Simulations Plus, Inc.

Greetings and welcome to the Simulations Plus second 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 phone presentation. 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 begin.

Good afternoon, everyone. Welcome to the Simulations Plus second quarter 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 have 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.simulationsplus.com. 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 anticipate 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 and 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, everyone, and thank you for joining our second quarter fiscal 2025 conference call. The momentum we reported at the beginning of 2025 continued into the second quarter. We're pleased to report that total revenue increased 23 percent year over year, and 5% on an organic basis, excluding the contribution from our adaptive learning and insights and medical communication business units. Diluted EPS was 15 cents, adjusted diluted EPS was 31 cents, and adjusted EBITDA was 6.6 million, or 29% of revenue. Turning to the macro environment, our operating environment remained unchanged from last quarter. And in line with recent trends, our customers are still taking a cautious, cost-conscious approach to spending. In our software business, which provides biosimulation infrastructure to our customers, we're seeing continued steady growth as it plays a critical role in our customers' expanding use of biosimulation to improve their development efforts. While services spending picked up since the start of the year, and we enjoyed a second consecutive quarter of robust bookings, clients have remained slow to initiate project starts. We have received several investor inquiries on potential impacts from recent federal cost-cutting measures under the new administration. We see minimal risk related to national institutes of health and other academic funding sources. While we have leveraged NIH grants for certain R&D projects in the past, we have no current exposure to NIH. Additionally, our software is provided free of charge to academic institutions, so we have no revenue risk associated with potential federal funding reductions. As we have consistently stated, our highly disciplined approach to executing effectively in challenging environments is a key operating strategy that has served us well over the past two years. At the same time, we're prepared to capitalize on any increase in customer spending as conditions evolve. Turning to our software segment, our software performance was impressive with strong growth. Renewal rates remain at historical levels, and new logo sales are tracking well even with the funding challenges some of the smaller biotechs are facing. Software revenue grew 16% in the second quarter of 25, 8% on an organic growth basis, excluding the $1 million in revenue from the Alley and MC business units. Our quantitative systems pharmacology, or QSP, business unit led software growth this quarter. Its revenue surged by 89%, largely driven by a model license for atopic dermatitis. As a reminder, QSP's quarterly results can be lumpy based on the high ticket price per license and a smaller pool of end users. Our chem informatics or chem business unit software revenue grew by 8% driven by higher revenues from AdMet Predictor. Additionally, there were 10 new customers and seven upsells to existing customers during the quarter. In our clinical pharmacology and pharmacometrics or CPP business unit, revenues grew 9% and we added 11 new customers and had two customer upsells during the quarter. Our physiologically-based pharmacokinetics, or PBPK, software revenue grew 1%. In the second quarter, we had some renewal slippage for GastroPlus. However, these deferred renewals have already closed in the third quarter. GastroPlus added seven new customers and booked seven upsells with existing customers. Software revenue in our Alley business unit 0.9 million, and software revenue in our MC business unit was 0.1 million. Overall, software revenue for these two new business units was in line with expectations. Moving to our services segment, services revenue grew by 34% in the second quarter, yet was flat on an organic basis. While bookings in our services segment continue to be strong, these clients continue to pace project initiation out to the second half of the year. This will result in a push of some service revenue to the back half of our fiscal year. Services revenue was led by strong performance in our CPP MC business units. CPP services revenue increased 19%. MC services revenue was $2.3 million. Our PVPK services revenue decreased 23 percent, reflecting the cautious pace of project initiation as previously mentioned. And our QSP services revenue decreased 7 percent. Services bookings during the second quarter were very strong, especially in our CPP and MC business units. And we ended the quarter with a backlog of 20.4 million, up 18 percent compared to the first quarter, and up 13% year over year. With that, I'll turn the call over to Will.