Simulations Plus, Inc.

Greetings and welcome to the Simulations Plus Third 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 full 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 third quarter fiscal 2022 financial results conference call. With me today is our CEO, Don O'Connor, and CFO, Will Frederick. After their portion of the call, we will open the floor to questions. Before we begin, 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 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 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 and filed with the United States SEC. With that said, I would like to turn the call over to Sean O'Connor. Sean? Thank you, Brian.

We had another strong quarter with growth across both our software and service businesses and encouraging underlying data supporting our long-term view for sustainable top and bottom line growth. The 17% revenue growth was purely organic. Our software business grew 16% year over year, an accelerated growth rate compared to last year. We experienced growth across all our client segments, but saw improving penetration into smaller customer accounts. This is an indicator of deeper adoption of modeling and simulation throughout the industry. In addition, initiatives to grow our geographic presence and expand cross-selling are benefiting our software business. As I said last quarter, We expected our services backlog to support increased revenue growth during the second half of our fiscal year. In this quarter, we experienced this with service revenue increasing 19% in the quarter. We maintained strong operating leverage during the quarter, generating significant profitability and free cash flow. EPS grew to 20 cents per share, and our adjusted EBITDA margin was 42%. Moving to our third quarter software highlights, GastroPlus revenue increased 19%. We signed six new commercial clients and made 14 upsells. Additionally, we saw good growth from Asia despite significant foreign currency exchange rate impacts. I'd also note that GastroPlus was referenced in 16 peer-reviewed journals during the quarter, supporting our progress in making simulation and modeling mainstream in drug development. In April, we announced a new funded collaboration with a large pharmaceutical company to expand and validate the mechanistic in vitro dissolution models using DDD Plus software. Recent enhancements to the tool have focused on improvements to in vitro analysis. Through this new collaboration, we will expand into the injectable product space and apply our novel approaches to capture disillusioned kinetics within in vitro systems designed by our industry partner. This funded collaboration is specific to DDD+, but the results will benefit users and developers of GastroPlus. Monolix Suite revenue increased 8% for the quarter and is up 31% year to date. Growth rates declined in the quarter due to the timing of renewals. We signed 10 new commercial clients and the pattern of significant upsell upon renewal of existing customers continues. We continue to believe that Monolix Suite is taking market share in established markets and expanding its addressable market geographically in China and Japan. Admet Predictor delivered 7% revenue growth in the quarter, but is still up 14% year-to-date. We added six new commercial customers and had nine upsells in this quarter. We released version 10.4 of ADMET in the quarter, allowing users to create 3D chemical structures within the software to access property prediction models derived from our cutting-edge 3D descriptors. Turning to services, PKPD revenue increased 29%, reversing recent trends and increasing our year-to-date growth in this area to 4%. Our good bookings result in the first half of the year contributed to a 69% year-over-year increase in the number of projects worked in the third quarter. Encouraging trends include increased consultant utilization, normal volume of project disruptions, and higher project pricing yields, which contributed to margin expansion. With improved bookings and a higher backlog, we are optimistic about the prospects for our PKPD services business overall. During the quarter, Lixopt and Cognigin completed a newly funded project from the U.S. Food and Drug Administration and the Center for Research on Complex Generics to establish the suitability of model integrated evidence to demonstrate bioequivalence for long-acting, injectable, and implantable drug products. We proposed a novel delivery design to alleviate bioequivalence trials lower power, or long duration for long-acting injectables. The results were presented at an FDA-sponsored workshop. This project was a great opportunity to leverage our scientists and developers across the organization to show the need and relevance of the population modeling approach for LAI products and bioequivalence calculations. QSP QST revenue increased 1% for the quarter and has grown 4% year-to-date. As you recall, this segment saw significant bookings acceleration in Q2 that allowed the QSP and QST team to commence planning and initiate many of these projects in Q3. Revenue from these projects will more fully impact future quarters. PBPK revenue increased 83% this quarter and is now up 37% for the year, and the number of projects is up 152%. The performance reflects the deeper implementation of PBPK modeling into new use cases and an increase in the perceived value of these projects and the impact on drug development cycles. Overall, our services backlog continued to grow, increasing 34% during the quarter, providing further evidence that the challenges and disruptions in the second half of last year are behind us. On the heels of our robust performance year to date, heading into the fourth quarter, we are currently at the high end of our 10 to 15% revenue guidance for the full year. Given that we are nearly halfway through the quarter, we're comfortable narrowing our guidance range to $52 to $53 million, or 12 to 15% growth. Within these ranges, we expect software to be approximately 60% of total revenue. Note that the fourth quarter is typically our seasonally slowest quarter. On the software side, the seasonal impact is especially prominent for Lixsoft, where buying decisions are typically made early in our fiscal year, driving higher revenue growth rates in the first half of the year. On the services side, it is common for projects to be pulled forward into our third quarter or pushed out of our fourth quarter into our fiscal first quarter. This is due to our customers taking vacation time during the summer months, especially in Europe. Concerning M&A, we continue to evaluate opportunities, and we are seeing some levels of valuation rationalization. We will update you when there is something to announce. Let me now turn the call to Will to discuss the financial results.