Q1 2021 Simulations Plus Inc Earnings Call

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good afternoon, everyone on behalf of simulations. Plus I welcome you to our first quarter fiscal 2021 Financial results conference call and webinar hosting the call today are simulations plus CEO wage earner in the company CFL will project an opportunity to ask questions will follow today's presentation.

Before beginning I would like to remind everyone that with the exception of historical information the matters discussed in this presentation or forward-looking statements that involve a number of risks and uncertainties, the actual results of the country could differ materially from those statements factors that can cause or contribute to such differences include but are not limited to the continued manage the company's products competitive factors that companies ability to finance future of the company's ability to produce and Market new products in a timely fashion the company's ability to continue to attract and retain skilled personnel and the company's ability to sustain or improve the current levels of productivity, but information of the company's risk factors is contained in the company's quarterly and annual reports and filed with the Securities Exchange Commission with that said, I would like to bring the car over to Sean O'Connor Schaumburg.

Thank you Cameron. The first quarter of fiscal 2021 was a good one for simulations plus continuing the momentum of last year and positioning us for another record year. We offered Revenue growth, even though the first quarter of last year presented a challenging year-over-year comparison due to an unusually strong quarter from our daily Sims is a division. The overall results is strong and in line with expectations at the same time, we continue to deliver solid and improving profitability benefiting from a more favorable Revenue mix with higher contribution from our software offerings as we look towards the balance of the fiscal year. We enjoy a growing sales Pipeline with bookings that reflect continued momentum in a solid position in the market even as the overall market place is still impacted by COVID-19 our relationship with regulatory agencies and large Pharma clients remains a point of birth.

And we are successfully leveraging these important relationships to enhance the value. We provide to our clients. We brought it or software and service capabilities. We continue to demonstrate the importance of modeling and simulation to effectively support clients and improve the drug development process modeling is increasingly important to the drug development process thoughts reduced costs accelerate pipelines and contribute to positive regulatory interactions The increased use of cases of modeling and simulation and the significant revenue and cost impact that they have for our clients underlies our ability to grow revenues customers and profitability in the future or the quarter our Revenue increased 40% overall. As I mentioned this growth was somewhat muted by the challenging year-over-year comparison in our daily subdivision as you may recall in the first quarter of birth.

fiscal year early sense

In response to multiple client requests accelerated Project work into the quarter resulting in a hundred and 38% growth in their Consulting service revenues last year off this situation normalized as the year progressed and Billy Sims Services. Grew 53% for the full year. Would that Stellar performance in the first quarter of last year till he said service Revenue in the first fiscal quarter of 2021 declined 66% as anticipated. It is important to note the Dilly some Revenue in q1 fiscal year two-thousand one increase sequentially from Q4 fiscal year 20, and we remain confident of good growth from the division for the year as a whole and better year-over-year Revenue growth compact beginning next year overall Revenue growth for the company, excluding the Dilly some service. Revenue was 28% for the quarter.

This growth was helped by a strong software quarter for the company software was 58% of total revenue compared to 49% in the year-ago quarter part was the benefit of the lick soft acquisition providing a full quarter of contribution over all our software business grew 35% compared to the first quarter last year compared to 12% year-over-year growth in the first fiscal quarter last year in our service business Revenue declined 6% due to the Daily some comparison service revenues grow excluding. Delisa was 15% while in line with our expectations over the last couple of years. We have accelerated Revenue growth for both organically and through acquisition off at the same time. We remain very focused on profitability. And in that regard we are performing well across its metrics gross margins have increased from the low seventies to log.

Is above 75% coming in this quarter at 77% ebitda as a percentage of Revenue has remained consistent in the mid-30s coming in this quarter at 36,000 diluted earnings per share continues to grow year-over-year coming in at 12 cents. This quarter and would have been 18% growth to 13% $0.13 off without the dilute of effects of last year's follow-on offering finally the rule of 40 metric that has been widely adopted by many to measure Revenue growth in combination with profitability. There's also a positive one for us coming in at 50% this quarter in summary these metrics demonstrate our ability to balance Revenue growth and profitability to delivered condition increases in earnings per share to our shareholders.

As I mentioned our software revenues represented about 58% of total revenue compared to 49% in the first fiscal quarter last year and 52% in the fourth quarter wage. The increase is largely due to the full quarter of sales of Monolithic sweet, which is now contributing 19% of our software revenue for the quarter gastroplus continues to be our Flagship project and generates the largest portion of our software Revenue followed by aadmi predictor and now monologue sweet the software Revenue contribution for monoliths demonstrates our continued focus on a existing products and introducing new products to drive increased Revenue.

You continue to improve and Advance or software offerings to maintain our leadership position gastroplus remains. Well established as the leading pbpk modeling platform in the industry off during the quarter. We released version nine point eight of our Flagship gastroplus offering adding the industry's first mechanistic model for in particular delivery and a revamped virtual brake lines trial simulation engine to address many of the requirements published in the fda's new regulatory guidance document on PBM applications, and he has been well received by our customers. We launched a new funded collaborations with the FDA in rush and we expect to launch GPX or gastro plus version 10:00 during this fiscal year off off.

We also released a px which is aadmi predictor version 10 and a i d d in the first quarter. We initiated a lead optimization project related to a page with a large farm of partner moving 70 molecules into the synthesis and testing phase. The new AI Didi module that was released with a px is a separately priced mom used with the aadmi predictor functionality. Click soft released monologue sweet version twenty-twenty in October adding a new simulates module, which is a pack inflexible Simulator for clinical trial pharmacometrics without user-friendly interface in addition. It allows for a complete modeling and simulation workflow from data analysis on compartmental analysis the population modeling and simulation with fully interoperable applications.

It provides users with a fast easy to use and Powerful Suite of applications for pharmacometrics analysis modeling and simulation clicks off reported a 23% increase in customers in q1 versus q1 fiscal year 20.

We're also nearing completion of our daily Sim version 10 update and this offering will include tighter integration with GPS and a px. Our goal is to facilitate cross-selling opportunities as we continue to offer better and broader solutions to our customers. Finally r i t f model and renew. Some offerings are nearing completion and we expect to have these available for license by mid-year.

First fiscal quarter renewal rate was 92% based upon fees and 88% based upon accounts are renewal turned from the client budgetary process continued into q1, but this appears to be settling back towards are more normalized levels, which for fiscal year 20 were 93% We were able to implement a price increase and initiate changes to our discount structure during the quarter with minimal pushback. We also continue to see increasing increasing average revenue per customer demonstrating the success from the price increases as well as continued up selling efforts.

Let me shift now to our service business for the quarter are Consulting revenues were sourced 54% from pkpd Services which are primarily delivered by cognigen 25% from q s p q s t Services delivered by dili some and twenty 1% from PvP K Services delivered primarily by our Lancaster group our Consulting business continues to perform well with strong Revenue growth and profitability, we support our clients use of modeling and simulation to positively impact their drug development programs for both the Outsourcing of their modeling and simulation needs as well as in addressing specific issues encountered in their development programs are pkpd offering increased 15% compared to q1 last year a strong result in what is typically a seasonally slow quarter. We delivered a 35% increase in new bookings q1 versus Q4 wage.

in a similar increase in pipeline activity

qsp qst offering declined as expected compared to the year ago quarter as I mentioned the first quarter last year was particularly strong for our speak UST service offering as our daily 7 business unit worked aggressively to meet accelerated customer demand. Finally r p p b k offering was a 14 was up 14% compared to q1 last fiscal year reflecting continued strong demand.

In terms of clients successes, we present it at a scientific poster regarding daily some contributions to the development of dentists fair at an important toxicity meeting Kelly some liver safety analysis was integral to a scientific review by the state of California office of environmental health hazard assessment on a set of benefits.

New Services during the quarter included large a large COVID-19 related project signed with a large farm client in addition. We signed a three-year project with the Gates Foundation in particular osis and three new projects with the gates Medical Research Institute.

With regard to a couple of key service metrics total service projects increased during the quarter with excellent growth in our pkpd and PPK service offerings and we close the quarter with twelve million in service backlog up 14% from the end of last quarter a good bookings quarter has reversed the trend that we saw during fiscal year 20 as new sign a contract closures were slowed to do to COVID-19 impact.

Let me turn to our fiscal 2021. Our goal is to maintain fiscal year 21 organic growth in the 15 to 20% range in line with the 18% organic growth wage and fiscal year 20 in fiscal year 21 incremental monoliths Revenue could contribute an additional three to five percent of Revenue growth on top of the organic growth any Revenue contributed by Acquisitions closed in fiscal year 21, what is well be incremental to this certainly the pandemic will continue to create headlines and fiscal year 21 News software license customers and new Consulting service contracts will continue to close at a slower pace is slower than historical pace.

We are targeting software.

Twenty to twenty-five percent 16% from 16% in fiscal 2020. This growth rate is based on the new version 9.8 release of gastroplus home and in fiscal 21, the expected release of version ten, which we will mark it as GPX. Additionally. We will benefit from the new release of aadmi predictor and the new monolithic sweet home as well as the modest price increases. We have already announced and finally the focus on cross-selling initiatives will help us accelerate software growth.

On the Consulting Services side, we anticipate twenty-five to thirty percent growth and fiscal year 21, we continued demand we continue to see demand across our services off and pbpk services remaining consistent overall. I expect the accelerated growth. We have delivered in fiscal year 20 to continue into fiscal year 21 month.

Finally we continue to pursue our m&a strategy and believe that these efforts are going. Well, we're looking at opportunities in both software as well as service entities that would contribute directly to our product portfolio at new revenue and Market opportunities within our computational biology Focus or contribute to our Geographic coverage in the marketplace month. Let me down turn the call over to our new CFO will Fredrick the discuss the financial results. This is the third time. I've worked with Will and my career and we enjoy a strong relationship. Well, wake welcome to the club.

Thank you. Shawn. Thrilled to be here when the pandemic abates. I hope to be able to need as many shareholders as possible in person is Sean mentioned our Consolidated revenue for the first quarter of fiscal twenty one was up 14% to 10.7 million compared to nine point four million in the prior year quarter.

Total gross profit increased 22% to 8.3 million representing a 77% gross margin compared to a gross margin of 72% in the same quarter of last year.

Sg&a expenses for the quarter or four point four million or 41% of Revenue compared to three point five million or 37% of Revenue in the same period last fiscal year.

The increase in sg&a expenses was primarily the result of higher payroll related expenses due to increased compensation and head count as well as increases in contract laborer Catherine's and professional fees.

All right the expenses for the quarter or eight million or 8% of Revenue compared to five million or 6% of Revenue in the same period last fiscal year off capitalized are indeed for the quarter was point seven million or 6% of Revenue compared to five million. Also 6% of Revenue in the same period last year

Income from operations was three point 1 million dollars an increase of 15% compared to two point seven million dollars the same period last fiscal year. This increase was primarily driven by a higher gross margin on increased Revenue, which was partially offset by an increase in operating expenses.

The provision for income taxes was $5000000 for an effective tax rate of 17% compared to point seven million dollars for the same period last fiscal year was an effective tax rate of 25% The lower effective tax rate was primarily driven by the tax benefit associated with disqualifying dispositions.

Net income increased 21% to 2.5 million dollars compared to two point 1 million dollars for the same period last fiscal year and diluted earnings per share increased 9% to $0.12 compared to $0.11 for the same period last fiscal year.

Ebitda increased 15% to 3.9 million dollars compared to three point four million dollars for the same period last fiscal year.

Deshawn previously mentioned our gross margin increased from 72% last fiscal year to 77% this quarter. This increase was driven by increased gross margin of 85% for our software business and 66% for our services business.

We continue to have a strong clean balance sheet at the end of the quarter are cash and short-term Investments balance was 118.8 Million compared to $1,016 at the end of last fiscal year reflecting significant cash reserves to support our continued expansion through internal investment and m&a activity month. We also continue to have no debt on the balance sheet and a current ratio in the twenties. I will now turn the call back to you Sean.

Thank you will in conclusion. We deliver consistent Revenue growth and continued profitability for the first fiscal quarter in line with our fiscal 21-month the environment remains challenging but we have seen Improvement and underlying sales activity appears to be moving back towards historical Trends over the past two years. We have made significant investments in our sales and marketing infrastructure designed to accelerate our growth these Investments included strategic adjustments to our pricing and discounting programs and wage growth rate is proof that these Investments have had the desired impact simultaneously with a stronger balance sheet and significant cash We are continuing our m&a efforts with the goal of increasing our scale and giving us more solutions to sell it to the same customers.

Would that I'll be happy to take any.

Operator thank you at this time will be back until indicate. Your line is in the question queue. You may press star to if you'd like to remove your question from the Q4 participants use a speaker equipment. It may be necessary to pick up your handset before pressing the storm. One moment, please while we pull for questions.

Our first question comes from Matt Hewitt with craig-hallum. Please proceed with your question.

Good afternoon, and thank you for taking our questions. My first one is regarding gross margin, obviously a fantastic pop their relative to Q one of them last year. And and I think you commented a little bit about it. But could you talk about how that can Trend over the next few quarters given some of the changes even implemented on the discounting certified but as well as the price increases that you've implemented.

Yeah, thanks and number of factors come into play in terms of pushing or gross margin up to the 77% level and the first quarter probably the most impactful driver. They're being a return to a higher percentage content of software revenues and in the max 58% of the revenues sourced in the fourth quarter in the software business is the highest percentage for several quarters back now and that certainly contributes to a richer mix as faith in our metrics there or software margin at 85% the service business in the mid sixties low to mid-60s the norm and so the Richer mix there is a big dragger on the software side some contribution from the price increase that was implemented before birth.

End of the calendar year the discounting structure changes. Those have been initiated those tend to take effect over a longer period of time so I would say that it may be immediate window the discounting structure changes are are a lesser contributor that here in the first quarter and then if I don't I don't, I would be the service margin which has which reflected a good step up in the first quarter and I think reflects some good contribution in terms of our focus on the efficiency of the delivery of our projects to our clients something that has been a focus where the last year and we saw some rewards from that may be returned and ongoing basis, you know, we see these Trends should be you know able to be continued in into the next year always impacted as that fluctuation between birth.

Ford service changes

Record a quarter basis, but feel confident that we'll continue to accrue benefits from this pick up on the gross margin line going forward. That's much appreciated color. Thank you and then regarding the service side, it sounds like you're seeing some of those projects that were maybe just kind of put on hold given the pandemic starting to free up. I wonder if you could just talk a little bit about the pipeline there and then maybe the the contract that you signed here. How quickly do you anticipate those starting to contribute to revenues is that immediately here in the second quarter or is it off of a delayed fuse a little bit?

Yeah, we won. I think more significant, you know learnings from the quarter is is that Trend change moving in a positive direction and seeing a clogged step up an increase quarter-over-quarter to twelve million at the end of the first quarter is indicative of we saw a better flow of business and closure of that business name in the last last three months some of which has been, you know, those items that were held up by Tove. It's some of it is is, you know, new opportunities that we've been countered may have closed in the in the quarter as we look out into the future, you know, I think the, you know delivery on those new bookings will be you know, similar thoughts as is this the norm projects are typically contracted and performed over, you know, it's a a three to six-month window of time.

So these are contracts and business that you know for the most part will be contributing to our in translated into revenue between now and the end of our our our fiscal year at this point in time. But I think this is you know, very favorable Trend change in the context of our backlog growing. It's one of the things that's buffered us from the slower paced than a little bit impacted time frames here. And while that has not gone away that impact in terms of the slower play Space of closure. We have stepped up in the quarter using that backlog goes to reaccumulate itself is is a significant positive positive achievement for us here.

Understood and then I guess last one for me and then I'll pop off but the looks off had a fantastic quarter, and I'm just curious is that a function of the cross-selling efforts nice that you're you've acquired the asset or is there some other Dynamic that was really driving that growth? Thank you.

Sure, man, you know, I I think it's attributable to the fact that the the market is seeing the benefits of monologues and it's workflow and front end and functionality in general and we're continuing to make or achieve successes in terms of both the expansion expansion of its existing clients and in in growth in terms of their home taking down more seats as well as the attraction of new players new clients and their step into and and and use of model X as an alternative nonmem, which is the typical tool abuse out there. And so I've been very pleased with their delivery on our expectations since we acquired them last April, they've now consistently over performed for each of the quarters that they've been part of the family birth.

And I think the biggest driver.

Is the acceptance of that product in the in the marketplace so you have good results from from our team out of Paris?

That's great. Thank you.

As a reminder. If you like to ask a question, please press star one on your telephone keypad. One moment, please while we pull it for questions.

Our next question comes from Francois. Priest bar with Oppenheimer. Please proceed with your question.

Hey, thanks for taking the question congrats on the quarter just a couple of years. So in terms of the COVID-19 Consulting projects and the 3-year project with the large farm of discussing the press releases this something maybe on the services side on the software side that is expected. Would you consider this part of your forecasting in that 15 to 20% organic growth or is this something that was kind of a nice surprise, which is you know, there haven't been too many nice surprises around COVID-19. It's something that just happened recently. That was unexpected I guess.

Oh, I wouldn't characterize it Frank as being unexpected. It's it's been part of that, you know lead population and sales pipeline that we've been working and it came to came to fruition finally and contributes to our our backlog nail business to be worth going forward. I wouldn't characterize it as being something that would be you know, you know incremental or causes to adjust or organic growth expectations of 15 to 20% to a different level. It's certainly a big when I accept to come we're not just in terms of dollars, but in terms of the type of work and the Cove it's space, so we're very pleased by that and and yet I wouldn't characterize it as being not necessarily an incremental driver above where we've been pointing to in terms of our organic growth. Great Target. Okay, great, and then in terms of you had mentioned wage

The renewal rates there was some for customers that had slowed down significantly in the less. I guess it was your yearly report was just wondering there at 92% and not have any more color to give on that renewal rate maybe on those for customers what's going on? Was it just consolidation? Are they coming back or any color there at all?

Sure. Yeah, I mean we set back up to 92% and in the second quarter that sort of Falls within the budgetary Cycles where we see the most wage earner opportunity for journalists. Our clients are going through their budgetary reviews. So stepping back up to 92% was a very positive outcomes. There were no equivalents in terms of the you know for anomalies that we had last quarter that took the percentage down that did not repeat itself as quarter. So that's very possible. I remind you that those those four clients those were not you know, 0% renewals in terms of their situations. They were reductions from site consolidations and each other factors and they did renew. They just renewed at on average of 75% level for those for clients and as I indicated quarter ago dead.

You know those clients are still in good.

Standing and they're our business development discussions taking place with them and discussions surrounding expanding their their licenses back to a another higher level or expanding in terms of across selling other modules other software products and and in one case a collaboration agreement and their sales Lakers are still underway at this at this point in time. So first and foremost, it was very positive that you know, we have gotten a second quarter of that window of budgetary discussions and we saw the renewal rate go back up as we expected to the store cool levels 93% or thereabouts and so good good outcome for the quarter in that regard.

Okay, great. And then just last one jump back in the cube in terms of organic growth. Obviously the monolith sweet like soft. It did fantastic really nice to see the the software issue, you know percentage of the total revenue. But so the organic growth is it just is it was it 1% And is that yet? It clearly impacted by daily Sim last year, but from Thursday to grow. Is there any concern about that 15 or that uh, sorry the the total software growth to see in the year or the organic growth 15 to 20 or is that something that is just based off a lease em, and and going forward is there's nothing to worry about that, you know, the first quarter comparable for him, you know impacts the you know, the total number but there again, I pointed to the year-over-year growth rate of 28% without at least some Consulting revenues. So the business is still firing.

Firing well on our systems here if you will also and no, you know as we've maintained are pointing to the 15 to 20% organic growth. Our expectation is is that will will conclude the year in that range is as as we've previously said comparables will get easier for dillie's them as we get into the second third and fourth quarter of this year our expectations for continued Improvement and growth driven a seasonality. Remember that this first quarter is our home the first and fourth quarters of the fiscal year our our lower Revenue quarters, we are now entering our second and third quarter which is usually a little bit more robust on both sides of the birth of software and services and get a number of software, uh, new product new functionality new releases that will contribute.

As we proceed through the quarter on the service side as we step back up in terms of our bookings level. You see that backlog number starting to grow that's support continued Improvement through the course of the year on the service side. So yeah, first quarter results really excellent across the board camouflaged a bit by the comparable ones at least them. But as I look out into the year as a whole still very confident in terms of the 15 to 20% Target Thursday, we put out there.

Okay, great.

Let me let me lie here. And and that's what last one here on the on the text number maybe for will hear anything going forward. I think it was 18% here that you mentioned in terms of Texas. I should we think about the tax rate going forward here, especially with everything that's going on at the higher level of political level as well.

So if we're going to get into politics, I have to give this one. All right, I'll give my Pittsburgh perspective instead of the California perspective on the effective tax rate. Yeah, we came in at 17% We definitely got the benefit of some Cassius exercises that that give us some offset. There would have been moved closer to probably about 20% and I want to say the twenty one twenty five percent I think is what the analysts have us at. So we're still looking at Faith in that that neighborhood.

Okay, great. That's it for me. Thank you, and thanks.

Our next question is from David Larson with btig. Please proceed with your question. Hey congrats on a good quarter. Can you maybe talk a little bit about gastroplus? And you know, what are going to be the drivers of Revenue growth there? And and also what percentage can you remind me what percentage of software Revenue gastro is? I think it's around a third of total. Thanks God.

Yeah, it's after gas request revenues are about 55% at least here in the first quarter. It's generally about that level of the revenues of software revenues as a whole lot. So 55% of software revenues, which were 58% for the quarter gets you down to the exact exact level gastropost growth drivers home or, you know, multiple a there is still an expanding list of use cases for PPK modeling and as those use cases increase the number of scientists that are employed by our clients to deliver those types of work efforts in cases well, and we're in an environment that is still somewhat constrained in terms of the number of scientists available would be hired by our clients, but it's a you know improved in birth.

And in that regard, so there's a dynamic of growth that's driven by the increase in users in our client base as well. As you know, their use of this type of modeling that increases its application and and behind that is, you know, not only the successes of those applications but the guidance and support the FDA and other regulatory bodies and providing wind in the in the sale in that regard other factors in terms of gastric plus growth this year specifically may include the release that we just put out this past quarter 9.8 and our anticipated gastroplus version 10 release months later in this year, which again expands the functionality of the product as well as the ease of use of the product which both support that first page.

At that point too in terms of its use in any new different ways.

By a broader base of scientific scientists and are in in our client client base. There is some some push there in terms of pricing wage has always had small relatively modest price increases. We didn't change that to dramatically this year. But but did Implement a price increase wage they contributes and you may have heard preferred to Discount structure changes that take a little bit longer for it to translate into Finance checking back, but we're making some changes there. The last thing I'd Point too is, you know an effort over the last year or two in terms of improving our sales and marketing capabilities with staff and tools leads us to Ability now to be a little bit more strategic and focus on cross-selling opportunities and therefore wage

Another driver in terms of the growth of gastric lessons in our other products and our software portfolio is a real focus in terms of key account management page and the opportunity to cross sale and demonstrate to our clients the benefit of utilizing our multiple modeling and simulation platforms. And the way they can work in unison in order to deliver impactful results to their process of drug development process. It's super helpful. Thank you. And then just one more time you talked about investing into sales and marketing. How many sales people do you have? Now? How many would you expect to have 12 months from now and and what areas are you making these investments into and is it off FTE is it people or is it a software or something else? Thanks.

Yeah, it's a little bit of all of the update above David it's you know, people based investment in sales professionals. And you know that life is generally gone from you know, I can forward to 8 in the last 12 to 18 months or thereabouts will look to continue to grow that page. That metric is a little bit great in the sense that you know, those are sales professionals. If you will and on both our software side of our business and Consulting with the business the sale was obviously a technical one and so that doesn't include the consultants and or software specialist wage at our technical in their background that really support the cell cycle. So for an exam, for example on the Consulting side, our Focus has been to Ann Arbor.

Rooting efforts and building our capacity on the service side. It's also profile for recruitment Consultants that have a little bit of Business Development in their DNA and the candidates that are going to you know, allocate a higher percentage of their time to Business Development efforts. So we we've grown our sales resource. If you said well not just in the metric of sales and marketing staff, but also in terms of highlighting the business development skill set and in our side birth certificate general science scientific recruiting efforts, you know, we're implemented a CRM system and other things as well. So it's people want people and and tools that we took adding to the mix here super. Thanks very much congrats on a good quarter.

Very good. Take care.

Our next question comes from David Lindley with Jeffries. Please proceed with your question.

Hi, good afternoon. Thanks for taking my questions. The first one is thinking about in market growth. I know there's a fair amount of noise both in your numbers and then In the End Market because of COVID-19. It's possible to see through that. Would you describe the end market growth as a relatively steady or are you seeing the distinct kind of before and after or pre COVID-19 postcode off toward adoption of our simulation?

Yeah, it's interesting. I don't know that I've got a metric that that that address is that but I would say that the pandemic and in in covet certainly highlighted the observation or the desire to move more quickly in the drug development process in general understandably. So so GIF the need to identify a vaccine as quick as possible. And so I you know, I would say that the attention the spotlight and the focus on how do we may prove and accelerate the drug development cycle of which you know, I believe modeling and simulation is one of the key means of achieving them that I you know, I would characterize that see the attention that is being placed on modeling and simulation is on the upswing how much of that is due to just

Is attributable to you know fact is without that there was a increasing Focus but both the industry as well as the Regulatory Agencies took the use of modeling and simulation. How much is how much is the continuation of that increasing attention that existed there before Cove? It came into place or just a month but you know, I would say that you know, it's a it it's a rich environment. We've seen good growth now for you know, many quarters, if not years. Now that has accelerated and you know opportunity that is Rich with opportunity for us going forward.

You're great and if I could this may be a alternative question to that theme or maybe a slightly deeper version is as you as you're acting with your clients is the they're increasing use of biostimulation. Is it kind of continuing to spread on what I'll call a a single platform, you know dare I say basic biostimulation approach or is it taking biostimulation and moving to more of a a robust comprehensive like model informed drug development. And if the latter does that create differential opportunities for a firm like yours that has multiple platforms to bring to bear?

It's good.

It's it's hard to say I mean and it's anecdotal I'd say you you go down to the list of top-20 farm and and deeper and Thursday each each entity has a differing fervor of adoption and a different means of adoption. Meaning, you know, we trying to change the the development cycle and total or we implementing a modeling and simulation approach in a therapeutic area or in a particular segment of their effort took the industry is across the map in terms of you know, those those approaches, you know, I do believe in in from our perspective the a month it is not a one platform Market. There is no one solution that then becomes the basis for your modeling and simulation your your model based drug development program birth.

A number of techniques and platforms that come into play here that is behind, you know in part of our expansion gastroplus had me predictor or acquisition model X last year is to be in a position to provide our clients all of the technical platforms that can contribute to a model based drug development program and provided to them efficiently in terms of a vendor partner that can supply their needs as well as technically under the covers platforms that are having the ability to talk to each other and can be integrated. If not immediately over time to make that process most most efficient. So, you know, I'd say that you gotta take a look at the market and there are some leaders there are some laggards and the vast majority or somewhere in the middle there in terms of partially and what time

Strategies implementing all I would say of all those character characterizations types of clients. If you compared them today versus a year ago versus thousand years ago today, their Devotion to model-based drug development is greater than it was in those time references. Got it. One more for me am in one of your answers some constraint on if I understood correctly some constraint on your software sales based on customers month limitations or maybe hesitation. I wasn't quite sure of hiring of scientists on their side. I'm wondering if you could comment on you know, the labor markets general or you know what you're seeing in in the hiring and your services organization in the labor market currently.

Sure, it wouldn't characterize it as a hesitation on their part but a challenge and that's the challenge that is better today than it was yesterday in the sense of there being more candidates more scientists that are skilled trained and have been developed with model-based drug development computational biology wage, whatever label you want to want to place on it. It's better today than it was yesterday, but it's still a resource short environment. And so I you know our our own internal efforts in terms of recruiting we've been very successful and have math or growing needs oil capacity to provide for our service business and it's it's Revenue growth. It's a very competitive market out there we've succeeded wage.

respectable continue to succeed

Need to meet our needs there and on the software side. It does often become a a limiting factor. I think we could grow faster on the software side and license more software tujha clients if they were able to build their internal programs in higher at a more rapid Pace, but that that that's how I character is market right? Thanks for taking my questions. Best of luck. Thank you. Sure. Take care.

Our next question is from Francois prusse ball with Oppenheimer. Please proceed with your question just the last one here on that note of the clients and we talked about large Pharma and you know the top 20 players and most of them are using this weather. It's um, you know on the stimulation side on pharmacometrics or or what not but I was wondering when you speak to or you see your clients come in terms of the large farm of versus the smaller Pharma that maybe don't want to waste time going down a path. That's not worth it. Is that movement or is that in terms of the client base wage? Is it moving more towards smaller or staying with larger? Is there any Dynamics there that we can um that you're seeing on your side?

In terms of our client's portfolio changing in terms of its mixture of large and small clients wage. I would say that it the growth and small client is is more rapid, but that's simply because it's a different Dynamic we've got, you know, the large large farmer or for the most part all our clients already in the dynamic there. Is there expansion of more seats more tools more projects. So on a sheer customer count Side New York Giants are tending to be would tend to be in the the medium to to to small-sized just because of that Dynamic. I think the, you know be too small size Ventures out their clients that are out there continue to make that choice make that choice between building an internal wage.

Ability and or Outsourcing their needs to a third-party provider link ourselves or our service drivers or software drivers of our Revenue growth going forward that off Dynamic of more scientists being available makes the potential there for that, you know cut point in terms of who outsources and who builds internally perhaps it's moving back to a smaller size, but that's a pretty slow movements low Dynamic change. Okay, and and are you aware of any large Pharma that actually use some of your software to drive their m&a decisions in terms of maybe acquiring some are smaller farmers.

Well, I I I don't know that I would point to direct use of it in that regard but often the modeling and simulation work that is done on a drug in their program if they're looking to then sell it off or if it's an acquirer looking at a company that's been developing a drug dog modeling data and Analysis that would exist already would be something that in their due diligence they would seek so I'm I'm sure it's in the mix there's some money but I wouldn't characterize that we have, you know, large Pharma X Venture division Venture, you know Business Development Division as long as our client at this stage of the game.

I understand.

Thank you.

Ladies and gentlemen, you've reached the end of the question and answer session at this time. I'd like to turn the call back over to Sean O'Connor for closing comments.

Very good. Well, thank you everyone for your interest. It's been a good quarter for the company a good start to our fiscal year Twenty-One, and I look forward to speaking with you next quarter. If not, if not sooner. Thanks a lot everyone. Take care.

This concludes today's conference. You may disconnect your lines at this time, and we thank you for your participation.