Simulations Plus, Inc.

Greetings and welcome to the Simulations Plus first quarter fiscal 2025 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. As a reminder, this conference call is being recorded. It is now my pleasure to introduce our host, Lisa Fortuna from Financial Profiles.

Ms. Fortuna, you may now begin.

Welcome to the Simulations Plus first quarter fiscal 2025 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. In the remarks or responses to questions, management may mention some non-GAAP financial measures. Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP measures are available in the most recent earnings release available on the company's website. Please refer to the reconciliation tables in the accompanying materials for additional information. With that, I'll turn the call over to Sean O'Connor. Please go ahead.

Sean O' Thank you, Lisa. Good afternoon and Happy New Year, everyone. And thank you for joining our first quarter fiscal 2025 conference call. We're off to a strong start in 2025. Total revenue increased 31% year over year. and 5% on an organic basis, including the contribution from our Adaptive Learning and Insights, or ALI, business unit, and our Medical Communications, or MC, business unit. Diluted EPS was one penny. Adjusted diluted EPS was 17 cents. And adjusted EBITDA was 4.5 million, or 24% of revenue. Turning to the macro environment, which continues to be a key area of particular focus for the financial community, We are continuing to face a challenging funding and cost-constrained environment in our sector. Key measures such as funding, pharma budgets, and the number of clinical trials all indicate that activity levels are marginally better compared to the last two years. Additionally, there continues to be a range of activity levels amongst our clients and prospective clients from stagnant to quite active depending on their specific situations. As the calendar year closed out, our clients were clearly turning their attention to planning for 2025. And our client engagement activities were especially robust. We participated in several major industry conferences that presented the opportunity to have positive and meaningful conversations with clients that are deeply immersed in their annual budgeting process. This resulted in new budget proposals and outlined plans to expand modeling and simulation capabilities within our client organizations. While this increased level of interest and activity is promising, we're still taking a cautious stance until spending plans are inked and the timing of those expenditures are finalized for calendar 2025. We are committed to maintaining the disciplined execute in a tough environment approach that has driven our success over the past two years. At the same time, we're ready to capitalize on any increases in client spending. I'm proud of our team who delivered these results despite the ongoing cost-constrained and limited funding environment for our pharma and biotech clients. Turning to our software segment, software revenue grew 41% in the first quarter of 25, 18% on an organic basis with strong performance across our software solutions. Our clinical pharmacology and pharmacometrics or CPP business unit led software revenue growth with Monolix Suite increasing by 43%, including a large pharma client fully committing to PK Analix, our user-friendly and fast application for compartmental analysis, non-compartmental analysis, and bioequivalent studies. During the quarter, we added 12 new customers and had nine customer upsells. Our quantitative systems pharmacology, or QSP, software revenue grew by 40%. And we added model licenses for psoriatic arthritis and Crohn's disease. 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. Our chem informatics or chem business unit software revenue grew by 15%, driven by higher revenues for MadNet Predictor. Additionally, there were four new customers and one upsell during the quarter. Our physiologically-based pharmacometrics, or PPPK, software revenue increased 4% for the quarter. GastroPlus added two new customers and booked four upsells with existing customers. Software revenue in our Alley business unit was $1.7 million, and software revenue in our MC business unit was $0.1 million. Overall, software revenue in these two new business units was in line with our expectations. Turning to our services segment, services revenue grew by 19% in the first quarter of 25, yet declined by 9% on an organic basis. This quarter, our business was temporarily impacted by client-driven data delays that postponed the ramp-up of certain projects into our fiscal year second quarter. PPPK services revenue decreased 9%, CPP services revenue declined 6%, QSP services revenue decreased 14%. Medical communications services revenue was $1.9 million in line with our expectations. On a positive note, services bookings were very strong during the quarter, especially in our CPP MC business units. We ended the quarter with $17.3 million in backlog, up 22% from $14.1 million sequentially. This was successfully achieved during a year-end quarter in which our clients' existing calendar year 24 budgets were depleted, and attention was turning to calendar year 25 activity. The year-over-year decline in services backlog was reflective of cost-driven pullback by our clients during the course of calendar year 24. With that, I'll turn the call over to Will.

Thank you, Sean. To recap our solid first quarter performance, total revenue increased 31% to $18.9 million, including a $3.7 million contribution from the newly formed ALI and MC business units. Software revenue increased 41%, representing 57% of total revenue, and services revenue increased 19%, representing 43% of total revenue. Turning to the software revenue contribution from our products for the quarter, GastroPlus was 38%, Monolix Suite was 21%, AdMet Predictor was 12%, ALI Training Platform was 16%, and other products were 13%. For the trailing 12 months, GastroPlus was 50%, Monolix Suite was 20%, ADMET Predictor was 17%, ALI Training Platform was 6%, and other products were 7%. The trailing 12-month software revenue for the ALI and MC business units only includes revenue since the acquisition of Proficiency in June 2024. During the quarter, our software customer renewal rate was 95% based on fees, and 83% based on accounts, both in line with prior year trends, recognizing the quarterly timing of renewals during the fiscal year. Average software revenue per customer for the quarter increased to $94,000. On a trailing 12-month basis, our software customer renewal rate was 92% based on fees and 83% based on accounts, also both in line with prior period trends. Average revenue per customer increased to $98,000 on a trailing 12-month basis. Shifting to our services revenue contribution by business unit for the quarter, CPP was 37%, MC was 23%, QSP was 22%, and PBPK was 18%. On a trailing 12-month basis, CPP was 40%, QSP was 28%, PBPK was 21%, and MC was 11%. The trailing 12-month services revenue for the MC business unit only includes revenue since the acquisition of proficiency in June. Total services projects worked on during the quarter were 183. Year-end backlog increased to $17.3 million from $14.1 million in the prior quarter. The largest driver of the backlog growth quarter over quarter was in the CPP business unit, while the backlog growth in the other business units remained relatively flat, with new bookings offset by revenue recognized during the quarter. The year-over-year backlog decline is primarily in the QSP and CPP business units, with an increase in the MC business unit. Total gross margin for the quarter was 54%, with software gross margin of 75%, and services gross margin of 26%. On a comparative basis, total gross margin for the prior year quarter was 62%, with software gross margin of 87%, and services gross margin of 36%. The decrease in software gross margin was primarily due to an increase in cost of revenue for the amortization of capitalized software development costs and developed technology amortization from the proficiency acquisition. The decrease in services gross margin was primarily due to the decrease in services revenue on an organic basis with relatively fixed costs of revenue. For the comparative basis reporting, the prior period reflects a reclassification of $0.8 million from G&A expense to cost of revenues in connection with the prior year business unit reorganization. Turning to our consolidated income statement for the quarter, R&D expense was 10% of revenue compared to 8% last year. Sales and marketing expense was 15% of revenue compared to 14% last year. G&A expense on a comparative basis was 28% of revenue compared to 34% last year, and total operating expenses were 53% of revenue compared to 56% last year. Income tax expense for the quarter was $0.1 million compared to $0.5 million last year, and our effective tax rate was 24% compared to 19% last year. Net income for the quarter was $0.2 million, or 1% of revenue, compared to $1.9 million, or 13% of revenue last year, and diluted EPS was $0.01 compared to $0.10 last year. Adjusted EBITDA for the quarter was $4.5 million, or 24% of revenue, compared to $3.4 million, or 23% of revenue last year, and adjusted diluted EPS was $0.17 compared to $0.18 last year. We believe both our adjusted EBITDA margin and adjusted diluted EPS are on track to achieve our fiscal 2025 guidance ranges. The reconciliation of non-GAAP financial metrics to the relevant GAAP metrics is in our earnings release and on our website. Turning to our balance sheet, we ended the quarter with $18.2 million in cash and investments. Consistent with prior year trends, the first quarter cash and investments balance decreased compared to the fourth quarter, primarily due to the timing of prior year annual bonus payments in the first quarter. We remain well capitalized with no debt and strong free cash flow to execute our growth strategy. I'll now turn the call back to Sean.

Thank you, Will. Our strong first quarter results reflected notable strength in software performance across all of our solutions. We're encouraged by our robust services backlog, which should drive sequential improvement in the coming quarters. Also, the integration of our ALI and MC business units continues to be progressing well and is tracking in line with our expectations. Moving on to our outlook for the balance of fiscal year 2025, With our first quarter 2025 results in line with our expectations, we are reaffirming our fiscal year 2025 guidance as follows. Total revenue is expected to be between $90 million and $93 million, and we will still expect Allie and MC to contribute between $15 to $18 million, as previously provided. Year-over-year revenue growth is expected to be in the range of 28 to 33 percent, software mix between 55 and 60 percent, adjusted EBITDA margin between 31 and 33 percent, and adjusted diluted earnings per share of between $1.07 to $1.20. We also expect total revenue for our second fiscal quarter to be approximately 24 percent of our fiscal year guidance range. with a year-over-year growth rate of between 18 and 22 percent. We expect the balance of our full-year revenues to be evenly split in the third and fourth quarters. As a reminder, our guidance does not include the impact of any future acquisitions. Our near-term priorities include successfully completing the acquisition integration, expanding cross-selling opportunities, and driving towards our historical adjusted EBITDA margin target of 35% to 40% and corresponding profitability levels. We are well-positioned to achieve our goals this year and remain focused on executing our disciplined growth strategy to deliver long-term value to shareholders. Thank you for your time today. And with that, I'll now turn the call over to the operator for your questions.

Great, thank you. We'll now be conducting a question and answer session. If you'd like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two to remove yourself from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.

One moment, please, while we pull for questions. First question is from David Larson from BTIG. Please go ahead.

Hi. The number that stuck out to me this quarter was the software revenue growth up 41% year-over-year. That's good. What's even better, I think, was I think you said it was 18% organic revenue growth. Can you maybe just talk about, I think last quarter the organic software revenue growth was like minus 6%. Why the huge positive rebound sequentially? Any call there would be very helpful. Thank you.

Sure did. Yeah, great quarter on the software side and really healthy across all of our platforms. The highlights during the quarter sourced in our CPP platform, the Monolix platform, where we continue to see significant uptake both in the context of the expanding existing license holders there, expanding the footprint with upsell there, extending to new logos. And of note, during the quarter, we had a large pharma account commit 100% to the use of PK Analytics, the NCA component of the Monolix suite, which is a significant step forward, obviously, with any client. Also very significant progress on the QSP front where we had some significant license activity in two therapeutic areas that bodes well both in terms of the acceptance of those therapeutic models and the value in them in general for license to more broadly in the industry. But as well with those two specific clients, their commitment and partnership with Simulations Plus as their QSP partner and anticipate that they will expand into other therapeutic areas with us on the QSP side as well. So certainly those two areas were, you know, delivered very strong results this quarter. But across the board as well, and as we identified previously, towards the end of the year, a focus in terms of our Asian market. If you look to those numbers, which I think are in the 10Q that was filed today, you'll see that 30% growth in the Asian market, which is pretty much essentially software revenue, good results and good start to the year in that geography as well. So quite pleased, you know, our software revenue because of the recognition Up front can be seasonal as a result of what renewals are coming up from renewal in a given quarter. In this first quarter, the start of this year, we've kicked off the year very strong on the software side.

Okay, and just any color on maybe pricing? Are we thinking like mid to high single digits? And then isn't software sort of a more leading indicator of the overall health of the business? I mean, services, you have consulting engagements that can be lumpy. It seems to me like software is sort of a core metric for the overall health of the business. Just any thoughts on pricing and those comments there? Thanks.

Sure. Yeah, no, certainly we're focused on the software side of our business. Both are important software and services in terms of how we support our clients, but our model and our strategy has always been in terms of a lean-to on the software side because of its obvious benefits in terms of consistency, recurring revenue, profitability, margin. So a leading indicator certainly in terms of the health of the business is the growth of our software segment of our business. In the context of price increase this year, yeah, mid-single digits is where we typically fall in our history, and this year is – is going to be in that same ballpark.

Just one last quick one for me before I hop back in the queue. What was the gastro plus year-over-year software revenue growth? It looked a little light. Is that 3% year-over-year?

Yeah, it's 4%, I think. Maybe we're rounding up or rounding down there, but I think it was about 4%. Yeah, there we had good results out of Asia. which is predominantly gas row plus, you know, decent uptake in terms of some upsells, relatively low in terms of new logos. It's a little bit bigger price point. And I think, you know, our view is that some of those newer clients are waiting until after the new year budgets in 2025. But, you know, healthy, you know, activity, uh, in terms of, uh, our pipeline and gas for plus no, no change in our outlook there.

Okay. And one last quick one. When you say Asia, how much of Asia is China?

Uh, China's relatively smaller portion there. Uh, Japanese market is probably the largest, uh, uh, contributor, uh, in our Asian, uh, marketplace, uh, uh, India, Korea, uh, and then, uh, probably China coming up, uh, fourth.

Okay, great, because China's been under pressure. Thanks very much. I'll hop back on the queue next quarter.

Sure, take care. Our next question is from Francois Brisebois from Oppenheimer & Company. Please go ahead.

Hi, sorry for the background noise, and sorry if I missed this. I think I got disconnected from the call for a bit, but I just wanted to hear more about the measure pharma commitment and its impact on the quarter you just reported. Was that a commitment that you had expected, or was that a surprise? Just a little more color there would be helpful.

Sure, Frank. The large pharma commitment in terms of PTA analytics is what you're referring to, I presume. And, boy, I wish these things came in surprises, but no. Healthy, hard work in terms of the business development team. working with them for some time leading to this sort of commitment. They were a license holder of the application, getting them over the barrier in terms of a full commitment, something we've been working on, anticipating we would get there, and that came through this quarter.

Okay, great. And then just on the... Oops, sorry. On the services side, the temporary postponing, is that something that affects the rest of the year or is this kind of a lump sum in the second quarter that we expect it to hit and then everything else should be back on track?

Yeah, you know, I think what we're seeing is as we closed out the calendar year of 24, the constraints on budgets through the course of the full year there, you know, depleted their budgets for spending. what is our first quarter, but effectively the last budget quarter of our clients' 24-year. Our bookings activity was quite robust, and our backlog is now, the metric is about 90% of it is realizable within a year. So a lot of activity from clients, some of which was booked and some of which is ongoing discussions in terms of planning for project activity in 2025. Some of that's in the second quarter here, the first quarter of the calendar year. Some of that spreads out into third and fourth quarter. You know, the delays that we saw in the fourth quarter, similar to delays that we've been seeing each of the last several quarters in trying to mix and match projects that will run to time estimates and those that will be pushed off, you know, May this first quarter. a bit challenging for the service team. But, you know, based upon the good bookings that we had in the first quarter, our visibility to that time and factoring in that, hey, nothing goes perfectly to schedule, you know, no change in our outlook in terms of the service business into the second and back half of the year.

Thank you, and congrats on a solid quarter. Thanks, Greg. Next question is from Max Smock from William Blair. Please go ahead.

Hi, it's Christine Raines on for Max Smock. Thanks for taking our questions. Just digging a little bit more into your previous comments, you discussed some promising conversations with large pharma companies as they went through their process of setting their 2025 budgets, but also noted that all these deals haven't been finalized. Just hoping you can give us an idea of how much of this incremental business has been contracted. And now that we've closed out the calendar year, if you have any idea of how your large pharma clients in specific their budgets for modeling and simulation in 2025 compared to 2024 and how this reflects on your initial booking expectations. Really just trying to get at if you think we're at a bottom for large pharma demand or if you think there's a potential other shoe to drop this year. And if we're at a bottom, then what is kind of your sense of a timeline for a rebound? Thanks.

Let me pull my crystal ball out and see how well I can respond on this one. You know, it was a very good quarter in terms of our discussions with our clients, a quarter in which we had – a couple of our more significant conferences in our industry. So a lot of face time across the board at all levels with our clients. And I'd say the thing I walked away from those conversations with, I'll come back to the specifics of bookings and timings and all that sort of thing, but certainly a strong commitment on our clients and appetite to expand their use of modeling and simulation in their programs. I think we are a set of solutions that can provide efficiency and better ROI on programs, and this has been their learning lesson during this past year or two of budget crunch and trying to improve their effective delivery. of ROI to their shareholders. And so I certainly walked away from the last few months of discussions with clients. Our clients are very committed and see the strength and value of what modeling and simulation can do in improving their performance. And good discussion in terms of collaborative partnerships, something that Simulations Plus has always been very good at in terms of partnering with our clients. And a number of these discussions were quite extensive in terms of how can we form an even closer alliance and work together. So strong commitment out of our client discussions. over the last three months. Inevitably, we worked that down to what's the budget and what's the project outlook, what's the modeling department need for more tools, expanding of our platform usage, and those discussions were good. Some commitments have come in already. Much of the discussion was in the context of what they were going to put into their budgets in their calendar year 25. Getting it into the budget and getting it approved is that first hurdle. That next hurdle is then their rollout. They don't roll it all out on January 1st. It's spread their spending through the course of the year. So as of mid-January or first week of January, people are just getting back and we're getting good calls and conversations going in terms of how do we roll this out. Are their budgets greater than last year? What's the relationship? Is it spending on the uptick? You know, boy, we don't get visibility to that level. Certainly our discussions with them and their planning process indicates such. But overall, you know, we're going to continue to take... that cautious, optimistic outlook here that, hey, there's some bright lights, good discussions, some promise for a pickup in the industry. We're going to live that as it occurs and be ready to execute at the levels that we've been operating at or step up and respond to higher spend rates in our industry going forward. I'm confident that it will be somewhat a better environment than it was last year, but let's see how it plays out.

Great, thank you. I appreciate the detail there. I'm also hoping you can give the contribution from proficiency in software versus services and discuss both the total top line and margin contribution from proficiency in the quarter aligned with your expectations or if a ramp is needed to hit the 15 to 18 million sales target. And similarly, just on margins overall in services, if utilization has improved there and how that kind of plays into the cadence for the year.

I'll give Will a heads up to respond on some of those numbers. I'll talk in general. Contribution from adaptive learning insights and medical communications, the two business units of proficiency right in line with both expectations in general as well as in the context of the 15 to 18 million that we've guided in terms of their revenue contribution. They're settling in well from an internal perspective in terms of integration to the SimulationsPlus organization. The activity level in the marketplace is very active, both in terms of the continuation of their business development efforts as part of the larger business development team, their existing accounts and pipeline, as well as cross conversations of introductions across the two entities, if you will, in terms of our introduction our clients and their introduction of legacy SQP products into their client base. In terms of specific revenue numbers and the others, Will, you want to comment?

Sure. And I would definitely point you to the earnings deck that we put out that has some of this detail. But the two business units for software, it was about $1.8 million for the quarter. and 1.9 million for services.

Great. Thank you both. And last, just one quick one for me. Just hoping you can give some more color on the data delays and kind of what's behind that and a resolution timeline.

I don't think it ever fully resolves. I think this is the reality of drug development today. It's the banner headline of fail fast and reallocate resources to programs that have a higher likelihood of success. That is going to result in terms of a higher frequency of resource allocation decisions on the part of our clients. So You know, it's something that we encounter on a quarterly basis, have in the past. We've seen that frequency increase. And I don't think we reach an end date in which that activity – it's always going to ebb and flow quarter by quarter. But it's the reality of the business model of development right now. So – A little bit more activity than typical in the first quarter. As we take a look at our backlog and our pipeline, we had a very robust bookings quarter on the service side. Mostly success, and those projects are teed up. Naturally, there will be some shifting of plan timing for them down the road, but it certainly starts out the year with good backlog, too.

fuel our service expectations in fiscal year 25. Great. Thank you so much. Next question is from Scott Schoenhaus from KeyBank Capital Markets. Please go ahead.

Hey, team. Thanks for the – most of my questions have been asked, but I just wanted to get a sense, This back half ramp, has anything changed in the last 90 days based on that commentary? And specifically, this is a follow-up to a previous question that was asked about the services revenue flowing into 2Q. Should it all flow back into 2Q that was lost in 1Q? I just want to get some clarity around it. Is there an air pocket in 2Q that's causing the back half commentary, or was it always that you thought of this year as having a back half ramp? based on what you're seeing in the industry? Thanks.

Yeah, fair question, Scott. You know, our seasonality by quarter, you know, software is the bigger impact there in terms of the sequency of renewal, renewals that take place on a quarter to quarter, but some seasonality on the service side. You know, we've seen historically second and third quarter being sort of peaks and fourth quarter, a little bit of a step down. Our comment there was just sort of recognizing that, hey, a lot of this project activity and budgeting discussions, that's not all going to close and be handed out and driven to revenue in the first half of the year. If budgets pick up, if the activity level picks up, it's going to go through the typical sales pipeline activity timeframe, you then get project performance that ultimately leads to revenue and probably pushes some of that service revenue to the back end of the year. When we say push-off here, we're talking about we've guided to 24% of our revenue being in the second quarter. In the past, it's been 26%. So we're not really talking about a big push-off to the back half of the year. We just wanted to make sure people's expectation in terms of consensus revenue for second quarter was on target.

Great. Thank you so much. Next question is from Matt Hewitt from Craig Howell. Please go ahead.

Good afternoon. Happy New Year, guys.

How are you doing, Matt?

Pretty good. So maybe first up, so I think I heard you say total organic revenue growth in the quarter was 5%. I realize maybe not everybody's reported, but do you have a sense where the market shook out for last year? Historically, it was kind of mid-teens, obviously, and you noted that the last couple of years have been challenging. So below that, but do you have a sense where the market was last year?

You know, we've got to wait and see some of the other reports come out to get visibility there. I think, you know, many of the peer group reporting that I saw whittled down to, you know, our comparable modeling and simulation components. You know, while our 24 growth was significant up at 14 percent level organically, I think Most of our peers were in the single-digit area. Our organic growth in the first quarter, I think you're right, it was 5%, 6%, something like that. But essentially within our expectations and our guidance as anticipated.

Got it. And then... One of the opportunities when you acquire proficiency was that it expanded the market opportunity in that you basically got to move into the commercial budgets within your customer partners versus just in the modeling and simulation and kind of the earlier stage work. Are you seeing some of the benefit? I mean, some of the comments that you've made today indicate that you are still facing some headwinds in Q1, but are you starting to see some of that new budget opportunity open up to you because of the acquisition?

The acquisition opened us up into two new budget areas. One is clinical operations and probably the most important budget, most adjacent budget in terms of the potential to see opportunities for synergy, if you will, between the modeling and simulation by the simulation solutions that we have and the training platform that is sold into clinical ops. The second budget that it opened us up into is medical affairs, both pre-approval and commercial budgets in that regard. And I think we're going to see the play out of the opportunity and expansion in those budgets to roll in that sequence. I think clinical operations first and leading ultimately on the commercial side. The proficiency operation of medical communications business unit internally today that is selling through to that. commercial medical affairs budget, very robust, had a good bookings quarter. And as we're learning, a more dramatic front end budgeting process that gives visibility to their business for the coming year. It's a little bit played out a little bit more explicitly. And so the good first quarter bookings quarter was a good confirmation of our expectations for medical communications in that regard into the latter part of the fiscal year here.

Got it. And maybe one last one, and I don't know if you're going to even have this handy, but I thought I'd ask. Obviously, the press release, it kind of notes that there was some data delays that prevented getting some of those service contracts going pushed them into Q2 and later in the year. And then on the call here, you've kind of mentioned, at least earlier in the prepared remarks, that there was some budgetary constraints. Is there a way to kind of parse out the delta between the two? How much of it was budgets versus data backlog or data delays?

You know, difficult to quantify there for you, Matt. And as I said before on the You know, the budget constraint side, you know, that is just, you know, we're operating our first quarter and the last quarter of the calendar year budgets for our clients. And like my son, sometimes when it gets to the end of the year, the end of the month, he spent all his money in the beginning of the month or the beginning of the year, the end of the timeframe becomes a little bit more difficult than that. I would characterize that. on the budget constraint side, the activity level. With regard to project delays, I've also commented in that regard that, hey, it's something that is encountered every quarter. Some quarters are going to be a little bit more populated with project delays and changes than others. That's what took place here in the first quarter for us. But it's an operating environment or phenomena that we will have to become adept at on an ongoing basis because it doesn't go away. That quarter in which there are no data delays or project delays in any of our expectations from the beginning of a quarter, I think that may be in a rearview mirror. We're always going to have that sort of existence.

Got it. Thank you very much. The next question is from Jeff Garrow from Stevens. Please go ahead.

Yeah, good afternoon. Thanks for taking the questions. I want to ask a little bit further on the ALI and MC contributions being in line with your expectations and doing the math there that annualizing the contribution you saw here in your fiscal first quarter will put you at the low end of the range you've set. But I'd like to think about that whole range of outcomes that you've outlined. And I was hoping you could comment a little bit further on the seasonality of that business here. catalysts you might see for the rest of the year, and then maybe outside the revenue contributions, just next steps for the integration of that piece of the business with the broader operation?

Sure, Jeff. You know, the alley side, the clinical simulation side, probably, you know, patterned similar to biosimulation project support for clinical trials. So when are those clinical trials going to take place? And so the seasonality for that side of the business kind of mirrors ours. And the year-end calendar quarter, our first quarter, not the most robust quarter for that, they'll be peaked in the you know, first three quarters of the calendar year, so our second through our fourth quarter. Medical communications, as I commented before as well, most of their program efforts are not going to take place in November, December, you know, sort of time frame. So they're probably similar, but maybe even a little bit more skewed towards what would be our fiscal year third and fourth quarter. Next steps in terms of the integration there, settle into operating regimen within the greater SLP company. We've undertaken most of the major steps to achieve internal integration. We've got the business development team integrated and a comprehensive go-to-market with regard to all of the solutions on a combined basis now putting those feelers out and beginning that networking of the proficiency spider web of relationships within clients and our spider web and trying to increase the number of conversations that lead to leads that fuel the pipeline for future business down the road. So next steps are really more market-driven as opposed to internal kernel.

Understood. That helps. And then I wanted to ask one around the macro environment. You know, you said the funding challenges and cost constraints and the press release and then hearing your remarks, you said a wide range of activity levels, wide variance by client. So I want to ask if there's any pattern by customer size or therapeutic area or stage of clinical development work or any other vector there.

Yeah. Well, I think you can, you know, the basic answer is no. It kind of is all over the map. There are some, you know, trends, if you will, that are probably obvious in terms of on a company perspective, look at those companies that are being a little bit more aggressive and a little bit better financial position out there, Novo Nordisk type of scenario versus some that may be still struggling in terms of their own financial reporting. from a therapeutic area. You know, oncology still is singing loudest out there. And so activity level in that therapeutic area is up. Obesity is up, but, you know, it's still, you know, sort of a trickle down in terms of clinical trial activity in the obesity space. A lot of attention, a lot of early programs start that clinical trial activity is still to follow. So, yeah, there's some trends in there, but it's pretty sporadic. I walked into a customer meeting wondering what's going to be the tone of this one with some ability to predict that's not perfect.

Appreciate that. Thanks for taking the questions. Thanks, Jeff. This concludes the question and answer session.

I'd like to turn it forward back to management for any questions.

Very good. Thanks again for joining our call today and for your interest in SLP. In the next few months, we'll be attending a few key events. In early February, the company will be at SCOPE, a flagship conference for clinical operations executives, so a top conference for our Allie and MC business units. For the financial community, in January we'll be holding meetings during the JPM Annual Healthcare Conference next week. And in February we'll be attending the BTIG MedTech and Digital Health Life Science and Diagnostic Tools Conference and the Oppenheimer Annual Healthcare Life Science Conference as well. Hope to see you there. or speak to you soon. Thanks for your attention. Take care.

This concludes today's teleconference. You may disconnect your lines at this time. Thank you again for your participation.