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Jul 16, 2009
  |  Press Release

Simulations Plus Reports Third Quarter FY2009 Financial Results

Simulations Plus, Inc. (NASDAQ: SLP), a leading provider of simulation and modeling software for pharmaceutical discovery and development, today reported financial results for its third quarter of fiscal year 2009 ended May 31, 2009 (3QFY09).

Ms. Momoko Beran, chief financial officer of Simulations Plus, stated: “The current global economic downturn has had some effect, with consolidated net sales decreasing 8.6% to $2,713,000 in 3QFY09 from $2,968,000 in the third fiscal quarter of fiscal 2008 (3QFY08), as we announced earlier in our preliminary earnings release on June 2. However, this was not enough to keep us from achieving healthy profitability and positive cash flow yet again this quarter . Sales for our pharmaceutical software and services business increased 0.5%, or $10,000 for 3QFY09 over 3QFY08 in spite of one order for approximately $124,000 slipping into the fourth quarter. Revenues from our Words+ subsidiary decreased 26.7% over the record quarter in 3QFY08. The record set in 3QFY08 had the benefit of a large order for our Say-it! SAM PDA kits, while no such order was received in 3QFY09.”

Ms. Beran continued: “For 3QFY09, consolidated gross profit decreased 7.4% to $2,170,000 from $2,344,000 in 3QFY08. R&D expense increased 50.4% to $334,000 in 3QFY09 from $222,000 in 3QFY08. Total R&D expenditures, which include capitalized software development costs, increased by 10.3% to $472,000 from $428,000, primarily due to staff expansions and salary increases. Consolidated SG&A increased $47,000, or 5.0% to $989,000 in 3QFY09, compared to $942,000 in 3QFY08. As a percentage of sales, SG&A increased to 36.5% in 3QFY09 from 31.7% in 3QFY08. Expanded travel and trade show expenses accounted for a significant portion of the increase as we have increased our marketing and sales efforts substantially over last year. For 3QFY09, net income before taxes decreased 25.3% or $300,000, to $888,000 compared with $1,188,000 in 3QFY08. Our provision for income taxes decreased by 26.7%, or $116,000, to $319,000 (35.9%) for 3QFY09 from $435,000 (36.6%) in 3QFY08. Using our best estimates for the remainder of the year, we anticipate a tax rate for the year to be in the range of 34-38%; however, this will depend on the amount of R&D tax credits generated during the current fiscal year.

“Consolidated net earnings for 3QFY09 were $569,000, or $0.03 per fully diluted share, a decrease of 24.4% from $753,000, or $0.04 per diluted share in 3QFY08. We attribute this primarily to the decrease in sales from our Words+ subsidiary and our increased investment in R&D and marketing and sales. Our cash continues to grow, with cash at the end of 3QFY09 of $7,373,000, up 23.2% from $5,986,000 (which included $750,000 in auction rate securities that were later redeemed at full face value plus interest) at the end of 3QFY08. Shareholders’ equity at the end of 3QFY09 was $10,936,000, an increase of 12.9% from $9,690,000 at the end of 3QFY08.”

Ms. Beran added: “For the first nine months of FY09 (9Mo09), c onsolidated net sales increased 2.4% to $7,303,000 from $7,132,000 in the first nine months of FY08 (9Mo08). Sales from pharmaceutical software and services increased approximately $231,000, or 4.7%; however, revenues from our Words+ subsidiary decreased approximately $60,000, or 2.7% over 9Mo08.

“Consolidated gross profit for 9Mo09 increased 2.1% to $5,681,000 from $5,567,000 in 9Mo08. The expensed portion of our R&D activities increased 42.3% to $996,000 from $700,000; while total R&D expenditures, which include capitalized software development costs, increased by 14.8% to $1,487,000 in 9Mo09 from $1,295,000 in 9Mo08, primarily due to staff expansions and salary increases. Consolidated SG&A increased 8.3% to $2,929,000, compared to $2,705,000 in 9Mo08. Travel and trade show expenses accounted for a significant portion of the increase as we have increased our marketing and sales efforts substantially over last year. As a percentage of sales, SG&A expenses increased by 2.2% to 40.1% in 9Mo09 from 37.9%in 9Mo08.

“For 9Mo09, net income before taxes was $1,900,000, a decrease of 17.2% from $2,295,000 in 9Mo08. Our provision for income taxes decreased by 11.3% to $651,000 for 9Mo09 from $734,000 in 9Mo08.

“Consolidated net earnings for 9Mo09 were $1,249,000, or $0.07 per fully diluted share, a decrease of 20.0% from $1,561,000, or $0.09 per diluted share in 9Mo08.”

Walt Woltosz, chairman and chief executive officer of Simulations Plus, said: “We’re pleased to report that Simulations Plus remains profitable, very healthy, and best-in-class in our market niches in the pharmaceutical software and services business. Our funded collaborations are advancing the state-of-the-art in the simulation of physiologically-based pharmacokinetics in GastroPlus, as well as adding new dosage routes for ocular and pulmonary drug delivery. Our top-ranked ADMET Predictor software has had a major update over the past few months that we expect to release any day now. And our consulting services seem to be in greater demand than ever. Regulatory agencies are requesting more licenses for both GastroPlus and ADMET Predictor, and we believe this is an especially strong leading indicator, because pharmaceutical companies will want to have the software that the regulators will use to evaluate their submittals. We continue to work on acquisitions, and we’re hopeful that we’ll be completing one or two during 2009. My bottom line has always been cash with no debt and shareholders’ equity. Our cash is up from about $6 million to $7.4 million year-over-year, and that includes spending over $600,000 through our share repurchase program. We’ll be continuing the repurchase through October as long as there are funds remaining in the program. Shareholders’ equity has grown over 10% in the last four quarters, and the number of outstanding shares and fully diluted shares is lower, so equity per share has increased at a faster rate.”

For complete balance sheets, click here.

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