Simulations Plus, Inc.

Simulations Plus, Inc. Annual Review – Cleaned Up for Investors

Hey there! Let’s break down Simulations Plus’ year in plain English. No jargon, just what matters for your investment decisions.

---

1. What They Do

They’re the “flight simulator” for drug development. Their software lets pharmaceutical companies test how new medicines might behave in the human body without costly lab experiments or human trials.

This Year’s Vibe: Steady growth, but slower than last year. More clients adopted their tech, but some smaller customers tightened budgets.

---

2. Financial Snapshot

• Revenue: $60 million (up 15% from 2022).
• Profit: $12 million (up 10%).
• Growth Trend: Slowing slightly—2022 growth was 22%. Why? Some clients delayed projects to save cash.

---

3. Wins & Challenges

✅ Wins:

• Landed contracts with 3 top-10 pharma companies (now 30-40% of total revenue).
• Launched an AI tool to predict drug side effects faster.
• Won a government contract for cancer research simulations.

⚠️ Challenges:

• Smaller biotechs (20% of customers) cut spending.
• A key software launch was delayed by 6 months.
• Customer concentration risk: 15-25% of outstanding invoices are tied to just 3 clients. Late payments could strain cash flow.

---

4. Financial Health Check

Strong. They have:

• $40 million in cash (up from $32M last year).
• Zero debt.
• Bought back stock, signaling confidence in their undervalued shares.

---

5. Risks to Watch

• Economic uncertainty could lead clients to delay projects.
• Big tech competition (like Google/Amazon) eyeing their space.
• Regulation changes might force costly software updates.
• Over-reliance on big clients: Losing a top customer could dent revenue.

---

6. Competition Check

Certara (their main rival) is bigger but slower-growing. Simulations Plus is more profitable, but Certara has deeper R&D pockets. Think: nimble speedboat vs. cruise ship.

---

7. Strategy Shifts

• Hired a new CTO from Microsoft to boost AI development.
• Pushing “software bundles” over single products.
• Expanding into agricultural chemicals (new market!).

---

8. What’s Next for 2024?

• Revenue growth: 12-15% (similar to 2023).
• Profit margins: May dip slightly due to AI investments.
• New products: Potential growth driver, but don’t expect overnight success.

---

9. External Factors

• AI hype: Demand for AI drug tools is rising, but so is competition.
• Personalized medicine: Tailored treatments could boost their tech’s appeal.
• FDA changes: New rules might require more simulations (a big opportunity).

---

Key Takeaways for Investors

1. Steady, not explosive: Slowing growth but still profitable.
2. Financially solid: No debt, growing cash reserves.
3. Customer risk: Heavy reliance on a few big clients.
4. Future bets: AI and new markets could pay off, but patience required.

Bottom Line: Simulations Plus is a stable player in a niche market. It’s a “set it and forget it” stock for long-term investors comfortable with moderate growth and watching customer concentration risks. Not for thrill-seekers!

Questions? Let’s chat! 😊