Simulations Plus Reports Third Quarter FY2020 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 third quarter of fiscal year 2020 (3QFY20) and the first nine months of fiscal year 2020 (9moFY20), the period ended May 31, 2020.
3QFY20 highlights compared with 3QFY19:
Net revenues increased 23.8% to $12.3 million, an increase of $2.4 million over $9.9 million Gross profit was up 26.5% to $9.6 million, an increase of $2.0 million over $7.6 million SG&A was $5.0 million, an increase of 62.6% or $1.9 million over $3.1 million SG&A as a percentage of revenues increased to 40.9% from 31.1%, inclusive of $1.1 million in one-time transaction costs related to the Lixoft acquisition Total R&D expenditures were $1,359,000, an increase of $293,000, or 27.5% over $1,066,000 In 3QFY20, $606,000 was capitalized and $753,000 was expensed In 3QFY19, $422,000 was capitalized and $643,000 was expensed Income before taxes remained flat at $3.8 million Net income increased 1.6% to $2.9 million, an increase of $47,000 over $2.9 million Diluted earnings per share remained unchanged at $0.16. One-time transaction costs related to the Lixoft acquisition of $1.1 million (approx. $837,000 net of tax) effected a decrease of $0.04 diluted earnings per share for the quarter9moFY20 highlights compared with 9moFY19:
Net revenues increased 23.5% to $32.0 million, an increase of $6.1 million over $25.9 million Gross profit was up 25.3% to $24.1 million, an increase of $4.9 million over $19.2 million SG&A was $12.6 million, an increase of $4.0 million, or 46.8%, over $8.6 million SG&A as a percentage of revenues increased to 39.5% from 33.2%, inclusive of $1.4 million in one-time transaction costs related to the Lixoft acquisition Total R&D expenditures were $3.8 million, an increase of $500,000, or 15.4% over $3.3 million For 9moFY20, $1.7 million was capitalized and $2.0 million was expensed For 9moFY19, $1.4 million was capitalized and $1.9 million was expensed Income before taxes increased 9.1% to $9.4 million, an increase of $779.000 over $8.6 million Net income increased 9.5% to $7.1 million, an increase of $620,000 over $6.5 million Diluted earnings per share increased 7.6% to $0.39 from $0.36. One-time transaction costs related to the Lixoft acquisition of $1.4 million (approx. $1.1 million net of tax) effected a $0.06 decrease in 9moFY20 diluted earnings per shareShawn O’Connor, chief executive officer of Simulations Plus, said: “Keeping with historical seasonality trends, the third quarter was again a strong quarter with revenue increasing 24% year-over-year to $12.3 million, demonstrating the significant progress we have made to accelerate growth. A solid base of recurring revenue and a large backlog of project-based service business have minimized the impact from current economic conditions resulting from the effects of the COVID-19 pandemic. While certain new customer software license and service projects were delayed in recent months, we continue to believe opportunities have been delayed, but not lost. Our backlog remains healthy, and we are encouraged by the pickup of new software license closures and consulting contracts at the end of the quarter. We expect double-digit, year-over-year revenue growth in the fiscal fourth quarter, despite the impact of seasonality on a sequential basis.”
“The integration of Lixoft is going well and initial feedback from the marketplace has been positive as customers acknowledge the strengthening of our offerings with the Monolix Suite,” Mr. O’Connor continued. “We are collaborating across the enterprise to fully integrate our sales and marketing efforts and leverage our existing infrastructure to extract maximum synergies and present a unified approach to our customers.”
John Kneisel, chief financial officer of Simulations Plus, added: “The dependable cash flow generation of our business was further enhanced with the immediately accretive acquisition of Lixoft in the third quarter. Following this cash investment, our financial position remains strong with a solid balance sheet that includes $7 million in unrestricted cash and no outstanding borrowed debt at the end of the third quarter and access to additional capital via a new, undrawn $3.5 million line of credit. Through a steady approach to growth and the prudent allocation of capital, we are able to maintain the economic engine of our business, invest for future growth, and return capital to shareholders in the form of quarterly cash dividends.”
In addition, the Company today filed with the Securities and Exchange Commission (the “Commission”) a Registration Statement on Form S-3 (the “Registration Statement”) filed pursuant to the Securities Act of 1933, as amended (the “Securities Act”). The Registration Statement was filed as a “well-known seasoned issuer” as defined in Rule 405 under the Securities Act of 1933, as amended, or the Securities Act, using an automatic “shelf” registration process and, thus, was immediately effective. No securities were sold in connection with its filing, but, by using a shelf registration statement, the Company may sell securities from time to time in the future and as described in a subsequently filed prospectus supplement.
Shawn O’Connor, chief executive officer of Simulations Plus, said: “The Company’s filing of its shelf registration provides the company the flexibility required to support any future need to issue securities for any working capital, mergers and acquisitions, or general corporate purposes in the future. Our recent qualification under the well-known seasoned issuer standard made this undertaking timely and efficient.”
Quarterly Dividend Declared
The Company’s Board of Directors has declared a cash dividend of $0.06 per share of the Company’s common stock payable on August 3, 2020, to shareholders of record as of July 27, 2020. The declaration of any future dividends will be determined by the Board of Directors each quarter and will depend on earnings, financial condition, capital requirements, and other factors.
Investor Conference Call
The Company invites all interested persons to attend its conference call at 4:15 p.m. Eastern Time on July 9, 2020. The live webcast/teleconference will be accessible by registering here. A live, listen-only teleconference will also be available by dialing (562) 247-8422. Please dial in five to ten minutes prior to the scheduled start time. A replay of the webcast will be available at the Investors section of the Simulations Plus website following the call.
About Simulations Plus, Inc.
Simulations Plus, Inc., is a premier developer of drug discovery and development software as well as a leading provider of both preclinical and clinical pharmacometric consulting services for regulatory submissions and quantitative systems pharmacology/toxicology models for drug-induced liver injury and nonalcoholic fatty liver disease. The company is a global leader focused on improving the ways scientists use knowledge and data to predict the properties and outcomes of pharmaceutical, biotechnology, and chemical agents. Our software is licensed to and used in the conduct of research by major pharmaceutical, biotechnology, chemical, consumer goods companies, and regulatory agencies worldwide. Our innovations in integrating new and existing science in medicinal chemistry, computational chemistry, artificial intelligence, pharmaceutical science, biology, and physiology into our software have made us the leading software provider for molecular property prediction from structure and physiologically based pharmacokinetic modeling and simulation. For more information, visit our website at www.simulations-plus.com.
Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995 – With the exception of historical information, the matters discussed in this press release are forward-looking statements that involve a number of risks and uncertainties. Words like “believe,” “expect” and “anticipate” mean that these are our best estimates as of this writing, but that there can be no assurances that expected or anticipated results or events will actually take place, so our actual future results could differ significantly from those statements. Factors that could cause or contribute to such differences include, but are not limited to: our ability to maintain our competitive advantages, acceptance of new software and improved versions of our existing software by our customers, the general economics of the pharmaceutical industry, our ability to finance growth, our ability to continue to attract and retain highly qualified technical staff, our ability to identify and close acquisitions on terms favorable to the Company, and a sustainable market. Further information on our risk factors is contained in our quarterly and annual reports and filed with the U.S. Securities and Exchange Commission.
Disclaimer
This press release shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of these securities in any state or jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state or jurisdiction.
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SIMULATIONS PLUS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited) (Audited) May 31 August 31, ASSETS
2020
2019
Current assets Cash and cash equivalents$
7,354,496
$
11,435,499
Accounts receivable, net of allowance for doubtful accounts of $25,000 and $0
10,853,452
5,026,558
Revenues in excess of billings
2,838,072
3,233,659
Prepaid income taxes
392,099
765,110
Prepaid expenses and other current assets
745,468
704,316
Total current assets
22,183,587
21,165,142
Long-term assets Capitalized computer software development costs, net of accumulated amortization of $13,293,943 and $12,356,055
5,754,971
4,959,736
Property and equipment, net
356,784
341,145
Operating lease right of use asset
1,019,408
-
Intellectual property, net of accumulated amortization of $4,729,270 and $3,948,750
12,275,730
5,026,249
Other intangible assets net of accumulated amortization of $1,503,481 and $1,210,000
7,146,519
3,280,000
Goodwill
12,792,171
10,387,198
Other assets
49,957
37,227
Total assets$
61,579,127
$
45,196,697
LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Accounts payable$
663,337
$
204,075
Accrued payroll and other expenses
2,137,383
1,639,038
Current portion - Contracts payable
3,761,028
1,761,028
Billings in excess of revenues
269,232
798,549
Operating lease liability, current portion
525,454
-
Deferred revenue
428,611
380,787
Total current liabilities
7,785,045
4,783,477
Long-term liabilities Deferred income taxes, net
2,775,398
2,731,616
Operating Lease Liability
489,463
-
Payments due under Contracts payable
3,942,333
-
Total liabilities
14,992,239
7,515,093
Commitments and contingencies Shareholders' equity Preferred stock, $0.001 par value 10,000,000 shares authorized no shares issued and outstanding$
-
$
-
Common stock, $0.001 par value 50,000,000 shares authorized 17,788,498 and 17,591,834 shares issued and outstanding
7,791
7,595
Additional paid-in capital
20,231,443
15,319,474
Accumulated Translation Adjustment
30,460
-
Retained earnings
26,317,194
22,354,535
Total shareholders' equity$
46,586,888
$
37,681,604
Total liabilities and shareholders' equity
$
61,579,127
$
45,196,697
SIMULATIONS PLUS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For the three and nine months ended May 31, 2020 and 2019
Three months ended Nine months ended (Unaudited) (Unaudited)
2020
2019
2020
2019
Revenues
$
12,298,036
$
9,936,921
$
32,049,003
$
25,944,545
Cost of revenues
2,665,405
2,324,188
7,974,702
6,734,890
Gross margin
9,632,630
7,612,733
24,074,301
19,209,655
Operating expenses Selling, general, and administrative
5,023,132
3,087,445
12,646,512
8,613,788
Research and development
752,719
643,255
2,026,684
1,896,926
Total operating expenses
5,775,851
3,730,700
14,673,197
10,510,714
Income from operations
3,856,779
3,882,033
9,401,104
8,698,941
Other income (expense) Interest income
4,465
11,050
27,814
20,296
Interest expense
-
(32,702
)
-
(109,078
)
Change in value of contingent consideration
(81,000
)
-
(81,000
)
-
(Loss) income on currency exchange
(602
)
(7,941
)
1,283
(40,467
)
Total other income (expense)
(77,137
)
(29,593
)
(51,902
)
(129,249
)
Income before provision for income taxes
3,779,642
3,852,440
9,349,202
8,569,692
Provision for income taxes
(844,073
)
(963,734
)
(2,205,276
)
(2,045,590
)
Net Income$
2,935,569
$
2,888,706
$
7,143,925
$
6,524,102
Earnings per share Basic
$
0.17
$
0.16
$
0.40
$
0.37
Diluted
$
0.16
$
0.16
$
0.39
$
0.36
Weighted-average common shares outstanding Basic
17,735,354
17,519,849
17,661,189
17,472,922
Diluted
18,426,872
18,096,195
18,333,596
18,008,336
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