Q2 2021 Simulations Plus Inc Earnings Call

Reception will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder. This conference is being recorded month. It is now my pleasure to introduce Jeff Stanley from Hayden IR. Thank you. Mr. Sandless. You may now begin.

Simulations plus I welcome you to our second quarter of fiscal 2021 Financial results conference call and webinar hosting the call today are simulations plus CEO shuttle Connor and the Company CFO Wilfred right 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 are forward-looking statements that involve a number of risks and uncertainties the actual results of the company could differ significantly from those statements factors that can cause or contribute to such differences include but are not limited to continued demand for the company's Products off of factors. The company's ability to finance future growth the company's ability to produce and Market new products in a timely fashion the company's ability to continue to attract and retain retain skilled personnel and the company's ability to sustain or improve the current levels of productivity further information on the company's risk factors are contained in the company's quarterly and annual reports filed with the Securities and Exchange Commission wage.

Without said I would like to turn the call over to shop.

Hannah O'Connor Shawn. Thank you Jeff. This was another strong quarter for simulations plus and a solid first-half to our fiscal year. We delivered 27% year-over-year Revenue growth bolstered particularly by the software side of our business the solid growth the inherent leverage of our business model and the greater mix of higher-margin software red LED to improve profitability. One of the highlights of the quarter was the successful launch of our m i d d plus scientific conference in early, March a two-day event focused on delivering customize modeling and simulation content specifically for pharmaceutical scientists and their organizations.

This event our first simulations plus sponsored event demonstrated our leadership in the industry more than five hundred commercial and academic professionals participated with tracks including dedicated sessions covering all stages of the drug development process including Discovery preclinical first-in-human phase one who posted them on generics in addition. This conference included a strong presence and active participation from Regulatory Agencies including representatives from the usfda offices of clinical pharmacology new drug Products Research and standards translational Sciences Center for drug evaluation and research and the national wage for Toxicology toxicological research as well as an visa and health Canada. Another highlight was the release of our inaugural ESG report dead.

Which you can find on our our website this report demonstrates our commitment to good governance diversity transparency and our shareholders. I'm proud of this report or something still rare for companies of our size as the ESG movement continues to find its form. We have adopted the mission of achieving our long-term goals for growth profitability and Industry leadership. So innovated science-based software and Consulting solutions to optimize treatment options that will both save and improve the quality of patients lives in summary. This was a strong and productive quarter with excellent Revenue growth and important initiatives that solidify our leadership position the strong software growth and especially the software mix took our results a bit ahead of our full full year plan and we expect expect this to normalize as we move through the second half of the Year turning to our Revenue mix for the second quarter dead.

As I mentioned we delivered twenty 27% Consolidated growth for the quarter organic growth was 12% versus the same quarter last year, like soft continue to outperform expectations with a revenue contribution of 1.6 million for the quarter software. Revenue was 60% of total revenues compared to 52% last year our system physical quarter software Revenue growth was 45% compared to 13% last year, excluding the addition of Revenue Source from which soft software. Revenue month was 15% compared to 13% last year. We are seeing accelerated organic growth in addition to lick sauce contribution resulting in excellent overall software growth per month.

our service

Revenue increased 7% compared to 35% last year as a reminder our daily some business experience some accelerated projects in the second quarter last year driving that 34% growth rate and we indicated at the time the performance was likely not sustainable our service Revenue growth in the quarter improved sequentially from q1 fiscal year 21 month, but still reflects this difficult dilisym year-over-year comparison in addition to the conclusion of a client funded software development project at cognigen.

Year-to-date are Consolidated year-over-year Revenue growth was 21% If you exclude the dilisym division with it's challenging year-over-year comparison our growth of 28% for the 6-month period compared to last year year-to-date our software Revenue was 59% of total revenue compared to 51% last year off again to look like soft acquisition being the driving Factor. Our year-to-date software Revenue growth was 40% compared to 13% last year excluding are tough division. Our year-to-date software Revenue growth was 13% Year-to-date Services Revenue increased 1% compared to 37% last year again. I'm doing some comparison is the primary driver of this growth rate.

Over the last couple of years. We have accelerated Revenue growth for both organically and through acquisition at the same time. We remain very focused on profitability. And in that regard we are performing well across these metrics for the second quarter of fiscal year 21 overall gross margin has increased from 74% last two years to 78% This court ebitda, as a percentage of Revenue has remained consistent in the mid-30s coming in this quarter at 33% off diluted earnings per share continues to grow year-over-year coming in at $0.15 this quarter and would have been 40% or 42% growth to $0.17 without the divorce affects of last year's follow-on offering and finally the rule of 40 metric that has been widely adopted by many to measure Revenue growth in combination with profit wage.

Is also a positive one for us coming in at 60% this quarter.

For year-to-date fiscal 21 overall year to date gross margin has increased from 73% the last two years to 78% Ebitda. Thursday is a percentage of Revenue has remained consistent in the mid-30s coming in at 34% Year-to-date diluted earnings per share continues to grow year-over-year coming in at $0.27. Year-to-date in would have been 30% growth to $0.30 without the dilute of effects of last year's follow-on offering and finally the rule of 40 metric is also a positive one for us for year-to-date coming in at 55%

in summary

These metrics demonstrate our ability to balance Revenue growth and profitability to deliver continued increases in earnings per share to our shareholders.

We enjoyed a diverse mix of software Revenue in the quarter with solid growth across our entire portfolio of platforms gastroplus represented 57% of total revenue for the quarter monolix sweet was from Lake soft was 20% of Q2 software revenue and add me predictor represented 16% other software contributed 7% of their revenue in the court on the year-to-date perspective gastroplus represented 656% of total revenue and monolix sweet was 19% off aadmi predictor represented 17% of total software revenue, and other software was 7% of year-to-date software Revenue.

With regard to software highlights during the quarter.

Aidd lead optimization collaboration with a large Pharma partner recently achieved a significant Milestone after being sent the sized and assayed by the farm apart eighty percent of the candidate molecules, tested exhibited sub micromolar activity and acceptable aadmi properties. These results are excellent job and demonstrate the unique value of the aadmi predictor machine learning models coupled with powerful aidd technology, which required only activity data to optimize molecules across a wide spectrum of properties.

These results are contributing to a growing sales pipeline for this product category.

We released version of our Flagship pbpk modeling platform gastroplus in anticipation of the gastroplus 10 or GPS flash scheduled for later this year version 9.1 gastroplus includes more mechanisms verification and guidance for are validated drug-drug interaction with a validated column in the drug drug interaction perpetrator be able to clearly identify the values that have been validated by our DDI experts for use and simulation a new option to include variability in London deposition in the population simulator and many other key enhancements. In addition. We all should establish a relationship with the South America distributor expanding our presence in this emerging region. The agreement is with the Institute of pharmaceutical Sciences or ICF.

Founded in 2002 i c f is one of the largest pharmaceutical research centers in Latin America and the first commercial Brazilian laboratory to be fully certified by the resilient Health regulatory agency and visa to conduct bioavailability and bioequivalence trials. ICF will provide Marketing sales and Technical Support to organizations throughout South America.

Monolix Armando like sweet. Our twenty-twenty was released in the first quarter and we are encouraged with the market reaction and the resulting lead generation. We completed the 5-day monolix virtual training workshop in March with daily attendance in excess of five hundred participants.

Finally, we announced a new distributor in China for monolix with mosam. One of Chinese leading biopharmaceutical services companies founded in 2015. Mazda was the first clinical cro providing clinical pharmacology services in China with a staff of over a hundred qualified scientists. Most of them will provide extensive connections throughout industry Academia and Regulatory Agencies to increase awareness of monolix sweet, including PK analytics monologues and simulates over of our monolix sweet has seen a 28% increase in customers year-over-year.

For the quarter. Our renewal rates were in line with historical rates at 93% based on peace and 86% based upon customers. We continue to see improvement in our average revenue per customer at around 84,000 for commercial customers and $66,000 for customers including nonprofits during the quarter. We signed six multi-year renewals for gastroplus and add me predictor. We also successfully renewed a large Pharma merger situation for monolix the scenario which often results in decreased seat license renewal by the combined client density.

Three agent renewals including two in India and one in Japan were delayed but we anticipate renewals from these entities in the coming quarters.

Year-to-date a renewal rate was also in line with historical rates at 93% based upon fees and 86% based on customers. We see continued Improvement year-to-date as well in our average revenue per customers at around 97,000 for commercial customers and 71,000 for all customers including nonprofits.

Let me see. If now to our service business our services Revenue grew 7% for the quarter compared to 37% growth last year for the quarter or Services service Revenue wage sourced 50% from pkpd Services which are primarily delivered by our cognigen division 32% from qsp qst Services primarily delivery dilisym Division and 18% from p b p k Services primarily delivered by our simulations plus division.

year-to-date service revenues were similarly dispersed by type in division

service Revenue growth and momentum is good. But continues to be impacted by the difficult year-over-year Revenue comparisons that Dilly some that we've previously discussed thought we were also challenged by the completion at the end of last year of a client funded software development collaboration absent these two factors service Revenue growth is more in line with historical growth turning to service highlights for the quarter. We signed a significant large farm a customer for pkpd project during the quarter in support of regulatory interactions. In addition more than a dozen projects were performed utilizing monolix as the primary analysis platform.

We secured seven.

TKA PD clients during the quarter and three large project contracts with ongoing existing clients. Finally. We secured a large qsp contract with a large Pharma client bought a new disease area.

Another significant event during the quarter was the formation of a scientific Advisory Board to provide guidance and direction for Billy Sims renasym quantitative systems toxicology. Kidney injury software platform. This board called the Consortium consists of six renowned experts in the field and is chaired by dr. Palmer seconds to Howard feargus purgason distinguished professor and director of The Institute for drug safety Sciences at the University of North Carolina off Ellie's. I'm also received a phase one NIH funded sbir Grant together with the University of Pittsburgh drug Discovery institute's the lamps experimental live or model and the micro physiology systems database to predict the safety of large molecules such as proteins that are increasingly used to treat diseases.

The first phase of development funded by the grant will include beta version software construction and V lamps testing of several large molecules successful completion of an object moves will lead to an application for a larger phase to Grant which would fully fund the development of the joint commercial offering this software uses properties of drugs predict the their risk of causing liver injury in patients and is now widely used to support he drug development decisions.

We also entered into a new funded collaboration with a large pharmaceutical company to develop machine learning models and enhance physiologically based pharmacokinetic pharmacodynamics approaches for potential treatments of pulmonary infections. Our plan is to apply or addme predictor platform to build machine learning models for key endpoints to serve two purposes to Aid scientists and Discovery as they screen candidate libraries and to inform the mechanistic gastroplus models at lead compounds progressed through development.

Digitally, we entered into a new funded collaboration with a large pharmaceutical company to add novel mechanisms for oral peptide formulations within the gastroplus advanced compartmental absorption in transit or a cat mechanistic model. This partner is a frequent user of the gastroplus platform across multiple research sites worth a growing portion of this farmers development pipeline is focused on therapeutic peptides and proteins and part of their strategy involves designing oral delivery system to complement the traditional invasive routes for these biomolecules this collaborative effort plans to expand the applicability of gastroplus to simulate intestine absorb option of large molecules in the effect of permeate permeation enhancers with an oral formulations.

if I

Cognigen division awarded a grant to the Department of pharmacology and Therapeutics and mackerel University in Kampala Uganda. The country's largest and oldest institution of Higher Learning this grant will fund upgraded internet capabilities and ensure access to cognigen ski we platform the goal is to accelerate the universe pharmaceutical research efforts and quantitative approaches, including modeling and simulation supporting future research and mentorships opportunities as kiwi users thousand faculty students at the University will gain access to a state-of-the-art platform to dynamically build compare refined and evaluate pharmacometrics models off. The talking to team will provide training and oversight to ensure kiwi is optimally leveraged to support the University's initiatives.

Overall, very busy and productive quarter for our Services Group providing mental momentum as we enter the back half of our fiscal year.

With regard to a couple of key service metrics total service projects increased 19% during the quarter with excellent Palm Springs this offset a reduction in projects and qsp and qst reflecting The Accelerated project and revenue growth in fiscal year 20 previously discussed. We close the quarter with eleven million in service backlog, which is improved after taking a fall since its peak at the end of Q2 fiscal year twenty prior to the impact of COVID-19 found this time last year.

Finally with regard to our fiscal year 21 Outlook. We continue to expect 15 to 20% total revenue growth for fiscal year 21 * to enter the back half of the year. We will see fiscal year 20 Revenue comparables that include licks off which we acquired in April 2020 and began contributing Revenue in q1 and Q2 for fiscal year twenty. This was anticipated in our fiscal 21 Outlook provided at the beginning of the fiscal year and remains unchanged.

Our software revenue is likely to perform at the high end or above the Outlook provided do to accelerating software growth rates in the stronger-than-expected contribution from Lexa conversely. Our service revenues are likely to perform at the low end or perhaps slightly below the Outlook provided due to difficulty overcoming year-over-year comparisons off on balance our outlook for fiscal year 21 remains unchanged and if anything profitability is enhanced by the Richer mix of software revenues for the year. We continue to be very active on the m&a front. So we're maintaining our rigor in the evaluation of opportunities.

with that

Return the call over to our CFO will Fredrick to discuss the financial results.

Thank you Shawn.

Our Consolidated revenue for the second quarter was up 27% to 13.1 million dollars compared to ten point four million dollars in the prior-year quarter total profit increased 33% to 10.2 million dollars representing a 78% gross margin in the second quarter of fiscal 2021 compared to a gross margin of 64% in the same quarter last year.

Sg&a expenses for the quarter or five point four million or 42% of Revenue compared to four point 1 million or 40% 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 increase is in contract laborer insurance and professional Fields R&D expenses for the quarter were one point three million dollars or 10% of Revenue compared to point six million dollars or 7% of Revenue in the same period last fiscal year capitalized are indeed for the quarter was point seven million dollars or 5% of Revenue compared to point six million dollars or 4% of Revenue in the same period last fiscal year income from operations was three point five million dollars a month.

An increase of 23% compared to 2.8 million dollars in 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 two million dollars for an effective tax rate of 6% compared to point seven million dollars for the same period last fiscal year which was an effective tax rate of 24% The lower effective tax rate was primarily driven by the tax benefit associated with disqualifying disposition that we saw in this quarter similar to last quarter, excluding this benefit. The effective tax rate for the quarter would have been closer to 21% We expect to see the rest of them are effective tax rate in the range of about 15 to 18% subject to other factors including profitability in any additional disqualifying dispositions off that income increase 49% to 3.2 million compared to two point two million dollars for the same period last fiscal year and diluted earnings per share.

Increase 25% to $0.15 compared to $0.12 for the same period last fiscal year.

you

Star increased 23% to 4.3 million dollars compared to three point five million dollars for the same period last fiscal year.

Our Consolidated year-to-date Revenue was up 21% to 23.8 million compared to nineteen point eight million dollars in the prior-year.

Total gross profit increased 28% to 18.5 million dollars representing a 78% gross margin in the first half of fiscal 2021 compared to a gross margin of 73% in the same period last year sg&a expenses were nine point nine million dollars or 41% of revenues compared to seven point six million dollars or 39% of Revenue in the same period last year similar too cute to the increase in year-to-date 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 insurance and professional life.

Are the expenses were two point 1 million or 9% of Revenue compared to one point three million dollars or 6% of Revenue in the same period last year capitalized R&D was one point four million or 6% of Revenue compared to one point 1 million also 6% of revenues in the same period last fiscal year income from operations was six point five million dollars an increase of 18% compared to five point five million dollars in the same period last year similar to to to this year to date increase was primarily driven by a higher gross margin on increased Revenue, which was commercially offset by an increase in operating expenses. The provision for income taxes was seven million dollars for an effective tax rate of 11% off.

Compared to one point four million dollars for the same period last year which was an effective tax rate of 24% as mentioned earlier the lower effective tax rate this year. I barely driven by the tax benefit associated with this qualifying dispositions.

Net income increased 35% to 5.7 million dollars compared to four point two million dollars for the same period last year and diluted earnings per share increased 17% to $0.27 compared to $0.23 for the same period last fiscal year even increased 17% to 8.1 million dollars compared to six point nine million dollars for the same period last year

Deshawn previously mentioned our total gross margin for the quarter increased from 74% last fiscal year to 78% this quarter. This increase was down by 89% gross margin for our software business and 61% for our services business.

We also saw an increase in our year-to-date gross margin from 73% last fiscal year to 78% this year. This increase was driven by 88% of gross margin for our software business and 63% for our services business.

We can send you that a strong clean balance sheet at the end of the quarter are cash and short-term Investments balance was 117.8 million years compared to $116 at the end of last fiscal year reflecting significant cash reserves to support our continued expansion through internal investment in m&a activity. We also continue to have no debt on the balance sheet. I'll now turn the call back to you Sean.

Thank you will in conclusion. We delivered strong Revenue growth in Q2 and the first half of fiscal year Twenty-One. The Richer mixture of software revenues is enhancing our profitability metrics nicely and we continue to advance our leadership position in the marketplace with business development momentum winning new business renewing and growing existing relationships key collaborations in Grants, and we successfully launched our first ever sponsored conference. As long as a result the underlying momentum. We see across our entire portfolio of software products and services is encouraging with that. I'll be happy to take your take your questions operator.

Thank you. We will now be conducting a question-and-answer session. If you'd like to ask a question, please press star one on your telephone keypad a confirmation tone when to get your line is in the question. You may press start to if you 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 star key. One moment, please for questions.

Our first question comes from Matt Hewitt with craig-hallum. Please proceed with your question. Good afternoon. Thanks for taking the questions and congratulations on the progress first up its dead a year now since you acquired look soft and I'm just curious how the cross-selling um is going but between the the two primary software programs, but how is that a growth that you're seeing and look soft is that I don't organic is the word but it's at customers coming and looking at look soft and and acquiring or is it because of the cross-selling initiatives that you put in place?

Yeah. Thanks Matt. All of the

Would be my my my starting point. We're getting good contribution from all of those sources, you know, remember what's up to had a good growth rate coming into the organization. So am I meant them in the marketplace a lot of adoption by both new customers as well as growth as the typical sale of model is a handful of user licenses for a period of time to test and get comfortable and then a follow-on renewal at a much higher user account. And so that Dynamic I was there in his continuing been very pleased in terms of the interaction between like soft and our simplest division the software sales team supporting gastroplus. Aadmi predictor number of opportunities have been created to introduce like soft to new accounts and some wage

Vice versa the other way in terms of like soft accounts that are provided some more exposure on the sun plus side hand over all we are very much focusing on a as a next step in terms of our development of sales and marketing efforts cross-selling programs that are focusing on key large accounts and wage organizing meetings interaction with that provides clients of one or more of our products and services to the visibility of or services that they might not be using. So that's been very good very good to date. And then lastly I'd comment that, you know the benefit in terms of you know, our big sale point on Model X has the efficiency that it can bring to the pharmacokinetic modeler in terms of performing their work effort and in that regard

We are stepping up ourselves internally and adopting monolix at a pretty rapid Pace. We're we're we're able in the performance of our client projects. I mentioned in the in the script, you know, a dozen accounts or a dozen projects. I should say this last quarter where we utilize monolix as the primary data analysis tool that's an important not just efficiency in terms of our internal speed and profitability on projects, but it's also another one of those cross-selling me demonstrating getting monolix and its functionality in the eyes of our Consulting clients and opening their eyes to the opportunity of adopting it as their tool in house as well. So overall from a number of different angles and sources the interaction that yeah is now a year old to have since our acquisition of like soft in April of last month.

There has been very very positive.

Well, that's great. Thank you for the update there. And then maybe one separate question given the mix is it sounds like it's going to remain elevated here towards favoring the software side at least for the long-term or the second half of the year. Should we anticipate that the gross margins are going to be kind of a you know up by that 78% kind of fish range for the second half as well or is there something else that could maybe knock the gross margins down? Thank you chairman know I mean we should see the benefit of that that your mix and their direction of the software contribution to revenues most definitely keep in mind in terms of the year-over-year comparisons that now we enter the third and fourth quarter and so the growth rate on the software side wage like soft is no longer purely acquisition growth if you will so the software growth while good and will continue to perform and as I said in terms,

The guidance that are above the the guidance that we gave at the beginning of the year. It's performing ahead of plan. Don't look at the 45% growth in the second quarter. Keep in mind. This very wage order will have somewhat soft revenues in the prior-year comparable. That'll bring that percentage year-over-year percentage down, but nonetheless the organic growth rate and look South rate on a stand-alone basis, uh will continue quite strong here, right? That's helpful. Thank you.

As a reminder, if you'd like to ask a question, please press star one on your telephone keypad. One moment, please while we polled for questions.

Our next question comes from Francois priests ball with Oppenheimer. Please proceed with your question.

All right. Thanks for taking the question just to touch on what what mentioned the cross-selling obviously on the software side. There's some cross-selling between software products are offerings. But how much of it is pushing? Also you talked about the Consulting business how much of that cross-selling can go to the services side? And is that something you know to tie it into an m&a question what exactly are the criteria that you're looking for? And um, you know is the the performance of licks off maybe changing what you're trying to look for here.

Boy, you're coming at several different angles there Frank and one question. Congratulations could good question. He said, you know the dynamic of cross-selling from Wix off to the Consulting business as I indicated before it is presenting opportunities, you know, there were at the time position one of the opportunities going forward where it was the fact that with soft was turning away requests inquiries by their clients for service related Thursday effort that like soft was not staffed up or in a position to to support and so inquiries to to look off now have a home and that's primarily cognigen and go into the lead and sales pipeline to be followed up and we've seen some good good activity there and then yep.

On the other side see yeah.

Demonstration of monolix in the performance of existing Consulting business in front of our clients is a tremendous sales opportunity to demo. It's not a cold call. When can we demo monolix? It's a warm relationship in a Consulting engagement and demonstration of the the merits of of monolix boss. So to a to a friendly existing client and that is very legible opportunity that that we're working as well. So feel very good life. They're both on the incremental software cross-selling as well. As on the Consulting side that opportunities are being presented to itself following onto the liquid to acquisition a year ago as it relates to m&a, you know, does it does it change our perspective in terms of our m&a criteria hey wage.

I think our acquisition of like soft was very positive and and checked most all the boxes not only at the time of the acquisition but a year later looking back in in high school, but the performance and contribution has been better than expected. And so yeah, those those are Acquisitions we'd want to do on a daily basis. So to speak up I don't know that it necessarily changes. However, the criteria that we're running with here, you know, we continue to look for good strategic fit could could cultural said we'd get a biased towards software entities. They can contribute an ad to you know, our desire to be, you know, the premier software tool tool provider to change the industry in in in biostimulation Services by Consulting opportunities to have their merits as well often. It's a geographical birth.

Terms of extending our footprint in Europe or perhaps and the Asia region and and then finally, you know, there are Services biostimulation services that walk through acquisition. We could expand into new but related to areas so all of those criteria remain remain the same wage certainly enjoyed the experience and like soft and and look to replicate that but I I think that's where we were last year and that's where we continue to be today.

Okay. Okay, great and I'll just sneak in another one you actually hit on all of those so there but the software and services mix is something that comes up a lot. Can I talk about you're obviously talking about twenty Twenty-One. But is this something that you know, maybe on the low side on the service grows? Maybe on the high side on the software side, but if we're looking at a 2022 350 down the road, do you share any thoughts about what would be an ideal mix of software and services but like where we've landed back at the 60/40 we bought you know over the last couple of years with some accelerated growth on the service side while we were investing in sales and marketing to enhance the growth on the software side. We saw that song that makes percentage come down from close to 6040 but down I think get its low points. It was even 49% software 51% service if I'm remember.

Bradley and

Recalibrated that and today we're supporting that with an enhancement inorganic growth on the software side as well. Obviously, there's been a fair in terms of the overall profitability of a of our model that that we'd like to take advantage of and in the long run. Yeah. We just tried to to maintain this month very inevitably will be some Epson Flows In quarter-to-quarter results. They're up, but put $64 would be demand for the March two thousand.

Okay, great. And then any comments you can share on the pandemic on you know, maybe businesses backlogs and maybe new business or hiring any any updates. I mean, there's been obviously. Um such, you know, you guys have been kind of sheltered from from the impact of COVID-19 a little bit. But any updates there from your perspective.

Yeah, I you know, I can't point to anything significant that's new or different, you know, as we're all experiencing. It's sort of a mishmash of opening up and closing down as you walk around the world to various places. Are are are are employees that like soft in Paris. I feel bad cuz they couldn't been locked down for so long and can't can't go more than six miles from their home their front door from a business perspective. I think there's been a settling in an increase in activity a moving on getting through life annual budgeting process allowed our clients to sort of step back and take a deep breath and say, okay. Well, what's the program going to be on a go-forward basis over the next page? What's that budget going to be? So so there's a little bit more fluidity to business if that's the right term at the same time, you know, it doesn't take much for

Companies to pull back and say we're cautious. We're going to wait till next Corridor. There's still the impact in terms of we've not been able to face to face with clients and in a conference industry conference and the impact that we felt in that regard to for the last year or so getting better at it. But but still. So, it's it's still a mish-mash. We're we're learning to to fight our way through it, but still have some impact.

Okay, and I apologize. I'll I'd I'd like to sneak in one last one. That's okay for about four million Revenue growth the first half year six for six months of of the wage report. Do you break out the contribution there from Lissa and embellish?

It was 1.6 and the second quarter and I don't know if we'll maybe you've got first quarter of visibility there. I don't have that cheat sheet exactly in front of me kind of a somewhat less than 1.6 in the first quarter. Okay. I was one point. We'll put it out in our 10-q on Wednesday as well. We'll have all that you're trying to gauge if if most of that growth all lakes off or the organic side how much of it is organic versus looks off, you know understand all those details will will come forth and you know, we're we're home group their, you know, their their growth has accelerated just apply the momentum that they've had they've also had some accelerated situations where clients have wanted to increase licenses and Thursday instead of doing the renewal may not have come up until third or fourth quarter, but we want more licenses. So let's renew it now in the second quarter a bigger dollar contract lice.

So total and accelerated forward.

So yeah, we're we're we're we're good businesses momentum is is good on which side, you know, they're they're sort of learning to become a public company though in terms of the quarter-to-quarter revenue projects. And so as we work into the back half of the year, the most important factor is keep in mind. There's look soft Revenue in our comparison from the prior-year. So that's going to impact that overall growth rate may not necessarily be implemented under underneath it understood. All right. Thank you very much. If you'd like to ask a question about phone keypad. One moment, please while we pull up for questions.

Our next question comes from David windley with Jeffrey's please proceed with your question. Hi, good afternoon. Thanks for taking my question. I believe I heard you say in your prepared remarks that maybe some company-specific factors in impacted your growth in qsp. I wondered if you could comment more more broadly about the trends that you're seeing in growth or demand from customers between what maybe you call Core models and disease models, you know, say hey, I'm moving out for any company specific factors. I'm trying to understand kind of where is the underlying industry demand going?

Adam and is still strong for a third party of assistance to internal modeling and service organizations, you know, it abs and flows a bit. I think it took was more impact impacted by covet than the software side of our business. As you know, all hands on deck turn our attention to page related programs and as a hesitancy or slowness in terms of other other programs in a push off there for of some services that were being utilized wage on a third-party basis like that, which we provided some some plus, you know, the the growth on on Services as over a you know, two or three year window, you know been as high as 40% growth as low as relatively flat I think the sort of consistent ongoing birth

Normalized growth rate will be you know in that 25% range that being said, you know, we'd all like services to be nice recurring off-and-on won't be business but the base nature it is so even with sort of a Target 25% or expectation 25% It'll have some Epson flows on a quarter-to-quarter basis.

Got it. And so just to clarify so in your case qsp is all services or are you also selling software? I guess what I'm trying to get at is the difference in demand between what may be thought of as as corn on disease modeling versus disease-specific modeling and if the industry is kind of rotating to getting more specific on disease States, you know fair question that you know, the whole quantitative mechanistic modeling qsp qst space is been a high demand area and continues to be very active Pipeline on our part. It also tends to be larger models your basic pkpd study which made land and hundred two hundred thousand range. The mechanistic models going to be, you know, five hundred thousand could be a million and therefore activities very good job.

That leads to sort of the ebb and flow and ups and downs.

Lumpiness of that business PKD demand is continues to be very strong magnetic modeling demand continues to be very strong as well. Okay, in terms of moving on two separate Topic in terms of of your m&a comments. It sounds like you're still very active in your evaluation. How how do clients or or me? Ask you differently do clients desire for those capabilities that you bring in through acquisition to be natively integrated with your existing platform. Is that important or not to the client?

I think it can be important. It's not number one on their priority list and I think the biggest driver in that regard can often be the siloed nature of the pharmaceutical pharmaceutical organization and so a a tool in Discovery a tool and clinical the immediacy the value to the Discovery scientists. He doesn't necessarily latch onto the value if those two products are integrated the client at a higher level in that organization will see those benefits and with liquid is something that is very valuable to to them but it depends on you know, where you're where you're at in The Matrix with with a client and depends on what those add-on, you know, a commission products or Services might be in terms of who you're talking to at the client. Okay and last last question for me just to clarify so I think numbers you gave birth.

Of about 2.8 million of the growth of your four million and growth on a year-to-date basis would have been licks off 1.2 and 1.6 from the last question. Is that is that right? And and then the remainder of the 1.2 would be your organic number that we should compare the the just shy of twenty million in the first half of last year. Is that is that a way to think about it sounds about right? Yeah. Okay. Great. Thanks. Very good.

There are no further questions at this time. I would like to turn the floor back over to mr. Sean O'Connor for closing comments.

He's good. I appreciate everyone's interest and joining us here on the earnings call and look forward to next quarter and returning and telling you the story of simulation with us. Take care, everyone.

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