Simulations Plus lowers FY25 revenue guidance to $76M–$80M amid services slowdown and $77.2M impairment charge

Simulations Plus reported a 10% increase in revenue for Q3 2025, reaching $20.4 million, though organic revenue declined by 4% due to lower performance in QSP/QST software and biosimulation services.

The company experienced a significant diluted EPS loss of $3.35 due to a noncash impairment charge of $77.2 million, while adjusted diluted EPS improved to $0.45, indicating some operational resilience.

A strategic reorganization is underway, transitioning to a functionally driven model to improve client engagement, alongside plans for an investment in Nurocor to enhance clinical trial design capabilities.

Fiscal year 2025 revenue guidance has been revised, with total revenue projected between $76 million and $80 million and an anticipated year-over-year growth rate of 9% to 14%.

Recommendation Rating: Caution Advised

Earnings Call Summary: Simulations Plus (SLP) Q3 2025

Management Overview

CEO Shawn M. O'Connor shared insights on the third-quarter performance, indicating that revenue slightly surpassed the preliminary expectations set in June. The final figures displayed a 10% increase in revenue, reaching $20.4 million, which included a $2.4 million contribution from the Pro-ficiency acquisition. However, on an organic basis, revenue saw a 4% decline, attributed primarily to lower revenue from QSP/QST software and a drop in biosimulation services. The company reported a diluted earnings per share (EPS) loss of $3.35 resulting from a noncash impairment charge of $77.2 million linked to previous acquisitions, in contrast to a loss of $0.15 per share last year. Adjusted diluted EPS improved to $0.45 from $0.27 year-over-year, while adjusted EBITDA amounted to $7.4 million, accounting for 37% of revenue compared to 30% last year.

O'Connor noted a revision in revenue outlook for fiscal year 2025 and beyond, stating, "We took prudent steps to align asset values with their near-term market worth." The company announced an investment in Nurocor to bolster clinical trial design capabilities, aiming for a more data-driven execution strategy. A strategic reorganization transitioning from a business unit structure to a functionally driven operating model was introduced, accompanied by significant leadership changes to enhance client engagement and strengthen sales and marketing efforts. CFO William Frederick emphasized that total revenue for the quarter increased by 10% to $20.4 million, with software revenue rising by 6% and services revenue by 17%.

Future Projections

CFO Frederick revised the fiscal year 2025 guidance, projecting total revenue between $76 million and $80 million, with Pro-ficiency expected to contribute between $9 million and $12 million. Year-over-year revenue growth is anticipated in the range of 9% to 14%, with a software revenue mix between 55% and 60%. Adjusted EBITDA margin forecasts are set between 23% and 27%, with adjusted diluted EPS