Q3 2021 Simulations Plus Inc Earnings Call
Greetings and welcome to the simulations plus third quarter fiscal 'twenty 'twenty, 1 financial results conference call. At this time all participants are in a listen only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance. During the conference. Please press star zero on your telephone keypad.
A reminder, this conference is being recorded it is now my pleasure to introduce Brian Segal from Hayden IR. Thank you. Mr. Siegel you may begin.
Good afternoon, everyone welcome to our third quarter of fiscal 2021 financial results Conference call.
Hosting the call today are simulations, plus as CEO, Shawn O'connor and CFO Fredrik.
An opportunity to ask questions will follow today's presentation.
Before beginning I would like to remind everyone that the exception with the exception of historical information. The matters discussed in this presentation are forward looking statements that involve risks and uncertainties.
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 competitive factors, the company's ability to finance future growth the company's ability to produce and market new products in a timely fashion.
On 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 further.
Further information on the company's risk factors is contained in the company's quarterly and annual reports and filed with the Securities and Exchange Commission with that said I would like to turn the call over to Shawn O'connor Shawn.
Thank you Brian.
Relations plus delivered another quarter of top and bottom line growth.
Quarter was highlighted by continued strong performance from our software solutions with growth exceeding 21% well above 10% to 15% historical growth rates.
Accordingly, we believe that going forward software revenues will contribute more heavily to our consolidated growth rates than they have in the past.
Our service business encountered several project disruptions, which impacted the quarter, leading to an 18% service revenue decline.
This decline was due to an unusually high number of projects 9 in total impacted by delays holds or drug development program cancellations all of which occurred during the latter part of the quarter.
Despite these near term factors, we remain confident in the mid to long term view on the service business.
As we saw solid bookings and backlog growth and overall pipeline expansion during the quarter.
Given our strong software mix, we were able to grow our bottom line faster than the top line as evidenced by our strong profitability in the quarter.
In fact, our net income through 9 months exceeded our total net income for all of fiscal 2020.
These results reflect the accelerating growth of our software revenues and inherent leverage in our business model and the progress we've made in expanding our profit margins.
As I mentioned this was a strong quarter for our software solutions GAAP.
Astro plus and have met predictor continued to increase growth rates with drug drug interaction or DDI.
And high throughput pharmacokinetic or H T P K module growth of 114% and 58% respectively.
We added 5 new customers to the 100000 plus license club and had 23.
Sales during the quarter day.
<unk> the strength of our product portfolio combined with our efforts to both cross sell and up sell.
Model X revenues continued to outperform our expectations with revenue up 64% from last year due to a combination of robust demand and early license renewals. This growth is now entirely organic as we have passed the 1 year anniversary of our acquisition.
After last year.
We also completed the training.
Of a new distributor in China during the quarter significantly expanding our addressable market.
Our business development investments are paying off by increasing our sales pipeline and creating a cross selling opportunity and deeper relationship with customers.
We also continued to add new capabilities and extend our industry leadership position with the latest release of that met predictor, which will allow for enhanced lead selection enhanced performance and accuracy.
Proved automation and a better overall user experience.
Additionally, the newest version of the monarch suite is on target for release in the fourth quarter and G. P. X 10 is on track for release by calendar year end.
Turning to our service offerings, our service revenue is nonrecurring and can therefore exhibit some measure of volatility.
During the quarter, our PK PD and U S. P. S. T services encountered project disruptions and mix changes that impacted the revenue growth.
P. J P. D projects are typically in the 1 to $200000 range, we see projects accelerate to meet their aggressive timelines or delayed by issues that are out of our control historically delays have been largely offset by new projects or projects pulled forward from backlog.
But this quarter several significant customer delays impacted our revenue and we'll continue to do so into the fourth quarter.
Customers are quicker to cancel can't challenging drug development programs in this pandemic environment and we saw several drug development program cancellations or technology allows customers to make decisions more quickly on whether or not to proceed with development of the compound.
Fail fast as an industry objective and this can contribute to our service project volatility.
We also saw delays with service projects.
In Israel this past quarter.
As well as from the tail end of the Covid impact.
With respect to the ladder projects are often initiated based on feedback from the FDA requesting more research into specific elements of our compounds.
During the pandemic the normal workflow of the FDA and with other regulators has been somewhat disrupted and this has impacted the schedule for certain drugs to be submitted to the FDA and the timeline for FDA reviews, as well as clinical trial time.
As a result, we saw a large number of changes in many of these notifications came late in the quarter.
Since our sales cycle had been somewhat elongated during COVID-19 already our backlog was not at the levels typical of this business limiting our ability to backfill and reallocate resources to make up for these changes.
On a positive note our bookings during the quarter were good and the backlog for service projects increased by approximately 5.5% despite the cancellations.
We also added 5 new clients during the quarter, which reinforces our optimism.
On the U S peak U S T side.
Projects tend to be larger in terms of dollars, making the revenue for this work more volatile.
Peak U S. T had 3 very large projects that concluded late in fiscal 2020 driving higher than normal revenue.
Further smaller toxicology projects that are usually the result of feedback from the FDA when regulators want our sponsor to provide additional data on potential liver issues with the compound.
And we have the gold standard of capabilities in this area as.
As Covid continues to rear view mirror, we think the overall pharma development pipeline will normalize and we will see opportunities convert to backlog and ultimately revenue.
That said our sales pipeline remains large in fact larger than normal with significant opportunities.
Separately, we did add an additional member to the liver model consortium in the quarter.
Furthering our integration with industry leaders.
Finally, our PB PK services reported solid performance in the quarter and our regulatory services resources are operating at capacity or.
Overall, this challenging quarter for our service division, but the trends are more encouraging than the Reluct results show our.
Our services continue to enjoy healthy demand and our sales pipeline is robust and growing.
The nature of these projects project based revenues result in some periods of over performance and some periods of underperformance or outlook for the services revenue in the long run remains unchanged and its ability to contribute to our overall revenue growth.
And with the accelerating growth of our software business, we continue to minimize our exposure to service fluctuations and improved profitability.
Based on the slowdown in our services revenue. We are now expecting full year total revenue growth of 5 to 10 per cent.
The service volatility encountered this quarter is not reflective of any market disruption or business execution does that change our long term outlook for modeling and simulations adoption or our growth prospects as a company.
While we are not yet releasing fiscal 2022 guidance, we believe that we will grow over the longer term by more than 15% annually.
Breaking our fiscal year 'twenty, 1 full year guidance down we expect our software revenue to grow $20 to 25 per cent for the full year.
This takes into accounts, the 32% year to date growth and anticipated flat mono lake's revenue in Q4 due to the renewals that were accelerated.
Third quarter.
Year to date, our services revenue was down 6% and we're expecting full year to see a decline of 7% to 12 per cent.
The timing of the delays holds in drug development program cancellations. It means that the fourth fiscal quarter is likely to see lower service revenues and we don't yet have the necessary visibility to predict when these projects will move forward.
Again, we view this situation is temporary and.
And strictly related to the timing of customer projects.
Let me now turn the call to our CFO will fredrik to discuss the financial results.
Thank you Sean.
Sean mentioned, our consolidated growth rate slowed to 4% in the quarter due to the challenges facing our services business.
When combined with an acceleration in our software revenue growth rate to 21% versus 18% last year, we saw a mix shift towards software, which accounted for 65 per cent of revenue for the quarter.
These mix shift and growth rate changes also impacted our year to date revenue growth, although the mix shift was not as pronounced with software, making up 61% of revenue year to date as growth increased to 32% versus 15% last year.
As you would expect these revenue mixed trends positively impacted our total gross margin for the quarter.
Software and services gross margins were both consistent with last year at 90% and 63% respectively.
Leading to an overall gross margin increase from 78% last year to 81% this year.
On a year to date basis, the mix shift had a larger impact on gross margin expansion with software increasing from 86% last year to 89% while services were roughly flat at 63% leading to an overall gross margin increase from <unk>.
75% to 79%.
We continue to enjoy a diverse mix of software revenue in a quarter with solid growth across our entire portfolio of products.
Gastro plus represented 65% of software revenue for the quarter.
Avnet predictor represented 18% of Q3 software revenue and monolithic suite was 11% with other software representing 6% of software revenue in the quarter.
Year to date Gastro plus represented 65.60 per cent of software revenue.
<unk> predictor was 17% and the monolithic suite was 16%.
For the quarter, our renewal rate was 91% based on fees.
1 client renewal slipped into the fourth fiscal quarter, causing the debt in our historic level.
This renewal occurred in this quarter.
Dual rate by fees would have been 93% consistent with prior years.
Our renewal rate was 83% based on customers this quarter due to the turnover.
And academic licenses.
We offer licenses to these groups at discounted prices or at no charge and they tend not to be renewed beyond the initial 1 year license true.
This turnover with the lower price or no charge non profit academic licenses is reflected in the difference between the fees and accounts based renewals.
We continue to see improvement in our average revenue per customer.
$98000 for commercial customers and $71000 for all customers, including nonprofits and academics.
The average revenue per customer demonstrates the success, we've had in Upselling and cross selling software solutions across our customer base.
Year to date, our renewal rate was also in line with historical rates at 91% based on fees and 84% based on customers.
The late renewal I just mentioned occurred in this quarter the year to date renewal rate by fees would have been 92%.
We also continued to see improvement in our average revenue per customer.
Round $112000 for commercial customers and $81000 for all customers, including nonprofits and academics.
Let me shift now to our services business for.
For the quarter, our services revenue breakdown was as follows.
43% from PK PD services, 27% from TSP Qs T services.
17% from PV, PK services and 13% from other services.
Year to date services revenues were similarly dispersed by type.
Yeah.
With regard to a couple of key service metrics.
Service projects during the quarter decreased 4% compared to the same period last fiscal year due to the project disruptions and mixed changes from previously mentioned.
We closed the quarter with $12.4 million in service backlog up $26 million compared to the same period last fiscal year.
Turning to our consolidated income statement for the quarter.
SG&A expense was $5.1 million or 40% of revenue compared to $5 million or <unk> 41 per cent of revenue in the same period last fiscal year.
The modest increase in SG&A expenses was primarily the result of higher payroll related expenses.
Total R&D costs for the quarter were $125 million or 11% of revenue compared to $1.4 million also 11% of revenue from the same period last fiscal year.
R&D expenses for the quarter were <unk> $7 million or 5% of revenue compared to $8 million or 6 per cent of revenue in the same period last fiscal year.
Capitalized R&D for the quarter was $28 million or 6 per cent of revenue compared to $6 million or 5 per cent of revenue in the same period last fiscal year.
Income from operations was $4.5 million, an increase of 18% compared to $3.9 million in the same period last fiscal year.
This increase was primarily driven by a higher gross margin on increased revenue, partially offset by a modest increase in operating expenses.
The provision for income taxes was <unk> $7 million for an effective tax rate of 16%.
Impaired to $8 million in the same period last fiscal year, which had an effective tax rate of 22%.
The lower effective tax rate was primarily driven by the tax benefits associated with disqualifying dispositions that we saw again this quarter similar to last quarter.
The effective tax rate for the quarter was in line with the 15% to 18%. We mentioned on last quarter's earnings call and where we expect to end the year subject to factors, including profitability and any additional disqualifying dispositions.
Net income increased 29% to $3.8 million compared to $2.9 million for the same period last fiscal year.
And diluted earnings per share increased to 18.
Compared to 16.6 for the same period last fiscal year.
EBITDA increased 15% to $5.3 million compared to $4.6 million for the same period last fiscal year.
When looking at our overall profitability metrics in Q3, we demonstrated the significant amount of leverage in the model.
As the 2% overall gross margin expansion drove a 5% EBITDA margin expansion and 13% growth in EPS and.
In summary, these metrics demonstrate our ability to balance revenue growth and profitability.
To deliver continued increases in earnings per share to our shareholders, even if quarter to quarter revenue fluctuates.
Turning to our year to date consolidated income statement.
SG&A expenses were $15 million or 41% of revenue compared to $12.6 million or 39% of revenue in the same period last fiscal year.
Similar to last quarter the year to date 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 labor insurance and professional fees.
Total R&D costs were $5.1 million or 14% of revenue compared to $3.7 million or 12 per cent of revenue in the same period last fiscal year.
R&D expenses were $2.8 million or 8% of revenue compared to $2 million or 6% of revenue in the same period last fiscal year.
Capitalized R&D for the year was $2.3 million or 6% of revenue compared to $1.7 million also 6% of revenue in the same period last fiscal year.
Income from operations was $11.1 million, an increase of 18% compared to $9.4 million in the same period last fiscal year.
Similar to Q3. This increase was primarily driven by a higher gross margin on increased revenue, which was partially offset by an increase in operating expenses.
Net income increased 33% to $95 million compared to $7.1 million for the same period last fiscal year.
And diluted earnings per share increased to 46 cents compared to 39 cents for the same period last fiscal year.
EBITDA increased 17% to $13.4 million compared to $11.5 million for the same period last fiscal year.
We continue to have a strong balance sheet at.
At the end of the quarter, our cash and short term investments balance was $119.8 million compared to $116 million at the end of last fiscal year.
Collecting significant cash reserves to support our continued expansion through internal investment and M&A activity.
We also continue to have no debt on the balance sheet.
I'll now turn the call back to you Sean.
Yeah.
He will.
In conclusion accelerated software growth rates and richer mix of software revenues are enhancing profitability metrics, but near term delays in our service revenue will slow our consolidated growth rate.
This is a short term phenomenon and bookings and backlog improvements point to normalization of our service revenue and the associated growth rates, putting us back in a position to deliver consistent growth in excess of 15% strategically.
Strategically we continue to reinforce our leadership in the pharmaceutical industries.
On a bottle based drug development tools and techniques, we remain well integrated with both academia and regulatory agencies, giving a scientific credibility as we look to the future.
Our investments in business development are generating the expected results, we have good market momentum with the close of new business renewal book.
And growth of existing relationships key collaborations and grants.
Finally, I want to mention that we are embarking on a celebration of the 25th anniversary of the founding of simulations plus the company will host a series of exciting events throughout the year as part of our 25th anniversary.
<unk> charitable contributions and exciting user conferences.
We have come a long way in the past 2 and a half decades and it is encouraging to see that Walter as his vision of accelerating the drug development process through software and modeling.
The increasingly embraced by the industry.
With that I'd be happy to 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 1 on your telephone keypad, a confirmation tone will indicate that your line is on the question queue. You May Press Star 2 if you would like to remove your question from the queue for participants using speaker equipment and may be necessary to pick up your handset before pressing the star keys.
1 moment, please while we poll for questions.
Thank you. Our first question comes from Matt Hewitt with Craig Hallum Capital Group. Please proceed with your question.
Good afternoon, and thank you for taking our questions.
A couple from me first on the service side I. Thank you for providing the color I'm just wondering if we could dig in a little bit more as far as what's you're seeing from customers you mentioned that the fail fast and move on to new projects early on.
How has that changed over the past year on it maybe pre pandemic and how quickly when they kind of move on to the next project are you able to kind of get things ramp back up for the various projects.
Yes, Matt.
Fail fast there's been a a a slogan and objective in the industry for some time and our modeling and simulation tools and services that we provide are very focused on achieving that objective.
So the objective and the occurrence of cancellation of projects has always been there we see that accelerating accelerating.
I think oh by the adoption of modeling based techniques and I think in Covid day environment here or there.
Changing priorities and changing focus.
Delays in certain debt development programs.
On that as things have started to settle down a bit those program says.
Return to the spotlight and maybe a few more decisions to cancel those drug development programs have come to bear.
We've been experiencing these sorts of phenomena, you know always sort of every quarter, but not at this at this level our 9 projects in the latter part of the quarter.
It got delayed or put on hold or or cancelled.
In our typical approach has been to reallocate resources to other projects.
Are there new projects that are being closed in and have quick start dates or out of backlog.
Resorting those scrubber project priorities and timing as best we can.
Oftentimes projects are dictated by the delivery of data from the closure of the clinical trial are.
In those situations you know, while we know we're going to do that work if the if the trial Hasnt been completed we can't start early and free will and move that project forward. So you know, it's hampered a little bit in terms of our resorting of our project work.
But typically we've been able to do that and I think in this case well, but backlog is rising it is just now reaching.
The level it was before COVID-19.
And so our ability the number of projects that we could sort through in backlog.
And replace the delayed projects was somewhat hampered.
And so could not could not respond as a as we may have in the past because of the number.
Of delays and N b, our portfolio of backlog projects to fill the gap is still still growing but just not as robust as it may have been in the past.
Okay. That's helpful. And then you mentioned that your you know and obviously alluded to this with the guidance as well, but it sounds like some of these disruptions are going to kind of continue here in the fourth quarter, yet I think a couple of times you mentioned that you expect this to be short lived are.
Are you expecting things to them on the service side to pick back up in fiscal Q1 or is it still a little bit on certain on on how quickly. This you know this business will start to ramp back up.
Yeah fair enough yeah. Some of the some of these projects were projects that werent anticipated to be completed in the third quarter and were slotted in to continue into the fourth quarter and contribute revenue over the over the second half of the year so their delay.
Or cancellation does impact the fourth quarter as well and well we're looking to do what we normally do which is to identify other projects to slot in and utilize those resources and drive revenue.
Our ability to do that is you.
You know not in full at this point in time, and so there will be some impact on.
As a result of some of those projects are being.
Being cancelled and some of the delayed projects.
You know the indication from the client is not yet firm in terms of.
This is a 1 month delay or is it a 6 month delay and so we're being cautious in terms of anticipating those those delayed projects.
Starting back up real real quick and contributed into the fourth quarter.
So our fourth quarter will be will be disrupted.
As we look out into the longer term.
Not in a position just yet to put out our fiscal 'twenty 2 guidance as yet I.
I can say on the long run I don't see anything in what's occurred over this past quarter that changes the outlook in terms of the use of consulting services by the industry in general those clients.
Debt, we've worked with over a long period of time the pipeline of activity that we're engaged in in terms of the.
Open proposals and bleeds.
And our backlog is right and so to the extent that the service business has contributed to our lap book growing 15%, 20% organically no change from my perspective, a difficult quarter in terms of the timing of a number of projects, but expect that our services will rebound.
In time here not as quick as the fourth quarter, but will rebound and debt.
Play its part its contribution in terms of our 15% to 20% growth objective on.
The positive side, you know the the need for it to rebound to some of its sites in the past is diminished as our software business has really performed well.
Our software business that historically has grown.
10% to 15% closer to the 10% in the past and today has stepped up and is growing in that 20 to 25 per cent range.
Contributing 60% a higher percentage of revenues on a phone.
Because theres been in terms of being the tool supplier to the industry and enjoying the recurring revenue and the profitability of the software model and that side of our strategy is very successful today.
Well, that's great and I guess, that's the perfect segue to software obviously, a fantastic quarter. This is now several quarters on a role where you've outperformed expectations. It sounds like that's going to continue.
How much of that is a is a contribution from <unk>.
<unk> soft and some of the new modules versus just a broader acceptance of simulation software and as we look out to next year I think at 1 point, maybe last year, you had talked about implementing some price increases given the pandemic those kind of got put on hold or is it your expectation now that we're kind of getting through.
The pandemic debt you might be in a position to implement some of those price increases next year. Thank you.
Well in terms of the sourcing.
Of the growth it has been you know across the board.
Our 3 primary platforms gastro plus add met predictor and monoliths are all performing very well and our historical platforms of gastro plus an admin predictor.
Have accelerated their growth rates from the past.
Yes.
Part as I as I pointed out in the.
The earnings presentation the modules the day.
D I for Gastro, plus an H T PK for admin predictor.
He has driven.
Some of that growth a good portion of that growth and.
It's either module sales to existing customers that are upgrading their platforms to include that new technology or it's motivating a new license holder to acquire the full suite the base product of gastro, plus and the module and door to full admin predictor license and its module so.
And that new technology, which opens up a new capabilities for clients.
As a as a good motivator for both upselling existing clients as well as bringing new clients into the fold as I mentioned, we hit a 5 additional clients that exceeded the 100000 Mark in terms of our annual software sales that's indicative of a client that's either building.
Number of seats are in there.
Their company and door.
Beefing up their incidence of receipt by adding more modules to the to the platform.
Mono lake's has performed very well throughout the throughout the course of the year and today. It's you know Inc. We entirely organic revenue growth on a reported numbers as well.
They have benefited from being part of the business development.
Infrastructure that is S. L P. They've benefited from their new releases both right at the time, we acquired them a year ago and then earlier. This year that has brought new functionality and attracted more eyeballs to their capability and we've expanded our distribution both in terms of model X.
Into a Chinese distributor capability as well as on the gastro plus side admit predictors side down into South America with a new distributor in that direction. So the software is our growth is being contributed true across the board and is is quite strong today.
On the pricing side, we are while we may not have been as aggressive as we might have due to the COVID-19 environment. We did you know there is a element of the of a price squeeze a increase in the numbers as we move forward. We'll continue to do that annually. We are well update the price list if you will.
And later this year with a significant release of the G. P X presents a larger new platform a debt what else would you know price would be a consideration and its introduction as well.
So you know price is always going to be a contributor.
From my perspective, right now most importantly, it's the expanding our revenue growth the products upon which that price increase sits on top of his debt because it's really a very a very pleasing to see the fruits of our labor in terms of business development.
Our investments over the last 6 to 12 months.
That's great. Thank you very much.
Thanks, Matt.
Yeah.
Thank you. Our next question comes from France swap reservoir with Oppenheimer. Please proceed with your question.
Alright, thanks for taking the questions.
Just a quick 1 here just can you give any more color maybe some more granularity on the delays and cancellations you mentioned 9.
Can you break down how many of those are delays versus cancellations and any can you share anything as to why these would've happened.
Well each each Frank as it's anecdotal story yeah.
I don't know that get the breakout between delays on holds and cancellations I think the cancellations were a 2.
Or 3 and N number you know gave.
Gave you a little bit of a feel to our to the magnitude to most of them were on the PK PD service.
Side of our business, where our project average projects are 1 to 200000 in terms of the average size.
Uh huh.
1 of them into selling you end up was it was a deal that the contracted just been signed.
Within 30 days the decision was made to discontinue the program.
So we were quite surprised by some of them and each of them has their own anecdotal story as to.
Cause a cousin ended the end to end effect leading to their decision.
Understood and just because of debt surprising factor.
Can you just remind us what gives you the confidence in and for the long term here and when you did kind of give guidance as to you on a 25% growth on software for the year and now you've adjusted your guidance.
Can you just remind us what you know.
How that guidance comes about you know how does is it from projects is it yeah outbound interest inbound interest how how do you guys get to your guidance.
On the on the service side I think you said software and I think he meant to say, sorry, I think guidance and.
You know there you know we are you know.
The guidance is built upon our backlog our pipeline.
Our resources are.
And you know all of those come together to project out a rare.
Revenue driven by the sequence of a project completions.
This 1 you know it was difficult those those are 9 in number of projects that were impacted Cape We've always got 1 or 2 of those that happen on a quarterly basis, but we've never encountered.
9 am I believe you don't see any commonality as I say each has its own story.
And I don't see any commonality in you know in the details there.
Several of them were from a long term clients and they will be long term clients and there are other projects.
On that are that are being worked today and or in backlog. So it's not reflective of any lost clients in any way.
You know we had disruption in terms of a project that was for an Israeli client with.
With the activity in the Middle East. So we had a number of a number of real.
Surprises are they came together in their magnitude in placing us on the quarter impacted where we thought we would.
We would come out.
And so you know our guidance is built on a long.
Our book of the project flow and what we see in the pipeline.
And as I say I don't see you know with the results that we've had in terms of new contract closures backlog went up despite.
All of those cancellations are coming out of the out of backlog are not going to revenue booking cancellations and detection backlog.
And so we you know we've gone through a similar process, we're being a little bit more cautious.
In our guidance there having encountered this number this quarter.
And perhaps hopefully we can you know.
Pete that are sort of expectation, but at this point in time, you know, what's Oh, you know be cautious it's near term and next quarter and as I look beyond that and into the next year and be on again don't see any changes in terms of the marketplace.
Our ability to execute that would to change are pretty consistent outlook for some time here in terms of the service revenue growth.
Excellent and then I have to ask in terms of M&A. The pullback in valuations across the board has that made a potential M&A a little more attractive or are we still thinking the same way there in terms of what could make sense, whether it's geographical expansion any color there on the M&A strategy.
I think you're right I think it actually helps them.
You know, it's a high valuation environment that we're in you know maybe over the last year.
Less than a year you know certainly made that part of the discussion somewhat difficult I would say that there's a little delay factor while valuations overall go down.
And individual individually person or company.
There's a little delay factor when they watch the market go down before they realize that there are companies value may maybe falling in the same direction, there, but I think it is.
On a positive in terms of the softening evaluations out there that have made some of those discussions will get a little bit more easy easily undertaken.
But you know.
It's still a challenging environment out there with high expectations and day and a flow of money both from other potential acquirers as well as a private equity venture capital sources.
Sources for some of the types of companies that are that we target a small private companies.
They've established a good.
Software product or service out there that would fit into our portfolio.
Phil.
With with alternatives.
Debt make for a challenging discussions there fully anticipate that they will because we had been in the past successfully find the right.
Target to bring into the simulations plus.
Plus family and continue to work to that objective.
Okay, great. Thank you very much that's it from me thanks.
Thanks Frank.
Yeah.
Thank you. Our next question comes from Dane Leone with Raymond James. Please proceed with your question.
Hi, Thanks for taking my questions.
Any chance just so we can get granularity in terms of.
The difference in the growth rate you could give us the revenues by division like.
Like how you've historically broken out by Lancaster.
Simulations, plus Buffalo cognizant in North Carolina until there's some.
Slip ups basically.
Yeah, Dana I. Appreciate the question I don't think we've ever given guidance that debt that sort of level and in fact as we've been transitioning over the last for more than a year.
We're really managing the business on there.
Consolidated basis in terms of our software business on our.
Service business.
Foster's internally, our ability to make progress in terms of sharing resources on the service side amongst divisions in things like like that so no I would say that that's not a level of guidance that we've historically are handed out nor nor is it a.
For fully tract are internally now as we manage the business from a software service.
<unk>.
Or are you guys not reporting that anymore and you had it in your last quarter of Ireland. So.
I wasn't asking for guidance by division, but I was just asking for that debt.
The revenues for the current quarter, you can see the year on year.
Yeah, I think we still report that segment are true to our the Q and in and anticipate that in the 10-K. It says we close the year. It is 1 of those things that we're looking at as to whether we continue that segment breakdown. After this fiscal year, but debt.
The Q will be reported here soon well when when when does that go was a Wednesday.
Yeah, it'll go out on Wednesday.
Okay.
Can you give us any granularity in terms of.
I guess debt.
Growth in the actual.
Software segments are.
Our service segments.
Like that for example on like maybe slide 12, just.
Because you only gave the year to date in the Q3, so we can't really do that year on year.
In terms of like the revenue come.
The the revenue generation.
Yeah on saying.
Yeah, I think in each quarter, we've delivered that quarters, our revenue breakout across.
The 3 major software platforms and the 3 primary sources of the service revenue reported that on a each quarter on a for the quarter and year to date basis. So.
You know the information is there.
Maybe bill can follow up in terms of helping going back in.
Tracking to those those previous our previous Ah Ah slide decks that are that are out there.
Okay.
I would add as well I mean.
Probably slide 8 and slide 9.
Looking at those for a year to date.
It's sort of breakdowns in Q3 breakdowns between software and services on those might be helpful day.
Right Okay.
What yeah. So so I guess in terms of the.
Was this just totally random in terms of that the contracts or projects that were canceled or were they clustered in certain areas like nash or other areas that.
Maybe experience some software in terms of on a.
Softness in terms of development interest.
Yeah, No no day in day, they were really kind of random they they they did not doesn't demonstrated pattern as I said it doesn't no.
Either by therapeutic area or by customer segment.
There was no consistency amongst them and there was a COVID-19.
Program there were other therapeutic area programs are geographically.
An international program.
And domestic program so.
You know again, we seem to have run into the perfect storm of a number of our projects are having and.
The delays the holds or or cancellations, but but no no pattern to be derived out of.
Okay last 1 from me how does how does the backlog actually calculated.
So where are these back these projects came out of the worth it in the backlog in the prior quarter or something or were they actually ongoing and not part of the backlog.
Once the contracts closed it goes into backlog and I'd say with the exception of the 1.
On deal that I mentioned that was a quick contract signing.
With the start date, there was almost immediate to that debt.
Canceled 2 within the first 30 days.
I believe the other 8 programs would have been in backlog at the beginning of the quarter.
Okay, and how long is your backlog realization of that 1.
1 quarter or on the Internet.
No backlog in total about $12 million and.
Would say that it is a 3 to 6 months typically in terms of its planned timing Oh. There. There is some component of that that extends for up to 12 months.
Club.
Okay.
Yes.
Very good thanks, Dan.
Thank you there are no further questions at this time I would like to turn the floor back over to Mr. Sean O'connor for any closing comments.
Okay, well I appreciate everyone's attention and I certainly look forward to speaking again very soon at the end of the next quarter and appreciate your continued to support take care everyone.
This concludes today's teleconference. You may disconnect. Your lines at this time. Thank you for your participation and have a wonderful evening.