

• Market Headwinds: Client budgets pressured by broader pharmaceutical challenges, including tariffs and pricing regulations.
• Software Revenue Declines: Notable declines in specific products, such as ADMET Predictor (down 10% in Q4) and GastroPlus (down 3% in Q4).
• Renewal Rate Declines: Lower renewal rates attributed to client consolidations and increased scrutiny on software configurations.
• Impairment Charge: A significant noncash impairment charge of $77.2 million negatively impacted net income.

5. Notable Q&A Insights

• Demand Environment: Positive signs in biotech funding and client budgeting, but caution remains due to potential market volatility.
• Pro-ficiency Performance: Software revenue from Pro-ficiency down 63% in Q4, attributed to a slowdown in clinical trial starts; however, Med Comm services grew significantly.
• Pricing Flexibility: Plans to implement more aggressive pricing strategies, particularly for new AI capabilities, while maintaining competitive pricing in services.
• Headcount and Capacity: Management expressed confidence in current staffing levels to support potential revenue increases, indicating flexibility to scale if needed.

Overall, while Simulations Plus demonstrated resilience with year-over-year growth in fiscal 2025, challenges in the current market environment and specific product performance present notable risks as they navigate fiscal 2026.