Q1 2023 Simulations Plus Inc Earnings Call

Speaker 1: drove these changes. For the first quarter EPS was six cents and our adjusted EBITDA margin was 25%. As anticipated in our guidance, investment in employee growth, retention, and recruiting impacted our operating leverage and will continue to do so throughout fiscal 23. This impact is reflected in our first quarter results just proportionately as it is now our seasonally lowest revenue quarter. Finally, we are also currently seeing a change in behavior at some new and existing customers with new sales and upsells aligning to early calendar 2023 budgets. These near-term changes as a whole do not change our outlook for our business in fiscal 23 and beyond. Modeling and simulation tools have become a key component of the drug development workflow and we expect continued growth. The first quarter was highlighted by significant achievements and support of our clients in both our software and service businesses. We were recently awarded two new FDA grants developing and validating novel model approaches for local gastrointestinal and pulmonary delivery reps. These newly funded awards achieve a significant objective for us as we will now be partnering with the FDA to provide validated innovative solutions for all major dosing routes around the body. There are few if any organizations that have six funded partnerships with the leading global health authority.

Speaker 2: entering 2023 on SimulationsPlus. A large pharmaceutical company utilized GastroPlus to perform virtual bioequivalence trial simulations, assess potential pH-dependent drug-drug interactions, and justify product specifications for their new tablet formation of CalQuinz.

Speaker 3: with the aim to offer physicians and patients increased flexibility when devising treatment plans.

Speaker 4: The results were used to inform regulatory decisions and accelerate approval.

Speaker 5: A large pharmaceutical company in partnership with the experts at Simulations Plus.

Speaker 6: Developed Gastro Plus models to evaluate the impact of meal contents and intake timing on drug exposure for new dosing regimens of Toruleo with the aim to increase patient compliance and tolerance.

Speaker 7: The results were used to inform regulatory decisions and accelerate approval.

Speaker 8: We are wrapping up a project with a top 20 pharma client on a major clinical trial optimization effort.

Speaker 9: In a scenario with significant recruitment and endpoint selection challenges, the client used our QSP disease modeling tools to pick the correct patient population and the endpoint for efficacy.

Speaker 10: Regulators are being approached now with results. We are targeting more projects like these.

Speaker 11: where we provide end-to-end program directives, and in fact, we already have another similar program in the works.

Speaker 12: In another project with a top 20 pharma client, we completed the general analysis of a target mechanism of action in NASH with our NAFL DSM software, allowing them to reprioritize in-house assets in their pipeline.

Speaker 13: This will bring cost savings and efficiencies for the client and has led to more work to come with the client.

Speaker 14: For a mid-sized pharma client, Dilisim identified the mechanism for a clinically known liver safety issue and helped them pick the correct dosing range to take forward safely.

Speaker 15: An investment firm that takes equity positions in publicly traded clinical stage life science companies hired us for a rapid turnaround project.

Speaker 16: The goal was to predict a clinical trial outcome.

Speaker 17: using only publicly available information for one of their holdings before it made a public announcement.

Speaker 18: After running simulations, our prediction suggested positive results from the trial.

Speaker 19: The investment firm then significantly increased its position in this company ahead of the public release of the trial results, which came approximately two weeks later.

Speaker 20: The results were positive, as our science predicted, and the stock price increased four to five times post announcement.

Speaker 21: The investment company has already approached us for additional projects in other therapeutic areas where they'd like to invest.

Speaker 22: The experts at SimulationsPlus supported a small biotech company in their pursuit of a therapy to treat inflammatory bowel disease.

Speaker 23: The first in human simulations projecting local concentrations.

Speaker 24: within the gut were included in the company's pre-IND briefing book.

Speaker 25: and will be provided to regulatory agencies to support dose selection for the upcoming first in human studies.

Speaker 26: These highlights demonstrate the numerous means in which we assist our clients in optimizing their drug development strategies, utilizing model-informed drug development approaches.

Speaker 27: and the ever-expanding use cases for the application of modeling and simulation techniques across the drug development cycle.

Speaker 28: Moving to our software business.

Speaker 29: Revenues were down 17% in the quarter due to our change in renewal strategy.

Speaker 30: As we said last quarter, we took deliberate actions to align software renewal timing for our customers, which we expected to impact our first quarter revenue seasonality, while boosting our second through fourth quarter results.

Speaker 31: Also, as expected, we're seeing some new sales push into our second quarter to align with customers' new calendar year budgets.

Speaker 32: The renewal patterns are progressing as expected, and we added 15 new customers across the portfolio during the quarter.

And so, I continued strength in our cross-selling strategy with 15 upsells.

While Gasper Plus was hit hardest in the quarter by the renewal alignment with revenue down 24%, we still added one new customer, made eight upsells to existing customers, and saw 14 peer-reviewed published journal articles.

These are all encouraging data points given the shifts in customer budgetary timing for new sales and renewals.

Monalick Suite revenue declined 1 percent in the quarter due to the renewal alignments and foreign exchange impact.

However, we added 10 new customers and made two upsells to existing customers during the quarter.

Admin predictor revenue declined 25% in the first quarter, reflecting timing adjustments in our renewal strategy.

Despite this, we added four new commercial customers and made five upsells to existing customers in the quarter.

Our University Plus program continued to grow and now represents 266 licenses in 54 countries.

This program integrates our software into educational facilities and makes it part of advanced curriculum while seeding the market of next generation modeling and simulation professionals to drive future demand.

Positive growth momentum in our service business continued in the first quarter with 17% revenue growth and backlog growth to 15.8 million.

Operationally, we added five consultants to our team, which we expect will help convert backlog to revenue in the coming quarters.

Finally, we enjoyed a successful fall conference season and continue to expand our virtual workshop programs.

PKPD revenue increased 23% this quarter. We experienced a shift to higher margin time and materials contracts from fixed price projects, which contributed to expanding our service profit margins.

QSP, QST revenue decreased 28% for the quarter due to the more volatile nature of these high dollar value longer lifestyle projects.

PBPK revenue increased 74% for the quarter, reflecting the deeper implementation of PBPK billing, including an overall expansion of use cases and higher perceived value and impact.

As you saw in our press release, we have an evolving capital allocation strategy that I would like to briefly outline.

We have three areas of focus.

corporate development, which drives inorganic growth.

internal investment which drives organic growth, and finally returning capital to shareholders.

Internal investment remains a top priority as it drives our expected 10-15 percent CAGR for organic growth over the next several years.

Most important is our investment in R&D to expand our product functionality and new offerings that maintain our technological leadership in modeling and simulation and support organic growth.

In addition to revenue growth, our goal is to increase efficiencies and drive operating leverage in our cost structure.

While operating leverage is expected to decline in fiscal 2023, longer term, we expect scientific employee retention programs and strategic hires we make, combined with selective head count growth in sales and marketing, will continue to drive revenue growth and operating leverage.

as experienced historically.

Internal technology is also part of the equation as we enhance our systems to drive further efficiencies across the company.

Next, we have evolved in our inorganic growth strategy beyond M&A to a broader corporate development focus.

In August 2020, we sold 2.1 million shares at $55 per share for net proceeds of $108 million for M&A purposes.

Since this offering, we identified more than 60 potential candidates that initially met the board's M&A criteria.

which includes strategic and cultural fit.

immediate EPS accretion, revenue synergies, and attractive valuations.

We engaged in various levels of discussion with all of these candidates, but we have not as yet closed any deals.

This does not mean we've exhausted all options. We expect many of these discussions to continue, but we have nothing to disclose at this time.

Our acquisitions will remain a top priority for inorganic growth. In light of the evolving marketing conditions, we will expand our corporate development strategy to allow for strategic investments.

and building strategic partnerships with companies that could lead to potential future financial upside.

This change will enable SimulationsPlus to cast a wider net of relevant companies previously screened out or allow us to gain access to leading edge trends and technology in biosimulation or adjacent markets.

Finally, with regard to returning capital to our shareholders, the board approved a $50 million buyback program.

Given our current cash position and free cash flow accumulated since the offering in 2022, we believe we can still execute corporate development initiatives while offsetting a portion of the dilution from the 2020 capital raise.

We believe that this evolving strategy optimizes the combination of organic growth, operating leverage, inorganic growth, and return on investment to our shareholders.

Looking to the remainder of Fiscal 2023, we remain confident in achieving the guidance we provided last quarter.

As a reminder, our full year revenue target is 10-15% organic growth.

which translates to 59.3 to 62 million.

As we said last quarter, we will continue investing in our people while selectively adding headcount in certain areas to support our long-term growth targets.

This means fiscal 2023 will be a transition year for our cost structure.

leading to lower margins and restraining EPS and EBITDA growth.

We believe these actions are prudent and will benefit our longer-term revenue growth while returning to a model with strong operating leverage.

We expect to achieve diluted earnings per share of 63 to 67 cents, which translates to 5 to 10 percent growth.

Let me now turn the call to Will to discuss the financial results.

Thank you, Shawn.

Total revenue declined 4% in the quarter, comprised of a 17% decline in software and 17% services growth.

Total revenue decline was approximately 1% on a constant currency basis.

Software represented 51% of revenue during the quarter.

Gross margin was flat year over year at 78%, reflecting the lower software mix offset by higher services margins.

Software gross margin decreased to 85% due to the lower revenue and foreign exchange rate headwinds.

services margin increased to 70% due to a higher bill rate this quarter.

For the first quarter, GastroPlus represented 50% of software revenue.

Monolix suite was 26%.

Admet predictor was 18%.

and other software with 6%.

For the quarter, our customer renewal rate was 82% based on accounts and 90% based on fees.

These lower rates reflect the renewal timing changes Shawn mentioned, the impact of FX rates for our EMEA and AsiaPac customers, as well as some of our smaller biotech customers not renewing their licenses.

Generally, the smaller customer non-renewals are offset with our price increases for larger customers as reflected in the higher fee-based renewal rates.

The decline in average revenue per customer is reflective of the new smaller biotech companies that we're adding as new customers as well as the seasonality of our software business.

We expect quarterly comparisons to prior periods to fluctuate throughout the fiscal year with our new seasonal expectations.

Shifting to our services business.

Our first quarter services revenue breakdown was 49% from PKPD services.

18% from QSP QST services.

25% from PBPK Services.

8% from other services.

Other services consist primarily of regulatory services we provide our customers.

to help them meet global regulatory compliance and quality requirements.

We also provide comprehensive learning services focused on modeling and simulation training with a variety of options to help our customers succeed.

Regarding key services metrics.

Total services projects worked on during the quarter increased 14 percent this quarter compared to last year, and backlog increased by approximately $1 million from last year to nearly $16 million.

Now turning to our consolidated income statement for the quarter.

Total R&D cost for the quarter were $2.1 million or 17% of revenue compared to $1.7 million or 14% of revenue last fiscal year.

R&D expenses for the quarter were $1.2 million or 10% of revenue compared to $0.9 million or 7% of revenue last year.

Capitalized R&D for the quarter was $0.9 million, or 7% of revenue, compared to $0.8 million, also 7% of revenue in the same period last year.

SG&A expense for the quarter was $7.2 million or 61% of revenue compared to $5 million or 40% of revenue last year.

Scientific headcount and compensation increases were the most significant driver of this increase.

Income from operations was $0.9 million while operating margin was 7%.

Q1 revenue is now our lowest revenue quarter for the fiscal year, which impacts our profitability with relatively fixed payroll expenses.

As quarterly revenue increases through the end of the fiscal year, the corresponding profitability will improve each quarter toward the level provided in our fiscal year guidance.

Interest and other income was $0.7 million this quarter versus $0.1 million last year.

This reflects stronger returns from higher interest rates on our investment portfolio balance.

Income tax expense was $0.4 million compared to $0.8 million last year, reflecting an effective tax rate this year of 23% compared to 22% last year.

The first quarter typically has the highest effective tax rate since the annual tax expense for our France division is included.

We still expect our effective tax rate for fiscal 2023 to be closer to 20%.

Q1 net income was $1.2 million and diluted earnings per share was 6 cents.

The revenue impact for the quarter from foreign currency exchange was $290,000.

expenses related to M&A during the corridor were $345,000.

for a total of $635,000 or about 3 cents diluted earnings per share.

Adjusted EBITDA for the quarter was $3 million and adjusted EBITDA margin was 25%.

compared to adjusted EBITDA of $5.3 million or 42% margin last year.

As a reminder, we calculated just to EBITDA by adding back stock-based compensation expenses and expenses related to M&A.

or other non-cash, non-operating expenses.

We provide a reconciliation of this non-GAAP metric to net income, the relevant GAAP metric, in our earnings release and on our website.

We ended the quarter with cash and short-term investments of $132 million and no debt.

We believe we are well capitalized with sufficient cash to support our capital allocation initiatives.

Accordingly, the Board has authorized a share repurchase program to repurchase up to $50 million of outstanding common shares as part of our ongoing commitment to drive shareholder value.

We intend to enter into an accelerated share repurchase transaction during the second quarter for the repurchase of 20 million dollars of our outstanding common shares.

We believe the remaining funds on hand plus our free cash flow

will be sufficient to continue our pursuit of strategic acquisitions and investments.

Now I'd like to provide some further commentary on our fiscal 2023 guidance.

with the expected changes in quarterly seasonality this fiscal year.

First...

We expect our second quarter revenue growth rate to be between 7 to 11 percent compared to last fiscal year.

As we mentioned before, Q2 through Q4 revenue should be more evenly distributed for the remainder of the fiscal year compared to prior years.

This should result in the largest quarterly growth rate occurring in Q4 compared to last fiscal year.

Second, I'd like to re-emphasize the generally fixed nature of our costs and expenses.

primarily related to employee compensation and total rewards.

Total costs and expenses are calculated by adding cost of revenue plus R&D expense plus SG&A expense.

While the allocation of costs and expenses amongst these three categories is largely driven by the type of work our employees perform each quarter, the total amount is expected to increase as we add headcount or increase employee related costs.

offset by the amount of capitalized R&D performed each quarter.

Third, even though our total costs may result in fluctuations each quarter as a percentage of revenue.

We still expect to see the same annual trends we mentioned in our last earnings call for fiscal 23.

annual trends we mentioned in our last earnings call for fiscal 23. Specifically?

Increasing software and services gross margins for the fiscal year compared to last year.

R&D expense is a percentage of revenue for the fiscal year in the range of 6 to 8 percent.

Operating expense is a percentage of revenue for the fiscal year in the mid-50s.

and an effective tax rate for the fiscal year of approximately 20 percent.

Plus, any additional impact from the new excise tax on stock buybacks.

depending on the actual timing of the repurchases.

Fourth, we saw an increase in interest income this quarter compared to last year as interest rates have gone up substantially since then.

We expect interest income for the remainder of the fiscal year will be impacted by four things.

one interest rate changes during the rest of the year, two

The $20 million accelerated share repurchase we expect to fund this quarter.

we purchased we expect to fund this quarter? three

The actual timing of share repurchases during the fiscal year for the remaining 30 million dollars of the repurchase program

and four, the timing and amount of any strategic acquisitions or investments that we make during the fiscal year.

Finally, we expect looted earnings per share for the second quarter to be between 17 to 19 cents.

Accordingly, diluted earnings per share for the second half of the year is anticipated to be between 40 to 42 cents to achieve our fiscal year guidance target of 63 to 67 cents.

We hope this additional commentary helps communicate our expectations for quarterly year-over-year trend comparisons with the shift changes this fiscal year.

As previously mentioned, we do not expect these quarterly shifts to have an impact on our fiscal year performance and annual trends.

I'll now turn the call back to you, Sean.

Thank you, Will.

This quarter unfolded as we expected.

the adjustments we're making to our business, including hiring scientists.

and expanding our sales and marketing organization, while adjusting renewal timing to facilitate cross selling, are driving the intended results.

While these changes impacted our consolidated results in the first quarter, we are confident we will achieve our full year outlook.

I'm proud that we continue to deliver on our commitment to science, driving greater adoption of in silico tools to accelerate innovation and reduce costs.

We are investing in internal R&D efforts to maintain and grow our leadership position, and our increased scale enables us to expand our industry collaborations.

We continue expanding our strong global regulatory relationships and now have multiple FDA technology development collaborations.

Thank you for your time and attention, and I will now turn the call over to the operator for the questions and answer session.

Thank you. Ladies and gentlemen, at this time we will be conducting a question and answer session. If you'd like to ask a question, you may press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset.

before pressing the star key.

the star key. One moment while we poll for questions.

Our first question comes from the line of Matt Hewitt with Craig Hallam. Please proceed with your question.

Good afternoon and happy New Year, guys.

Happy to hear your map. Maybe a couple. First on the renewal side, last quarter when you talked about the shift in strategy as far as allowing your customers to kind of line up the renewals across suites and products, and then there was also the piece that was tied to budgets and the shift to the

the January budgets for your customers. Is there any way to kind of break out or look at that second piece as far as the budgetary aspect of it and maybe talk a little bit about what you're seeing so far here through this quarter through Q2 which includes January and...

what you are seeing, I realize it's very early days, but what are you hearing from customers from a budgetary standpoint?

That's a fair question, Matt. I don't know that we can quantify the split between the two, but there's always been a phenomena in the industry in terms of spend budget for this year as we get to November , December , where we lose it, and then waiting for new dollars to be available.

after the first of the year and the new budget year. I think what we experienced or saw is a handful of deals that were potential deals that might have occurred before the end of the calendar year, that in these situations we have not lost those opportunities. Those opportunities were earmarked for.

spending by our clients in the new calendar budgets after the first of the year. I'll check with the team. I'm not sure by January 4th we've cut them closed as yet, but I anticipate that they will now come through this year. On the other side, we saw a lot more conservativeness on the part of our clients.

that got pushed off or delayed into the second quarter. And then, you know, on the other side, on the new renewal side, you know, pretty, pretty good visibility out to the renewal activity of our clients and the changes that we were making to line them up.

And that was pretty anticipated. No, expectations for the quarter came in exactly what we thought they were.

That's great. And then shifting gears a little bit, the $50 million share repurchase program, that makes complete sense. But you are also implementing a little bit of a shift in your strategy as far as looking for more or the possibility for some strategic investments or partnerships.

What are you thinking along those lines? I mean is this a $10 million investment into a software company? Or what could that look like? And more importantly I guess from a shareholder perspective, how would that investment flow back?

to your shareholders? Sure, fair question. First, I'd like to highlight that the acquisition effort is still number one focus here. While we've all been a little frustrated in terms of the speed to closure, there are a number of good candidates that are still...

in discussions and would hope that those will continue and come to fruition at some point in the future. The strategic investment opportunity sort of expands with the same objective, the same objective of finding good.

technology fits that open up TAM, open up market for us in an organic way going forward. Same objective with strategic investments.

Well, we find a lot of technology plays out there in the marketplace aren't really entities that are ready for acquisition, ready for acquisition amongst the criteria that we listed off the be it the accretion or evaluation expectations for some, not startup, but early stage companies.

And our opportunity there is to partner with them. You know, the company has a rich history of collaboration, those collaborations that we do time and time again with our large pharma clients.

collaborations that we do with the FDA, whereby we work with a partner.

and that effort results in technological advancement that finds its way into our product suite. And with some of the opportunities out there that might not be today right for acquisition.

There's opportunity to in a you know lesser dollar point to make a strategic investment in a partnership that allows for some technology sharing and some development of our products or it could be Go to market strategies along with that with that entity That open up opportunities for us the payback in the end

is the same payback from an acquisition. An opening up of a market and enhancement of our existing products that delivers a larger TAM and a larger opportunity for us in the long run.

Got it. Maybe one last one that will hop back into queue and maybe touches on that a little bit. So there has been a step up in R&D investment here the past couple of quarters, a little bit more pronounced here in Q1. Is there anything tied to that? Obviously, you called out that you've got six different –

federal or FDA, you know, partnerships, if you are, or contracts that you're working on, but typically those dollars kind of offset R&D. So is this some internal investment? Is there something that you're investing there? Or is something else that's hitting that line? Thank you.

I think some incremental spend there is the scientific resources are allocated during the quarter into development work there. I think the percentage there probably exaggerated a little bit because of the lowest quarter top line revenue caused.

Thank you very much.

Our next question comes from the line of Dane Leon with Raymond James. Please proceed with your question.

All right, thanks. Maybe you could just talk a little bit more of where you're seeing some of the investment by therapeutic area or drug development area. You'd mentioned Nash. I was just curious on that area given I remember a year ago you'd seen some pullback in spending.

on NASH related projects and anything you'd say on some of the oncology products as well, that'd be great. Thank you.

Yeah, no, we've not pulled back. There's an ebb and flow in terms of the client activity in the therapeutic areas and NASH has been one. It's the new phase of Zi Key bridge

that the NAPL-DSEM product and our QSPQSP group.

supports clients in that area on an ongoing basis. Just had a significant project this last quarter there. It ebbs and flows. Oncology area, one of the stronger areas in terms of drug development today, an area that we support as well.

Neurological therapeutic endeavors is a larger area for us as well. But the service group performs work effort across the board to force back them into therapeutic areas.

Great, thank you.

Thanks, Dave.

Our next question comes in the line of Francis Brisbois with Oppenheimer. Please proceed with your question.

Thanks for taking the questions. Just a couple here, you talked about TAM expansion. The example you gave with the investment company that used the software to gauge the probably success of a clinical trial outcome. I was just wondering if you disclose

how you would charge an investment company, and is it related to maybe the profit that they can make off a correct decision? Or is this a project that you think could significantly actually expand the TAM?

that you're currently looking at or just kind of a one-off.

I'm hoping it's not a one-off, Frank. It's an area that knocked on a lot of doors over the years with modeling and simulation support to either capital entities or investment companies.

sporadic success in that regard. It was a highlight during the quarter, a very successful project performed. I would say that our model there has been...

Similar to the work we do for our more traditional clients in that we do work for a fee, whether it's timing materials or a fixed rate. We don't do our service engagements with any future drug success, royalty, extreme work.

in this case a return on investment opportunity as part of the proceeds of our work effort there. But yeah, it's priced accordingly as best we can and doesn't really, you know, have a direct impact in terms of the strategic investment opportunity.

that this was just not part of the plan in terms of corporate development in the past. It was outright acquisitions and now this expands it or was it also somewhat part of the plan in the past.

I would say that it really wasn't a focus on our part. We were very focused in terms of the continuing the success of prior acquisitions, which were always very focused on standalone entities.

with the criteria that we listed off with an acquisition orientation. And not really an open eye to opportunities that might not be right for.

acquisition at this point in time, but a strategic investment would link the two organizations could could lead ultimately to an acquisition down the road, but most importantly would open up some technology sharing or market capability sharing that would enhance obviously both companies in the shoulder line.

Okay, great. And in terms of the business model, is it fair to assume this would be some sort of a biotech-y kind of upfront and milestones and royalties with the partnership or too early to disclose? The potentially inappropriate Giveigen limit, an original Florida- apartments of California.

Well, you know, each deal can take its own form based upon circumstances. Our focus is

is primarily in terms of again like our acquisition strategy will be focused on software opportunities service opportunities as well, but software opportunities that can build the technology either within our products or in some linkage to others.

capabilities in third parties hands. Those terms, those strategic investments can take many many forms.

But I wouldn't limit it to a sort of drug oriented, drug development oriented, milestone royalty type of drug.

Okay, great. And just lastly here, I'm sorry if I missed this, but in terms of the stickiness of the business, obviously the change in seasonality, but the stickiness had already been there around 95%. And I think you had mentioned some of the 5% that it's not necessarily sticky as either maybe a company getting that.

out of business or just due to M&A. Is that stickiness still there on the 95%?

Oh absolutely, the renewal rate is anticipated as certain renewals that previously would have been in the first quarter because of the change in the renewal pattern here will happen during the course of the year. That's reflected by our guidance of 10-15% for the year.

The underlying metric there is that 95%, 93% to 95% renewal rate, and that will occur. But as we indicated last quarter, first quarter would be impacted by the push out of renewals into the second, third, and fourth quarter in hence.

on a year-over-year basis you see a little depth of that per fee renewal metric.

Okay, great. Thank you very much. That's it for me.

You're good. Take care.

Thank you.

Our next question comes from the line of Mitra Ramgopal with Sidoti. Please proceed with your question.

Yes, good afternoon. Thanks for taking the questions. Just a couple. Of course, if you could just provide some more color on the headcount additions.

in terms of is it ahead of where you expect it to be as you head into the second quarter and the end of the year? And are you seeing any change in easing in terms of availability of candidates and even compensation? So what does this look like going forward inuation?

Yeah, Mitra, as we've indicated, it's a very competitive market out there for scientists in computational biology and therefore we were extremely pleased with the success we had this past quarter in both regards in terms of the addition of the new technology to the robot, or the new machine.

And you know, we're continuing through the course of the year to look for new talent to bring on board and successful first quarter gives me high expectations for our ability to continue to operate the plan.

Okay, thanks. And just coming back on the M&A side, I know you mentioned since August 2020, you identified more than 60 candidates that sort of met your criteria, but you haven't announced any coupons yet, do you think?

closure so to speak and I'm just curious what has sort of been like maybe the biggest sticking point or maybe a few things that you think might have just led to not being able to get a deal done.

Oh, yeah, you know, it's a range of scenarios, you know, not the smallest of which probably top of the stack is, you know, companies are not always.

in a position where they're looking to be acquired. And so, you know, that is a scenario that's often been encountered in those instances where there is interest, you know, the accretive nature of their business, it being

at the stage that would allow us to fulfill the criteria which said We're not interested in non accretive acquisitions that would be a stumbling block in cases.

And then finally, a directive evaluation, the dynamics of which have changed over the...

course of the last couple of years as healthcare multiples have risen and fallen and over time those valuation discussions have changed and evolved but in the end valuation is always a key criteria to come to agreement on that.

Okay, thanks. And then finally, I know, obviously, you have a lot on your plate in terms of the domestic market, but I know you've always talked about exploring opportunities in Europe and even Asia. Just wondering if you're having any traction on that front.

Good to action.

service Europe directly. We service Asian and Latin American markets through distributors and we're seeing a pickup in terms of the distributor geographies. They were in some cases more impacted by COVID.

more impacted for a longer window of time and those seem to be Improving probably the exception to which is obviously the Chinese market But there's there's some promise of that opening back up here of light and and the Latin American market which we

initiated a new distributor agreement late in the last fiscal year. Looks they could be contributing very well to us as we move into the new fiscal year here. European marketplace is pretty robust.

service site to see more boots on the ground, more scientists local in that territory. And working to that end have increased the employee count in Europe pretty well over the last couple of years, but there's more work to be done there. So I think you know as we've grown.

the European component of our revenues I think has

that split of round numbers, 60-65% revenue in North America.

the remainder split pretty evenly between Asia and Europe has stayed pretty consistent. So it's growing as our businesses as a whole. And I think there is opportunity for us to accelerate in some geographies there.

Okay, thanks for the caller and thanks again for taking questions.

Very good, Niko. Take care.

As a reminder it is star 1 to ask a question.

There are no further questions in the queue. I'd like to hand the call back to Mr. O'Connor for closing remarks.

Very good. Well, I appreciate everyone's time and attention here. It's been a very good quarter for us, very active, and look forward to continuing that through the next couple of quarters and look forward to talking to you again at the end of our second quarter. Take care, everyone.

Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation. You may disconnect your lines at this time, and have a wonderful day.