Simulations Plus, Inc.

Greetings, and welcome to the Simulations Plus First Quarter Fiscal 2022 Financial Results Conference Call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce Brian Siegel from Hayden IR. Thank you, Mr. Siegel. You may now begin.

Good afternoon, everyone. Welcome to our first quarter fiscal 2022 financial results conference call. Hosting the call today are Simulation Plus' CEO, Sean O'Connor, and CFO, Will Frederick. An opportunity to ask questions will follow today's presentation. Moving to slide two, before beginning, I would like to remind everyone that except for historical information, the matters discussed in this presentation 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 at this time, 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 the company's risk factors is contained in the company's quarterly and annual reports, filed with the Securities Exchange Commission. With that said, I'd like to turn the call over to Sean O'Connor. Sean?

Thank you, Brian. We began the fiscal year with an excellent first quarter, as both segments of our business delivered solid growth, leading to total revenue growth of 16%. Our software business was up 19% year over year in the first quarter. And we continue to see strength across each of our three core product lines, with bookings exceeding expectations and significant cross-selling progress. From an innovation standpoint, we continue to release new versions that we believe will continue to build on our leadership positions. Our service business returned to positive growth, up 13% year over year. This portion of our business also continued to grow its backlog recovering from the pandemic impacted challenges of the second half of last year. Diluted EPS grew at a faster pace than revenue, up 25% from last year, driven by mix in the operating leverage inherent in our model. Overall, this was a strong start to the new fiscal year. As I mentioned, our software business had a strong quarter. GastroPlus revenue increased 19% year over year this quarter, We had 16 new 100K-plus customers in the quarter and nine new small biotechs, pharma companies, CROs, and incubators. This is a rapidly growing segment of the market, and we are experiencing robust growth in this area. We also saw customer success with 21 upsells to existing customers in the quarter. A significant accomplishment that we announced during the quarter was the award from the FDA to Hans and validate mechanistic in vitro in vivo correlation or IVC methods for long-acting injectable formulations to accelerate innovator and generic product development and regulatory assessment. This is a joint proposal with the University of Connecticut's Department of Pharmaceutical Services, and we are now engaged with the FDA on four different funded programs. validating the widespread embracing of modeling and simulation technology as an important tool in drug development. Monolix sales continue to set the pace for our software segment. Sales of this product increased 35% this quarter. Our efforts to expand the addressable market for Monolix Suite in Asia are starting to bear fruit as we signed our first deals in China and added Northern Science Consulting in Japan as a distributor. Renewals for the Monolix Suite remain robust, and our recently released update saw more than 1,000 downloads in the first 10 days. As I mentioned on prior calls, we believe Monolix Suite is taking market share, and we are confident in our ability to innovate and maintain our technological advantages. Admet Predictor delivered 24% revenue growth in the quarter. During the quarter, we released a new version of the product, APX3, which is generating increased demand from our customers. We also closed two artificial intelligence drug-driven drug design or AIDD module deals with customers. The phase two of our AIDD collaboration continues to be successful, attracting greater interest from current and potential customers. Turning to our services offering, Our PKPD services revenue this quarter increased 4% as the relatively high number of project disruptions that impacted the business during the second half of last fiscal year are returning to normalized levels. While PKPD bookings were still slower than prior quarters as the industry continues to navigate the pandemic and its impact on the FDA pipeline, we entered the second quarter with a robust pipeline of sales opportunities for this business. We had some meaningful accomplishments for the quarter that I'd like to highlight with the following two examples. First, we helped the Fortune 100 pharma client develop a treatment for patients with COVID-19. Our work involved performing a population analysis using data collected in healthy individuals and in patients with the virus. Our goal was to identify and quantify the effects of patient factors on drug exposure in order to confirm and support dose selection for the next phase of development and determine whether dose adjustment was required in any specific population. These analyses were helpful in supporting the achievement of regulatory milestones in obtaining emergency use authorization for the compound. Second, we supported a biotech company by helping them to gain greater understanding and insight into the risk profile for their compound. which is intended to treat patients with type 2 diabetes and inadequate glycemic control. We developed a population model and used the resulting estimates of individual patients' drug exposure to explore relationships between exposure and efficacy, as well as between drug exposure and the occurrence of a particular type of adverse event. This understanding was used to support the need for dose adjustments in special populations and to assist in preventing these particular adverse events. These are just two of many examples of the important work we do for customers, large and small, advancing their drug development and regulatory approval efforts. Our QSP QST revenue was up 31% for the quarter. Even with this strong growth, our backlog increased by 124%, giving us confidence in this business over the next few quarters. During the quarter, we released Renasem version 1A, the novel quantitative systems toxicology software for predicting and investigating drug-induced kidney injury. The information from Renasem modeling will help guide go-no-go decisions on drug development projects, potentially avoiding the disastrous financial effects of failed clinical trials, or better, providing assurances of a path to FDA approval. Renosem was developed with SBIR funding from the National Institutes of Health's National Institute of Diabetes and Digestive and Kidney Diseases Division. During November, we presented breakthrough scientific data at a top liver disease conference, helping to explain the relatively high positive response rates in placebo cohorts related to potential treatments of non-alcoholic, stadiohepatitis, or NASH. Our research found that small changes to the diet patterns and patient behavior can lead to reductions in fibrosis scores, a key metric of efficacy for NASH treatments. This insight can help NASH clinical scientists better understand the clinical trial results and should keep potential treatments on track to be delivered to patients in short order. Finally, our PBPK revenue was also up 37% this quarter, and backlog increased by 56%. Of note, we announced a new grant from the FDA to enhance the Transdermal Compartmental Absorption in Transit, or TCAT, model in GASTRO+. Overall, our services revenue grew 13% and backlog increased 31% during the quarter. Good progress in moving beyond the disruptions from the second half of last year. Looking to our fiscal year 2022 outlook, we are maintaining our guidance for the fiscal year. Our software business continues to deliver accelerated growth rates and we're seeing continued recovery in our consulting business. Accordingly, we should exit fiscal year 2022 at a pace that supports our longer term expectations for 15% or better organic growth with any acquisitions incremental to this number. With respect to M&A, we continue to look for strategic opportunities to increase our total addressable market and accelerate our growth rates. Let me now turn the call to our CFO, Will Frederick, to discuss the financial results.