Simulations Plus, Inc. (NASDAQ:SLP) Q3 2023 Earnings Call Transcript

So it is what is attractive on our part to get there more quickly as opposed to the longer-term build internally of the model in that space. The acquisition of Immunetrics brings those to us very quickly. In terms of size, I mean, the entity, let’s go to the bottom-line first, it’s accretive immediately, will be in the fourth quarter. And as we move forward, there’ll be some efficiencies that probably improve their profitability within the Simulations Plus family. Most importantly, on the top-line, yeah, it’s — the revenue profile of the company is best pointed to in their earnout characteristics, the terms of the earnout payments, which called for their earnout payments in ’23 — calendar year ’23 should they achieve the revenue of $6 million for the 12 month calendar year and $8 million approximately in fiscal year ’24.

Pleased with their revenue projection targets from which they get their earnout payments. A little aggressive maybe, but all of our past acquisitions, the earnouts have been happily paid in full to our acquisitions. So we’ll be working with them to achieve those targets. It’s little tough with a short quarter here, the close of the transaction into the quarter. They’re going to have to adjust to the fact that they’re part of the public company with an August year-end, which wasn’t necessarily a key calendar milestone for them in the past. So we’ll make a transition here in the fourth quarter. They will contribute to revenue and it will be accretive. We’ll be better positioned to give longer-term guidance when we get to the end of our fiscal year and the guidance for the 12 months into — for fiscal year ’24.

David Larsen: Okay, great. Thanks. That’s very helpful. And then, in terms of software growth, up, I think, around 12% — I’m sorry, 10% year-over-year shows a very good uptick, especially relative to 1Q — fiscal 1Q of ’23. Can you maybe just talk a bit about — I think, there were 13 GastroPlus upsells, that seems very good to me quite frankly. You had a tough comp in the year-ago quarter for GastroPlus, obviously a very good quarter in the year-ago period. And then, how much of that growth came from the renewal harmonization sort of process? How far along are you in that renewal harmonization process? Are you like 80% of the way through it? And will you be through it by the end of the fiscal year? Thanks.

Shawn O’Connor: Yes, fair question. GastroPlus, unlike the contrast here is Monolix that had a great quarter with 80%-plus growth in the third quarter. They benefited from the harmonization process by seeing more of the license renewals dislocate out of first and second quarter and a little bit forward from fourth quarter into the third quarter, and so they saw that benefit, we saw that benefit with Monolix from harmonization in the third quarter. That’s teed up on the GastroPlus side for the fourth quarter where we see a lot more of those focal dates of when licenses will be renewed, dislocating to the fourth quarter. So from a price increase perspective, from a upsell perspective, from a cross-selling scenario, new customers, pretty good statistics in terms of the GastroPlus performance, but the harmonization has pushed some revenue into the fourth quarter.

I mean, that being said, again, would we like to have seen some more logos — new logos and some larger upsells in [indiscernible] and other product lines? Sure. The market is growing a little lesser this year. But GastroPlus in the third quarter is — primary impact was the harmonization.