Simulations Plus Reports 3rd Quarter And First 9 Months FY2012 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 2012 ended May 31, 2012 (3QFY12). Results below are reported for continuing operations (without the discontinued operations of the Company’s former Words+ subsidiary), except as noted.

3QFY12 highlights compared with 3QFY11:
  • Net sales increased 5.0% to $2.77 million from $2.64 million
  • Gross profit increased 6.8% to $2.33 million from $2.19 million
  • Gross margin increased to 84.2% from 82.8%
  • SG&A increased 14.5% to $0.891 million from $0.778 million due to:
    • Increased costs for health, dental, liability, and workers’ compensation insurance
    • Increased marketing and sales expenses for travel and scientific meetings/conferences
    • Expanded staff, as well as increased salaries and bonuses to existing staff
    • All facility rent and related expenses are now charged to Simulations Plus after sale of Words+
    • As a percent of revenues, SG&A increased to 32.2% from 29.5%
  • R&D expense increased 129% to $228,000 from $100,000 due to:
    • Staff expansions as well as salary and bonus increases for existing staff
    • Investments in our new chemical entity (NCE) project designing molecules for malaria
  • Income before taxes decreased 5.4% to $1.29 million from $1.37 million due to higher SG&A expenses and higher R&D investment
  • Net income from continuing operations decreased 16.8% to $869,000 from $1,044,000
  • Diluted earnings per share decreased to $0.05 ($0.053) per share compared to $0.07 ($0.066) per share
  • Cash increased 30.3% to $12.89 million from $9.89 million, after paying dividends of $1.6 million
  • Shareholders’ equity increased 13.0% to $15.6 million from $13.8 million.

For the first nine months of fiscal year 2012 (9moFY12) compared to the first nine months of FY2011 (9moFY11):
  • Net sales increased 6.8% to a new 9-month record $7.81 million from $7.31 million
  • Gross profit increased 9.1% to $6.62 million from $6.07 million
  • Gross margin increased to 84.8% from 83.0%
  • SG&A increased 15.1% to $2.55 million from $2.21 million for the reasons cited above
    • As a percent of revenues, SG&A increased to 32.6% from 30.3% compared to 9moFY11
  • R&D expense increased 73.9% to $745,000 from $428,000
  • Income before taxes increased 2.2% to $3.62 million from $3.54 million
  • Net income from continuing operations decreased 0.97% to $2.463 million from $2.487 million
  • Net income including discontinued operations increased 5.9% to $2.68 million from $2.53 million
  • Total diluted earnings per share increased 6.2% to $0.17 ($0.167) from $0.16 ($0.157)

Ms. Momoko Beran, chief financial officer of Simulations Plus, said: “Nonrecurring charges and other elements of increased SG&A had an impact on gross profit and pretax earnings for the first nine months. SG&A increases over last year’s first nine months included a one-time charge for our M&A consultants for the sale of our former Words+ subsidiary, increases in overhead staff and salaries, increased marketing and sales expenses, increased year-end bonuses, and the fact that we now accrue 100% of the building lease and facility-related expenses to SG&A, which includes the 50% that had previously been paid by Words+. Words+ continues to rent a smaller portion of the building (20%) but their contribution to the building leases and related costs is not included in SG&A, but is reported as Other Income. Last quarter we estimated that SG&A would be somewhat higher going forward by approximately $130,000 per quarter, and in fact, for the first nine months it is higher by about $334,000, or slightly more than $111,000 per quarter to date. We have increased our R&D spending both by increasing the scientific staff and through our investment in our malaria new chemical entity (NCE) project, resulting in the 129% increase in R&D for the third quarter and 73.9% increase for the first nine months. During the third quarter we paid both our first and our second ongoing quarterly cash dividends of $0.05 per share per quarter, totaling just under $1.6 million. Even after paying both dividends, cash increased by just over 30% from last year’s third quarter. As of yesterday, cash was approximately $13.3 million.”

Walt Woltosz, chairman and chief executive officer of Simulations Plus, added: “Consulting services have been a bit slower so far this fiscal year, so software licenses have made up for the decrease in those revenues and then added to growth. For the first nine months, software licenses increased $770,000, or 12%. Our recently announced funded collaborations for expanding the oral cavity dosing model and adding a transdermal dosing model in GastroPlus™ will begin to be reflected in the current fourth quarter revenues. We believe the investment in our malaria NCE project has shown remarkable results, demonstrating the power of our ADMET Design Suite™ for new molecule design. Just yesterday we received the lab results for our four final compounds and, once again, they are all active against the malaria parasite, although they’re not as potent as two of our earlier molecules. Nonetheless, every molecule we designed has hit the target, and we do not know of any other software company that has taken the risk to design, synthesize, and test completely new molecules. We plan to repeat this demonstration for a different disease target this calendar year, and we plan to seek partners to take the results of our work to date on malaria to the next level.”

The Company has announced an investor conference call that will be webcast live at 1:15 PT/4:15 PM ET today, Thursday, July 12, 2012, which may be accessed by first registering at the following website: https://www2.gotomeeting.com/register/448603106. Upon registering, you will receive a confirmation e-mail with a unique link and instructions for joining the call. Please dial in five to ten minutes prior to the scheduled start time. For listen-only mode, you may dial (415) 363-0078, and enter access code 855-469-584.

About Simulations Plus, Inc.

Simulations Plus, Inc., is a premier developer of groundbreaking drug discovery and development simulation and modeling software, which is licensed to and used in the conduct of drug research by major pharmaceutical, biotechnology, agrochemical, and food industry companies worldwide. We also provide a productivity tool called Abbreviate! for PCs as well as an educational software series for science students in middle and high schools known as FutureLab . Simulations Plus, Inc., is headquartered in Southern California and trades on the NASDAQ Capital Market under the symbol “SLP.” For more information, visit our Web site at www.simulations-plus.com.

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Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995 – With the exception of historical information, the matters discussed in this press release are forward-looking statements that involve a number of risks and uncertainties. Words like “believe,” “expect” and “anticipate” mean that these are our best estimates as of this writing, but that there can be no assurances that expected or anticipated results or events will actually take place, so our actual future results could differ significantly from those statements. Factors that could cause or contribute to such differences include, but are not limited to: our ability to maintain our competitive advantages, acceptance of new software and improved versions of our existing software by our customers, the general economics of the pharmaceutical industry, our ability to finance growth, our ability to continue to attract and retain highly qualified technical staff, our ability to identify and close acquisitions on terms favorable to the Company, and a sustainable market. Further information on our risk factors is contained in our quarterly and annual reports as filed with the U.S. Securities and Exchange Commission.
Simulations Plus, Inc. Condensed Balance Sheets
At May 31, 2012 (Unaudited) and August 31, 2011 (Audited)
 
ASSETS
      May 31,   August 31,

2012

2011
Current assets
Cash and cash equivalents $ 12,889,180 $ 10,181,049
Income tax refund receivable 259,434 259,434
Accounts receivable, net of allowance for doubtful accounts of $0 2,210,710 1,170,861
Contracts receivable 86,962 185,816
Prepaid expenses and other current assets 113,484 123,954
Deferred income taxes 217,596 302,076
Current assets of discontinued operations   -   1,051,637
Total current assets 15,777,366 13,274,827
Long-term assets

Capitalized computer software development costs, net of accumulated amortization of $4,890,750 and $4,416,669
2,434,180 2,188,982
Property and equipment, net 109,097 43,010
Intellectual property, net of accumulated amortization of $1,875 73,125 -
Customer relationships, net of accumulated amortization of $128,042 and $126,172 - 1,870
Other assets 18,445 18,445
Non-current assets of discontinued operations   -   340,204
Total assets $ 18,412,213 $ 15,867,338
 
 
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable $ 301,432 $ 176,136
Accrued payroll and other expenses 309,314 276,327
Accrued bonuses to officer 60,000 -
Accrued income taxes 1,131,918 168,897
Deferred revenue 132,610 141,191
Current liabilities of discontinued operations   -   378,567
Total current liabilities 1,935,274 1,141,118
 
Long-term liabilities
Deferred income taxes 873,255 656,047
Non-current liabilities of discontinued operations   -   33,558
Total liabilities 2,808,529 1,830,723
 
Commitments and contingencies
 
Shareholders' equity
Preferred stock, $0.001 par value
10,000,000 shares authorized
no shares issued and outstanding - -
Common stock, $0.001 par value
50,000,000 shares authorized
15,923,019 and 15,572,943 shares issued and outstanding 4,394 4,044
Additional paid-in capital 4,642,281 4,167,650
Retained earnings   10,957,009   9,864,921
 
Total shareholders' equity   15,603,684   14,036,615
 
Total liabilities and shareholders' equity $ 18,412,213 $ 15,867,338
 
Simulations Plus, Inc. Condensed Statements of Operations
For the three and nine months ended May 31,
(Unaudited)
       
Three months ended Nine months ended

2012
 

2011

2012
 

2011
 
Net sales $ 2,771,500 $ 2,639,508 $ 7,808,682 $ 7,311,628
Cost of sales   437,734     453,907     1,186,670     1,242,760  
Gross profit   2,333,766     2,185,601     6,622,012     6,068,868  
Operating expenses
Selling, general, and administrative 891,131 778,085 2,547,569 2,213,330
Research and development   228,163     99,507     744,679     428,183  
Total operating expenses   1,119,294     877,592     3,292,248     2,641,513  
Income from operations   1,214,472     1,308,009     3,329,764     3,427,355  
Other income (expense)
Interest income 22,572 22,948 69,528 67,269
Interest expense - - (3 ) (43 )

Miscellaneous income
25,011 - 47,667 -
Gain on currency exchange 29,802 34,663 168,690 43,004
Gain (loss) from sale of assets   -     -     (433 )   240  
Total other income (expense)   77,385     57,611     285,449     110,470  

 

Income from continuing operations before provision for income taxes
1,291,857 1,365,620 3,615,213 3,537,825
Provision for income taxes   (422,524 )   (321,167 )   (1,152,204 )   (1,050,608 )
Income from continuing operations   869,333     1,044,453     2,463,009     2,487,217  
Discontinued operations:
Gain (loss) from discontinued operations, net of tax - 9,690 (249,898 ) 41,899
Gain on sale of Words+, net of tax   -     -     465,820     -  
Results of discontinued operations   -     9,690     215,922     41,899  
Net Income $ 869,333   $ 1,054,143   $ 2,678,931   $ 2,529,116  
Basic earnings per share:
Continuing operations $ 0.05 $ 0.07 $ 0.16 $ 0.16
Discontinued operations   -     -     0.01     0.00  
Net basic earning per share $ 0.05   $ 0.07   $ 0.17   $ 0.16  
Diluted earnings per share
Continuing operations $ 0.05 $ 0.07 $ 0.15 $ 0.16
Discontinued operations   -     0.00     0.01     0.00  
Net basic earning per share $ 0.05   $ 0.07   $ 0.16   $ 0.16  
Weighted-average common shares outstanding
Basic 15,918,905 15,447,273 15,710,014 15,535,581
Diluted 16,340,765 16,039,951 16,070,478 16,114,138

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