Simulations Plus, Inc. (NASDAQ:SLP) Q3 2019 Earnings Conference Call - Final Transcript

Jul 10, 2019 • 04:15 pm ET

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Simulations Plus, Inc. (NASDAQ:SLP) Q3 2019 Earnings Conference Call - Final Transcript

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Presentation
Executive
Shawn O'Connor

results. During the quarter, we were successful in closing business with a large pharma client with a proposal that included both software products and consulting services sourced across our three divisions.

Internationally, we made progress as well. While we did not add personnel in Europe during the quarter, we have hired two additional consultants who will begin in the fourth quarter in Europe, doubling our staff in this geography.

In Asia, we have completed the expansion of our existing distributor relationships to include our DILIsym products.

While these investments add to expenses in absolute dollars, the resulting increased revenue growth rate has kept our expenses as a percentage of revenue at or below historical rates. Our 16% revenue growth in the quarter was achieved while delivering a 20% increase in net income year-over-year. Year-to-date, our 13% revenue growth was achieved while delivering a 25% increase in net income, excluding the effects of last year's deferred tax benefit adjustments.

And not insignificantly, our cash position continues to grow net of continued dividend payments in funding of deferred acquisition costs.

Overall, we made good progress on all key initiatives and I'm encouraged with the results and the team that we have in place to execute on our strategies.

Turning to our third quarter results by division. In our Lancaster Division, overall revenue was up 7% year-over-year and 8% year-to-date. Software revenue at $5.4 million is a record for the company in this -- our quarter with our highest level of renewal business. Consulting revenue in this Division grew 53%. On its small base, reflecting the demand however for collaborative efforts for GastroPlus enhancements and PBPK modeling assistance. Overall, our Lancaster Division continues to enjoy good revenue growth in line with renewal seasonality and in line with our historical growth expectations.

Breaking this down further, 81% of our revenue was from renewals; 10% from new licenses; and 9% from consulting. Our renewal rates were 85% based on accounts and 93% based on fees. Our license units of 284 were up 5% year-over-year. We added 7 new commercial companies and 11 non-profit groups. We have projects with 28 companies and 4 funded collaborations.

During the quarter, we strengthened our relationship with the regulatory agencies worldwide. The FDA purchased the 15 user license for our ADMET Predictor software suite. The purchase was made by the Center for Tobacco Products to support research projects aimed at informing regulatory decision-making. In addition, we've received an order from the Pharmaceuticals and Medical Devices Agency in Japan to add licenses to its GastroPlus Software suite. As a reminder, working with the agencies like the FDA and PMDA is important to Simulations Plus as it validates our modeling software and builds awareness throughout the industry.

Often employees at these regulatory bodies ultimately leave to work for pharmaceutical companies and if they have positive experiences with our software, they bring these experiences with them to the new employer.

In addition, during the quarter, we've released Version 9.7 of our flagship, physiologically-based