Simulations Plus, Inc.

Greetings and welcome to the Simulations Plus First Quarter Fiscal 2024 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 Tamara Gonzalez from Financial Profiles. Thank you, Ms. Gonzalez. You may begin.

Welcome to the Simulations Plus first quarter fiscal 2024 financial resource conference call. With me today are Sean O'Connor, Chief Executive Officer, and Will Frederick, Chief Financial Officer and Chief Operating Officer of Simulations Plus. Please note that we updated our quarterly earnings presentation, which will serve as a supplement to today's prepared remarks. You can access the presentation on our investor relations website at www.simulations-plus.com. After management's commentary, we will open the call for questions. As a reminder, the information discussed today may include forward-looking statements that involve risks and uncertainties. Words like believe, expect, and anticipates refer to our best estimates as of this call. There can be no assurances that these will actually take place. So, our actual future results could differ significantly from these statements. Further information on the company's risk factors is contained in the company's quarterly and annual reports and filed with the Securities and Exchange Commission. With that said, I'll turn the call over to Sean O'Connor. Sean?

Thank you, Tamara. Good afternoon, everyone, and thank you for joining our first quarter fiscal 2024 conference call. Results for the first quarter fiscal 2024 played out as anticipated. We delivered solid revenue growth of 21% and diluted earnings per share of 10 cents in line with our guidance for the full year. Our team performed very well in what is still a softer environment for our biotech and pharmaceutical clients. A few notes on the background behind our results. As our clients closed out their fiscal years, we saw the usual spend before you lose in 2023 activity, a rush to use allocated budgets before the year end. Even though the spend fell short of previous year end highs, we were encouraged that it was greater than what we saw last year. We also gained insight into our clients' budgets for fiscal 2024. Some have more aggressive budgets, while others have more cautious, as the industry's portfolio of drugs that are going off patent looms on their horizon, causing them to be more conservative on spending. Funding for biotech continued to show signs of life, but again, was still well below the funding levels of two to three years ago. Importantly, our leadership in AI and predictive analytics continued to accelerate discovery efforts and improve clinical outcomes for our clients. For context, we have been utilizing AI techniques and approaches in our solutions since our beginning. As AI technologies have evolved, we have enhanced our AI solutions and experienced the benefits that can be harnessed with better data access, algorithm training, and predictive accuracy. Our tenure in serving the drug development industry has provided significant access to private and public data necessary to perfect and refine predictive algorithms. partnerships, and collaborations with industry leaders and regulatory agencies is unmatched and provides us with ongoing means to continue this into the future. Moving to our software segments performance, software revenues increased 25% for the quarter, reflecting good renewal activity and converting in active and strong PEC pipeline. Our physiologically-based pharmacokinetics, or PBPK, business unit, had a strong quarter. Revenues increased 27% for the quarter, reflecting some spillover from the fiscal fourth quarter 2023, and a diminishing impact from small biotech client renewals that previously weighed on results. GastroPlus was referenced in 21 peer-reviewed journal articles, and the PPPK business unit added six new customers. The team also booked nine commercial client upsells. In our clinical pharmacology and pharmacometrics, or CPP, business unit, revenues declined 1%. Biotech churn still exists in CPP, where we lost eight customers whose total revenue was only $120,000. In total, CPP added nine new customers and had 10 customer upsells in the quarter, with one renewal shifted to the second fiscal quarter. Our cheminformatics business unit saw revenues increase 3% in the first quarter. There were two non-renewals, one from a small biotech, and one renewal that was delayed for renewal later in calendar 2024. The team booked five upsells during the quarter and added two new customers. In our quantitative systems pharmacology, or QSP, business unit, revenues increased 219%. reflecting a new license to an existing customer for the QSP oncology modeling platform. No new customers were added during the quarter, and the team booked one upsell. We were pleased with this quarter's results, but given the large per-license dollar amount and smaller client volume associated with this business, quarterly outcomes can be lumpy. Looking at our services segment, revenues grew 17% during the first quarter. Services had a good start to the fiscal year as the momentum out of fiscal 2023 continues. Overall, services saw more choppiness than usual in project flow due to data and other client-related delays that impacted project deliveries. Services revenues in our CPP business unit were up 12% in the first quarter, a good outcome. CPP completed 67 projects in the quarter, and continued its momentum from the end of the fourth quarter with excellent bookings. In our QSP business unit, services revenue grew 100% for the first quarter, including the benefit from the Inunetrix acquisition. The team completed 27 projects during the quarter, with one cancellation from a large client that negatively impacted overall backlog. Services revenue in our PBPK business unit declined 12% in the quarter. as revenues were negatively impacted by client-related data delays and affected project deliveries and milestones. During the quarter, the team completed 63 projects. Given the pipeline, the outlook for PVPK looks solid for the year. The immunetrics integration continues to go well. Immunetrics has an active pipeline, reflecting inherited leads and new leads sourced in the SLP client base post-acquisition. Overall, the QSP team is executing very well and is collaborating on projects. Before turning the call over to Will, I'd like to call your attention to a separate release that we issued simultaneously today announcing four key leadership appointments, each effective today. First, Will Frederick is assuming the additional role of Chief Operating Officer. Will has been with Simulations Plus since 2020 and has demonstrated excellent operational leadership over this time. In his new role, Will now oversees operations for all of our business units. Second, we're pleased to welcome Dan Zott to the Simulations Plus team in the new role of Chief Revenue Officer. Dan has over 20 years of enterprise sales experience across all phases of drug development in large organizations. In this key role, Dan oversees the sales and marketing teams to identify collaborative cross-selling opportunities and enhance productivity. Third, Josh Foley is transitioning to Senior Vice President of Operations and will leverage his customer insights to provide client-focused leadership across all business units. And finally, Dr. Sandra Suarez-Sharp has been promoted to President, Regulatory Strategies. Sandra is responsible for expanding our regulatory strategies business unit, a critical, fast-growing component of our overall services offering. These appointments recognize the experience and proven contributions of each of these leaders. Importantly, we share a common vision of always putting our clients first as the best possible way to ensure long-term sustainable growth. I'd also like to take a minute to thank those of you who attended our first Investor Day in November. We had a great turnout, and the feedback has been positive. In addition to a deep dive into our business, we also outlined our new organizational structure. With this new structure, we reorganized the companies we acquired over the years into five business units that correspond to the scientific domains in the drug development process in which we have expertise. This structure aligns with how our clients do business with us and encourages cross-selling and collaboration. Our team continues to deliver tremendous value to our clients, providing customized services and easy-to-use software offerings, each of which is at the core of our business model. And with that, I'll turn the call over to Will.