Simulations Plus, Inc.

Greetings and welcome to the Simulations Plus fourth quarter and fiscal year 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 call is being recorded. It is now my pleasure to introduce Lisa Fortuna from Financial Profiles. Ms. Fortuna, you may now begin.

Good afternoon, everyone. Welcome to the Simulations Plus fourth quarter and fiscal 2024 financial results 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, and 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, I'll turn the call over to Sean. Please go ahead.

Thank you, Lisa. Good afternoon, everyone, and thank you for joining our fourth quarter in fiscal 2024 conference call. Our team delivered strong results in 2024. Total revenue increased 18% year over year. and 14% on an organic basis, excluding the fourth quarter contribution from proficiency. The organic growth rate was above the 10.5% growth rate we achieved in fiscal 2023, and at the high end of our guidance provided at the beginning of the fiscal year. Full year diluted EPS of 49 cents exceeded the high end of our guidance range of 46 to 48 cents. Turning to key highlights of the year, as an industry leader in biosimulation software tools, we continue to improve our competitive edge during fiscal 2024 with major upgrades across our platform supporting PBPK, PKPD, and drug discovery. Our release of GPX in May significantly enhanced our flagship GastroPlus PBPK platform with advanced models, refined algorithms, and integrated machine learning technology. GastroPlex Plus X greatly enriches the user experience with an intuitive interface, streamlined workflows, and faster processing. In May, we released Monolix Suite 2024. This release included integrations, presets, and other upgrades that make the software easier and faster to run, allowing scientists to spend less time on programming and more on exploring models and simulation results. In July, we released AdMet Predictor version 12, our machine learning cheminformatics platform in support of drug discovery. The release included enhanced models with greater predictive accuracy and expanded high-throughput pharmacometrics capabilities, amongst other new features. During fiscal year 2024, we continued to supplement our organic growth with strategic acquisition accomplishments. We completed the integration of our June 2023 acquisition of Pimientrix. The combined scientific resources and therapeutic area coverage positioned us as a clear leader in the fast-growing area of quantitative systems pharmacology. The 57% growth in fiscal year 24. This June, We acquired Proficiency, the largest and most significant acquisition in our company's history. The transaction doubles our TAM to $8 billion and significantly expands our market opportunity. This addition enhances our ability to support clients across clinical operations, medical affairs, and commercialization. Our comprehensive suite of innovative solutions now spans the entire drug development continuum and uniquely positions us to drive growth and profitability. Next, I'll spend a moment on the macro environment, which we realize is an area of particular focus for the financial community. Spending environment for pharma and biotech has been cost and funding constrained for a second fiscal year. Current leading indicators, including pharma budgets, clinical trial activity, funding activity, and others, provide a mixed bag of metrics for the next year, but suggest a potentially improved environment compared to the last two years. We continue to observe a wide range of activity levels among our clients, many who are engaged in their internal calendar year 25 budget preparation process. Although we are encouraged by some positive initial budget discussions for 2025, we are entering the year with cautious optimism. Our guidance for fiscal year 25 is based upon current market conditions continuing, but we will be prepared to take advantage of any improvement in our clients' spending during the year. Turning to our software segment, software revenue grew by 12% for fiscal year 24, 9% on an organic growth basis. Software revenue grew by 6% for the fourth quarter, and decreased 6% on an organic growth basis. Kim Informatics business unit revenue grew 6% for the year and 1% in the fourth quarter. During fiscal year 24, we have grown the number of clients utilizing the AIDD module to 15 of our total installed base of 110 ADMET predictor clients. Physiologically based pharmacokinetics or PBPK business unit Revenue increased 7% for the year and decreased 8% in the fourth quarter. GastroPlus continues to grow well despite some renewal slippage in the fourth quarter and ongoing software growth in the Asian markets. Clinical Pharmacology and Pharmacometrics or CPP business unit revenue grew 18% for the fiscal year and 20% during the quarter. Monolix continues to increase its market share and displace its main competitor as the PKPD platform of choice. Revenue in our Quantitative Systems Pharmacology, or QSP, business unit grew 7% for the year, yet decreased 67% for the quarter. As a reminder, quarterly results can be lumpy for QSP software based upon the high ticket price per license and a smaller pool of end users. Revenue in our adaptive learning and insights or alley business unit was 1.1 million for the fourth quarter, generally in line with our expectations. Revenue in our medical communications or MC business unit was $100,000 for the fourth quarter, also in line with our expectations. Turning to our services segment, services revenue grew by 26% for fiscal year 24, 21% on an organic basis. Services revenue grew by 39% for the fourth quarter, 21% on an organic basis. We're pleased with this result given client cost constraint measures typically impact external service budgets as clients may eliminate project work or delay execution in tighter funding environments. Performance was especially strong in our CPP and QSP business units. CPP business unit revenue was strong, up 19% for the fiscal year and up 28% in the fourth quarter. USP business unit revenue grew 57% for the year and 32% in the fourth quarter. TBPK business unit revenue decreased 5% for the fiscal year and 6% for the fourth quarter. We continue to encounter client source data delays impacting the initiation of contracted projects in this space. Medical communications revenue was $1.1 million in the fourth quarter. This contribution was less than anticipated due to higher revenue recognized in the quarter prior to our acquisition, as well as some project timing delays. Turning to an update on proficiency, as a reminder, proficiency provides experience in content simulation developed with AI technologies to enhance clinical trial success, data analytics, and medical communications, both in the regulatory approval process as well as post-approval commercialization. Ultimately, these activities support increased confidence in regulatory success for our clients. In addition, proficiency meaningfully expands our customer return on investment by helping them achieve accelerated clinical trial cycles, reduce protocol deviations, reduce cost of clinical trial operations, and improve market awareness. The combined product and service portfolio results in offerings across the pharma value chain. Software offerings from Proficiency include Proficiency Performance Management, an adaptive learning platform that uses lifeline simulation and detailed data tracking to increase recruitment, retention, and protocol compliance during clinical trials. In simulations of complex real-world scenarios, learners are asked to make decisions and practice implementation of the trial protocol. The data generated provides insight into areas of the trial protocol that are unclear to healthcare practitioners, enabling clarification and further education prior to the start of clinical trials. Panorama KOL Insights is a platform for key opinion leaders research in the life science industry. It provides current information about influential industry leaders, which can be filtered by criteria including, but not limited to, therapeutic expertise, professional affiliations, and geographical location. We're pleased to report that the integration process is tracking ahead of plan across all fronts. As previously announced, we formed two business units, adaptive learning and insights to carry forward with our clinical simulations business, led by Jenna Rouse, and medical communications, led by Murray Alpert, who do address medical affairs and commercialization support for our clients. On the sales and marketing front, our combined go-to-market strategies and lead generation are underway. We expect these efforts to contribute to business development opportunities. Together, our scientific and technological capabilities are expected to deliver enhanced products and services, which further benefit our clients. And additionally, we have integrated our back office financial, operational, and general administrative organizations, which we expect will contribute to efficiencies and expense safety. With that, I'll turn the call over to Will.