Simulations Plus, Inc.

Q1 2022 Earnings Conference Call


spk_0: the ratings and welcome to the simulations plus first quarter fiscal two thousand twenty two financial results conference call at this time all participants are now listen only mode a brief question and answer session will follow the formal presentation if anyone should require operator systems during the conference please press start zero on your telephone keep it as a reminder discovered has being recorded it is now my pleasure to introduce brian siegel from here and i are thank you mister siegel you may now begun
spk_1: good afternoon everyone welcome to our first quarter of fiscal two thousand and twenty two financial results conference call him a call today or simulation plus a ceo sean o'connor and cfl will frederick an opportunity to ask questions without a presentation moving to fly to before beginning i would like to remind everyone that except for historical information the matters discussed in this presentation are forward looking statements then involving 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 were events will actually take place so actual future results could differ significantly from those statements doctors i could cause or contribute to such differences include but are not limited to our ability to maintain our competitive advantages acceptance of new software improved version of our existing software by our customers the general economics of the pharmaceutical industry our ability to finance growth or below lead to continue to attract and retain highly qualified technical staff our ability to identify and close acquisitions and terms favorable to the company and a sustainable markets further information the company's risk factors it is contained in the company it's quarterly in annual reports filed with the securities exchange commission with that said allah concern the call over to start o'connor sean
spk_2: thank you brian
spk_3: we began the first the fiscal or with fiscal year with an excellent first quarter as both segments of our business delivered solid growth leading to total revenue growth of sixteen percent
spk_2: our software business was at nineteen percent year over year in the first quarter and we continue to see strength across each of our three poor product lines with bookings exceeding expectations and significant cross selling progress
spk_3: from an innovation standpoint we continue to release new versions that we will we believe will continue to build on our leadership positions
spk_2: our service business return to positive growth up thirteen percent year over year this portion of our business also continue to grow it's backlog recovering from the pandemic impacted challenges of the second half of last year
spk_3: deluded dps grew at a fair at a pace faster pace than revenue at twenty five percent from last year driven by max in the operating leverage inherent in our model overall this was a strong start to the new fiscal year
spk_2: as i mentioned our software business had a strong court gastro plus revenue increased nineteen percent year over year discordant we had sixteen new hundred k plus customers in the quarter and nine new small biotechs pharma companies see arose 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 twenty one up cells to existing customers in the quarter a significant accomplishment that we announced during the quarter was the award from the f a to hands and validate mechanistic in vitro in vivo correlation where i i be ip ib same methods for long
spk_3: acting injectable formulations to accelerate innovator and generic product development and regulatory assessments
spk_1: this was a joint proposal with the university of connecticut department a pharmaceutical services and we are now engage with the ft a on four different funded programs validating the widespread embracing a modeling and simulation technology as an important tool and drug development
spk_2: a like sales continue to set the pace for a software segments tales of this product increase thirty five percent this quarter or efforts to expand the addressable market for model monolith sweet in asia are starting to bear fruit as we signed her first deals and shamed in china and added northern science console
spk_3: thing in japan as a distributor renewals for the monolith sweet remain robust and are recently released updates are more than one thousand downloads in the first ten days as i mentioned on prior cause we believe monolith sweet is taking market share and we are confident in our ability to innovate and maintain our technological advantages met predictor delivered twenty four percent revenue growth in the quarter during the quarter we released a new version of the product a p x three which is generating increased demand from our customers we also close to artificial intelligence drug driven drug design or a id d module or deals with customers
spk_2: the phase two of our a a i didi collaboration continues to be successful attracting greater interest from current and potential potential customers
spk_3: turning to our services offering our pk pt services revenue this quarter increase four percent as the relatively high number of project disruptions that impacted the business during the second half of last fiscal year are returning to normalize levels while pk pt bookings crystals slow slower than prior quarters as the industry continues to navigate the pandemic and it's impact on the ft a pipe i pine we enter the second quarter with a rope us pipeline of sales opportunities for this business
spk_2: we had some meaningful a compliments accomplishments for the quarter that i'd like to highlight with the following two examples
spk_3: first we help the fortune one hundred former clients develop a treatment for patients with covered nineteen 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 patients actors on drug exposure in order to confirm and support those 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 us authorization for the compound
spk_2: second we supported a biotech company by helping them to gain greater understanding an insight into the risk profile for it their compound which is intended to treat patients with type two diabetes and inadequate glycemic control
spk_3: we developed a population model and use the resulting estimates of individual patients drug exposure to explore relationships between exposure and advocacy
spk_2: as well as between track exposure and the occurrence of a particular type of adverse events this understanding was used to support the need for dose adjustments in special populations and to assist in preventing these particular adverse events
spk_3: these are just too many examples of the important work we do for customers large and small advancing the drug development and regulatory approval efforts
spk_2: a q s p que se revenue was up thirty one percent for the quarter even with the strong growth or backlog increased by one hundred and twenty four percent giving us confidence in this business over the next few quarters during the quarter we released rena some version one a the novel quantitative systems toxicology software for predicting and investigating drug induced kidney injury the information from riemann marina some modeling will help guide go to know go decisions on drug development projects
spk_3: potentially avoiding the disastrous financial effects of failed clinical trials are better providing assurances of a path to ft a approval green assembled developed with spr funding from the national institutes of health national institute of diabetes and digestive in 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 and placebo cohorts related to potential treatment of non alcoholic stereo hepatitis or nash our research found
spk_2: that small changes to the diet patterns and patient behavior can lead to reductions in fibrosis scores a key metric of efficacy for nasri treatments this and say can help nash clinical scientists better understand a clinical trial results and should keep potential treatments on track
spk_3: to be delivered to patients in short order
spk_2: finally or tbp k revenue was also up thirty seven percent this quarter and backlog increased by fifty six percent of note we announced a new grant from the ft a to enhance the transdermal compartmental absorption in transit or t cat model in guess for a plus
spk_3: overall or services revenue grew thirteen percent and backlog increase thirty one percent during the quarter
spk_2: progress and moving beyond that disruptions from the second half of last year looking to our fiscal year twenty twenty two outlook we are maintaining our guidance for the fiscal year our software business continues to deliver accelerated growth rates and were saying continued recovery in our consulting business
spk_3: accordingly we should exit fiscal year twenty twenty two at a pace that supports our longer term expectations for fifteen percent or better organic growth with any acquisitions incremental to this number with respect to emanate we continue to look for strategic opportunities to increase or total addressable market and accelerate our growth rates let me now turn the call to our cfl will frederick to discuss the financial results
spk_4: think he shot
spk_5: as you may have seen in our press release earlier today
spk_0: we have expanded our financial disclosures to give a more complete picture of the business by providing adjusted ebitda
spk_5: well this isn't a metric we've previously provided it has become commonplace with our companies and we felt it appropriate to provide for our current and prospective investors
spk_4: or just leave it or is currently calculated by adding that stock based compensation expense and in the future will add that any expenses related to emanate or other non cash non operating expenses that may occur
spk_1: we provide a reconciliation of this nine get metric to net income the relevant gap metric in the press release announcing our results and it can be found on our website as well
spk_5: or total revenue growth rate was sixteen percent in the quarter the strong growth of nineteen percent in our software business positively impacted our mix which was at the high end of our fifty five to sixty percent guidance range for the fiscal year
spk_0: or services business grew at thirteen percent and it's share of the mix was at the lower end of the forty to forty five percent guidance range
spk_5: or software gross margin was ninety percent for the quarter up from eighty seven percent last fiscal year due to increased revenue and slightly lower cost of revenue
spk_4: our services margin was sixty percent down from sixty four percent last fiscal year due to increased salaries and an increase in lower margin services projects including training and international workshops in china and brazil
spk_0: our total gross margin increased slightly year over year to seventy eight percent as a result of the improving software revenue mix
spk_5: we continue to enjoy a diverse mix of software revenue and reporter was solid growth across our entire product portfolio
spk_0: for the quarter gastro plus represented fifty four percent of our software revenue
spk_5: model sweet was twenty one percent admin predictor was twenty percent and other software was five percent
spk_0: discord quarter we saw monolith sweet climb to our second highest revenue software product
spk_5: for the quarter or renewal rate for commercial customers with ninety six percent based on fees and ninety three percent based on accounts as a reminder are renewal rates fluctuate quarter to quarter due to customers who either renewed early in the quarter before their license term ends or late in the following quarter after their license term ends renewal rates for commercial customers on average continue to be in line with historical
spk_6: rates in the mid nineties
spk_5: we saw a slight decline in our average revenue per customer this quarter compared to the prior year quarter this change reflects our normal price increases and ongoing up selling efforts offset by changes to our discount structure for multiyear deals
spk_0: we also now have ninety two university plus customers and twenty six countries the university plus program offers free access to our software for students and educators as part of our ongoing support of academic research training and collaborationist and we believe this program will help prepare them
spk_4: next generation of scientists and contribute to the rapid development of safer lower cost treatments for patients worldwide
spk_7: the me shift now to our services business
spk_0: for the quarter or services revenue breakdown was as follows
spk_5: forty six percent from pk pt services twenty nine percent from q s p u s t services seventeen percent from tv pk services and eight percent from other services
spk_1: with regard to a couple of key service metrics total service projects increased forty eight percent this quarter and we ended the quarter with fifteen million dollars and backlog of three million dollars from the prior your quarter
spk_5: now turning to our consolidated income statement
spk_0: total are in the cost for the quarter were one point seven million dollars or fourteen percent of revenue compared to one point five million dollars also fourteen percent of revenue and the same period last fiscal year
spk_1: are the expenses for the quarter were point nine million dollars or seven percent of revenue compared to point eight million dollars or eight percent of revenue in the same period last fiscal year
spk_5: capitalized are in the for the quarter was point eight million dollars or seven percent of revenue compared to point seven million dollars or six percent of revenue in the same period last school year
spk_0: sg an expense for the quarter was five million dollars or forty percent of revenue compared to four point four million dollars or forty one percent of revenue in the same period last fiscal year the increase in history and a expense was primarily due to higher pay costs increased insurance expense and increased commission costs
spk_5: income from operations was three point eight million dollars an increase of twenty four percent and operating margin expanded to thirty one percent from twenty nine percent last the school year income tax expense was point eight million dollars for an effective tax rate of twenty two percent compared to last fiscal year income tax expense of point five million dollars and an effective tax rate of seventeen percent
spk_0: we saw a lower effective tax rate last fiscal year primarily driven by the tax benefits associated with disqualifying dispositions
spk_5: net income increased twenty two percent to three million dollars compared to two point five million dollars for the same period last fiscal year deluded earnings per share increased twenty five percent to fifteen cents compared to twelve cents for the same period last school year
spk_4: expenses for interest income taxes depreciation and amortization and nine cast stock based compensation included in our net income were two point three million dollars compared to one point eight million dollars for the same period last fiscal year
spk_0: adjusted ebitda excluding these amounts was five point three million dollars or forty two percent of revenue compared to four point three million dollars or forty percent of revenue for the same period last fiscal year we continue to have a strong balance sheet with significant cash reserves to support our continued expansion through internal investment and potential emily activity at the end of the quarter or cash and short term investments ballads grew to one hundred and twenty four point three million dollars and we continue to have no debt
spk_5: all now turn the call back to use on
spk_3: thank you well and conclusion this quarter demonstrates improve momentum relativity the end of fiscal twenty twenty one or bookings generally exceeded expectations we grew revenue double digits for both software and services and we expanded our services backlog to porting future growth our investments in business development are paying off helping us capture market share expanded to new regions and more effectively cross sell solutions across are installed base recent successful releases of new software and service achievements demonstrate our scientific leadership overall we are well positioned for continued organic growth additionally strategic i'm in a remains and important path to augment organic growth and with a strong balance sheet and a growing leadership position in the industry's we serve we continue to evaluate potential acquisitions with that i'll be happy to take your questions operator
spk_0: thank you we will now be conducting a question and answer session if you'd like to ask a question of please press start one on your telephone keep at a confirmation total indicator light as in the question que you may press start to if you'd like to remove your question from the que participants using speaker comment and may be necessary to pick up your headset before pressing a start one moment please while reporter questions thank you are first question isn't france lot busy boys with oppenheimer please proceed with your question
spk_8: right that's taking the questions and regulations on a on a nice korea here
spk_1: the first question i had was just the your colder here that you report it ended in november lot of people are you know and i'll in court is your fourth quarters and calendar year that are ending in december and in december know he had a lot of fun with this oh crime variants i'm just kind of wondering on your and
spk_8: you know in terms of guidance it was a strong corridor just get exp you know talk about maybe how you have seen a the variant effect different parts of your business if at all at a distance
spk_0: thank god that are obviously good results in terms of our booking sales revenue drive were great and my in the quarter ended dead november so i can point to any on on the ground
spk_9: impact in that timeframe it's built up since that point in time in december and hearing to him into january
spk_3: and an agreement in awaiting see what the impact is a bad get a year and a half ago with the other
spk_9: pics or there are the virus say we saw snow slowdown in terms of a coin companies air point to the company's am dead you know they're hiring and the need for more software more licenses the impact in terms of that a processors and speed that shared on local trials or concluded some of that him at may be may maybe yet to be seen here in the few months that they're coming months but to date they're not not not a lot of impact as yet sentences
spk_8: okay okay that that's that's how fun and mean each help us understand last time there was a an issue and you guys have rebounded very well from on a services side in terms of you know in in relationship to stick to the pandemic but i just want to make sure you know we understand hear that would happen if the wasn't that there was not necessarily enough backlog but was it just the timing of the cancellation is a certain products and is difficult to get the backlog involved there or what what was the reason again for the service issue
spk_9: the primary source in a problem frank was the yeah number of delays and cancellations and hold said that guy came up during the quarter and especially in the third quarter right towards the end of a quarter last half of the quarter ab which you didn't allow us to reach into backlog and call that other proud your toward damn and move our staff to or other engagements of a projects that with to maintain the lower revenue there are backlog a said in a mix of projects that day some can be a move forward to have many just kathy mood for because it's waiting on project is waiting on data that day comes from the client or zero on the completing a the the clinical trials so if a backlog is very vigorous as we talked to before and then there's no more probability more opportunities to have some of those projects for the backlog was was short and the number of number cancellations and that third quarter were significantly about what are our normal experience as it happens it happens to report it the marry that we incurred in the third quarter of last year was well about what would be considered during normal ab which are you know my cancellations there this past quarter and baghdad but they were not as significant or as new numerous and therefore didn't impact has quite scared
spk_8: quite a significant okay great men maybe leslie at a high level here and we talked about and it is interesting the this is clear have a change sure that the use about simulation is is progressing with the ft the a you talk about the acceptance of by simulation with the sta and and whether or not that's accelerated by the pandemic understand make a lot of stuff
spk_3: and to to save time especially with the uae that the you guys were involved with but have you run into the issue where because of the pandemic yes yes is so busy that maybe they're not ready to accelerate by english as much as you thought or doesn't make a ton of sense in they're if they're all on board
spk_9: i if anything were to see the impact in terms of their their processes around the review or a drug candidates and those emissions
spk_8: no impact
spk_3: certainly in a negative way on their endorsement and use their own use of modeling assimilation an endorsement of the industry's usage the can there is a bit of expanding application out there a bio simulation techniques their acceptance by liquid once waivers excedrin
spk_9: i continue to expand so an endemic can be of up man know where impactful and jumpsuits that slow workflow that certainly doesn't slow the
spk_8: rapid adoption of bio simulation he and the supporting that some the from the at the a impact mean of through this process sad modelings inflation techniques have been used in some at am
spk_9: kobe treatment said available there that have been in the review process and the in their core
spk_8: a more opportunity to expand it's application and to areas vaccines accident
spk_0: okay great thank you very much and congratulations
spk_10: thanks man
spk_11: thank you are next question is from that you went with craig holman please proceed with your question
spk_10: good afternoon and congratulations on the good start the year thanks that
spk_9: ah a first up in it's it's kind of a two pronged question but we've heard a lot about the great resignation that occurred laden the year axes que three to force a lot of people the i'm switching jobs and i'm curious what impact if any that has had ah on your customers and have d c that type of migration from one company to another and out of that has that impacted your sales and then separately i'm at simulations plus that you know where where does your hiring said have you been able to find some some good people the film roles as you continue to grow
spk_3: or the first for you question in terms of the activity yeah
spk_9: in the industry clients
spk_8: i i don't have a a measurement the as to where comparison to prior time is volume my chances that itself
spk_9: wanted isn't that a lot of industries out there that day ooh clinton of the of staff is is is more active now than it as we came out as earlier phases of go read as we began some of our claim companies began to step back and terms of my working the number of drivers the in terms of the the movement there
spk_8: some impact in terms of than the
spk_9: well as a new sales than must come from bad as they are i'm losing people and or searching for other people generally quite frankly it's a positive thankless as when a fan of the simulations plus moves from company a the company be often times that creates a new sale opportunity for us both on the sat there said as that individuals accustomed to using the tools at their career prior job and and a need them for a new position as well as on the server side they are in a position to control the acquisition of service said engagement said deliver those require them from consulting firms like ourselves have been a fan for other of our team previously them that often translates to a new opportunity at the company that they've moved him mostly it's mostly positive in that it also in the company that is losing people create opportunity where they need to continue to be deadlines and make great need to go outside to simulations was to get work done
spk_3: the same might have otherwise done maggie and else so
spk_9: overall it is it needs to be a bit of a positive
spk_3: in terms of you know it's impact on our own environment a this is banned for a long time a very competitive marketplace for talent
spk_8: this store ugly man demands has exceeded their supply in general there for computational biologists and scientists that does that work and the in this field and i continue through to today and am dead
spk_9: yet we have that pretty good historical retention rates in terms of our employees that matter hundred percent retention there are people that we lose from time to time often it is you know a consultant said that may have come out of a postdoc environment into a company like simulations plus and without any farmer direct pharma experience and have wants to go get that experience into their in the their resume the and the fact they then become even better consultant so down the road with that experience on their resume and that we look forward to them coming back at some point in time
spk_10: wow on the recruiting side aired yet very competitive market the we generally been able to keep pace with are hiring plan but it is a very competitive market and there's something that we pay close attention to it because it is the lifeblood of the business or scientific staff in their contributions vote on the software side as well it's with consulting side key ingredient of bar or success
spk_3: that that's really helpful thank you
spk_9: i guess at reaching out or kind of touching base on the the asia pacific region where you are making a little bit more of an effort there at all where did you see that business going given i'm against kind of the market their it has been growing robustly for the past few years and i'm just curious a week to that become a ten percent of revenues and a couple years where do you see that going over the and long term thank you generally the asian market in total is as big contributing about fifteen percent of the or revenues
spk_3: and so we've got his presence there is directly with said
spk_9: the guess or that detector products at the and especially in japan where that long standing relationship with a distributor there as for them
spk_0: in a very good correct their get ready ago says for many years or expansion into other areas in terms of korea china
spk_3: india those marketplace
spk_9: a little bit less developed for or ourselves and we six go seek more opportunities like work with them
spk_12: and finally i'd say that they're actually in asia while it is fast growing it was probably the most disruptive to the kobe dad and their start stops in terms of
spk_9: does this activity what was probably more impactful there than anywhere geographically that said now we've on the monolith sides added a new independent china a chinese distributor and for the monoliths better product several months ago the start a period of time and we reach the end of it and said as bm the school in his past quarter with their curse licenses to them and distributors
spk_10: i'm very recently put their the model it's product into the portfolio of products said that are japanese distributor reps for us in that marketplace so expected some uptick there on the monolith side which has done some business ab but not proportionally appropriate
spk_0: for their overall next the business it's like that that to be a good growth area for onwards and in general will wear will will contribute dead
spk_13: at that fifty percent level and or or i think get along with that isn't that is this whole list that's great our thank you very much for answer the questions and congrats again on a good start to the year thanks that thank you are next question is from dayna leone with raymond james please proceed with your question
spk_9: thank you for taking a questions and and congratulations on that the results maybe uk died provide a bit more color in terms of the couple of share game that you could what monoliths ah just where those share gates are coming from but what the competitor products are the man i could use yeah the question a lot i did your view of how active you can be an in organic growth and acquiring other businesses either and the service or software side of the course of twenty twenty two thank you today yeah the backwards in terms of the i'm in a question acting can search out there in terms of fast awaiting which we can contribute to our our tam in the long run by adding now products and services was young british for sketch area as it's been applied in a previous acquisitions am am tab a lot of activity there like glutton earlier in the year with commented on the fact that they're valuation was was a challenge him in the marketplace worst that has said you opened up a bet it's always a challenge
spk_0: never goes away that said i think that area
spk_9: has improved was my looking at and a number of the potential acquisition candidates are that are out there and the me a while unpredictable i would hope that though we are able to work find me and too dumb to let them to an agreement turned himself in acquisition that in this time friends but said happy as can be the right right sit there meet our criteria both in terms of that product and cultural said
spk_14: as well as the treated in the in a pub evaluation names that those opportunities do it just out there
spk_9: damn government's that so remote at some point to a cheaper first question in terms of monoliths and i are marketshare game their the in l a me
spk_8: modeling a tool of market is dominated by
spk_0: non them
spk_15: long term release early product as in dutch it's beginning a modeling and simulation twenty plus years ago largest install base in that the man software segment the and we believe a we are taking based upon our growth at the thirty plus percent and know his monologues and that's much higher than the overall market growth rate for that product area in therefore must be taking them or marketshare from the largest candidate and that day in that space to london
spk_16: thank you
spk_0: thank you
spk_9: our next question is from metro ram gopal that said audi please proceed with your question yes i could afternoon i can dress had a great quarter to scupper questions armed for so scarce balance sheet is very strong and as you're building cash absent acquisitions if maybe you can just let us know how you prioritizing our capital allocation is releasing a b r and d or expanding sales etc sure feature
spk_8: yeah we certainly are focused in terms of the capital allocation first in both are most on on finding an acquisition opportunity
spk_9: to utilize those are those funds in that direction
spk_15: are indeed investment
spk_3: investments in art isn't than organization there are certainly investments they were making as we are making those investments really sort of the under that
spk_8: the profile of our traditional allocation of the of expenses too hard to earn income statements
spk_0: yeah maintaining their profitability
spk_9: when within the beginning of our are you doing our investments in business development and and our deep within that profitability profile an interview where are the confident that the ebony opportunities will just near term a more translate said as funds into the more revenue generating nelson good thanks and then am quickly and targeting you customer growth and know to focus our we mostly focused still us with as you look towards europe and asia is a pandemic or the avocado variant damn have been affecting you on that front as you look to expand overseas
spk_15: well i think we're all hoping that there that this way they say it is a quicker way that passes and factor is it and backing us now
spk_9: now admitted certain degree in business activity and thirty two labs be impacted their as
spk_0: as the you know people shut down and bending an hour drastic yeah
spk_17: each geography implements so their response generally i think daycare the world has gotten an improved their their their ability to continue what flow within these environments that it is is it is disrupted that damn week the weak manager or way to to today's without to see what's going on
spk_18: that we got a way to take now that emerged the challenges the impact of go that route is so
spk_9: mr was writing them close close up and down there thanks for taking questions
spk_8: dirt again
spk_9: thank you are next question is from david larson it with a bt i g please proceed with your question heikki talk about the rebound professional service revenue what drove that and really what are your expectations are for that line item i'm going forward a man with respect her army crown and clinical trial activity like it it sort of my understanding that army crime it's a much shorter duration when you look at data from south africa looks like maybe one month compared to delta which was like four months if like have you heard of clinical trials been stalled to leader or shut down at all just thanks thanks how much i appreciated true true no we're having a big impact that know where we were you see the impact of is and are delays and cancellations and holds in terms of work flow on the on the server side and dead now they they came down was still exist on a go to declutter basis but they came down the as quarter
spk_0: now we'll we'll we'll see an uptick that are in the second quarter more relevant in time for him to the army omnicom increasing help perhaps were little bit better position to respond to that with a backlog having grown quite significantly vs where it was mid point zero last year
spk_9: have to i think we'll be able to respond to that all the gathered that dead but not no big signals as yet in there as you say he time duration and their the impact or based have gone south africa experience looks to be favorable that hopefully this will be a little bit more short lived under a lesser and in terms of the tempo service revenues in general yeah be at to treat treat their sources of our service business bjp day to as teach us t and ptp case am male all stepped up in terms of their revenue growth compared to the latter part of the of last year the step up to positive service growth was really on the back out u us p u s t engagements were and we grew quite significantly and group backlog hundred and twenty four percent said so bad the flow of both types psychology
spk_17: projects as well as to as t project said both but i saw improvements and versus the latter part of last year and her that backlog pick up kids are such a lot more confidence in terms of their their their ability to lead to work continue to grow quite nicely mentored one much better than they do last year he did he take them their business group that as well
spk_8: pick a tv as side they're mad turned the corner and dad
spk_17: proved in terms of their growth rate that they're probably lags in terms of that the increase in sales activity in
spk_12: a backlog or growth they compared to the other two but we're seeing pretty cool for pipeline right now in bad area that to anticipate well well look into the to read more success in the second quarter on the rebound mean overall were after know a couple of quarters is have negative net
spk_0: greg of same the service i am getting to at thirteen percent growth in the first quarter is a a very good time and thing and gives us confidence as we move into the remaining parts a circus where you're twenty two a fantastic and that's encouraging just just one other question for me he better margin look really good arm that forty two percent and then what are your expectations for your he bit or margin
spk_19: aren't both in the near term and in a longer term tax as that i not a line item we give guidance on that as a been pretty consistent in terms of it's t the dark percentage share over overtime or that a fluctuation but with no was very good in terms of the fastest growth of our software side which share country surge circus positive close to or profitability and to either top percentage oh man so with a turban to suffer business growing at a faster than the service growth at agree with you see some continued leverage a result in a man okay great thanks for much progress on a good quarter
spk_9: the garden thank you as a reminder if you'd like to ask a question please post star one under telephone keep that a confirmation total indicate your line isn't the question cute you may press start to if you'd like to move your question from the que our next question is from david with late with jeffries please proceed with your question hi good afternoon thanks for taking my question sean there's there's been a number of ah a new cat lot to do new company formation in your your biotech target customer base and and moreover enough funding to those companies that are moving forward
spk_3: is there are a size or maturity sweet spot where they become a really of that the they become kind of the perfect target for your sales and software sales or
spk_9: because of his is anybody fair game i'm wondering like how mature to they need to get before they they really are ready to expand capital on your software yeah good question and yeah we yeah we we saw this first quarter ma'am some increase in terms of the biotech companies segment of the of our sales as well as an incubator sales which was very pleasing see advocates indicative of adoption a modeling and simulation in those early earliest stages which historically hasn't been that great
spk_19: we'll deal when do they become a candidate for a software sales welfare to get have someone hired to but i want to have to operate the edge of the software so that said no that's for yeah litmus test in terms of whether we send our a software or expertise business too though the person on that argument that a counter were a service said more business and for person to the accounts that we've been very place there to see their their use of modeling and simulation picking up an end hour that often be against with service as engagements and that they are more quickly and their timelines and hiring
spk_20: modeling and simulation person that into the group seem to the earlier question on the call here we see eg a good slow
spk_8: the a large farmer modeling and simulation scientists as stepping out of large armor to become at the department the modeling it's employees you department at an earlier stage show smaller a biotech companies and that so that's a good time and in one mm example world where as i mentioned before
spk_0: movement during a good dad simulations plus user
spk_9: into a smaller organization creature a very positive approach was great appreciate i answer another question kind of a slightly different access around gross is our i'm wondering at the thinking about phases of them phases of the molecules development life cycle
spk_8: where is is the peak intensity of of uses your products and maybe it's different by product but but more importantly to the question are there are other areas of the life cycle where there are use case opportunities but the intensity of modeling is really you know hasn't picked up yeah
spk_9: they that you see is in all call it a next frontier although that's maybe a little too pollyanna but but the next frontier for the intensity of modeling used to really increase it's fair question you know our products and services spam from discovery to read submission mission and prove ma'am so where you know sort of anecdotal in terms of the use of our products there's no discovery spaces in a very fast growing in terms of it's adoption of modeling simulation we're seeing a lot of from new biotech and that's where those start starter and so and there's a robust growth said in in that phase of development and is bad translation into clinic is one of the pain points in the drug development process in terms of there being more predictive of successful candidate an improving the batting average of those that began the clinical process in succeed empty and modeling and simulation is a primary tool in terms of improving that adding average and selection candidates to move into to the clinic ab identifying true damn clinical trial phases am to looking for
spk_20: proved or dosing regimens for
spk_0: asian particular population said
spk_21: for developing drugs nectar our little bit more smaller market and the and there that often means drugs date or put the ball and smaller populations al a modeling and simulation has great application and avatar and then obviously new improving the as a clinical trial a said where the the
spk_9: as proportion amount of talked about and expenditure takes place in fact that translates into biggest opportunity save money if you take the right candidates in two days three and you design the trial appropriately and then is as is often the case the result to that clinical trial how can they be dash in a way that improves probability of the ft a google afterwards so
spk_3: now i will we we see growth in all areas at me and god
spk_0: modeling and simulations of class at application and meeting

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