Q2 2023 Simulations Plus Inc Earnings Call
[music].
Okay.
Greetings and welcome to the Simulations Plus second quarter.
Fiscal 2023 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.
As a reminder, this conference is being recorded.
It is now my pleasure to introduce Brian Siegel from Hayden IR. Thank you, Mr. Siegel. You may begin.
Good afternoon, everyone. Welcome to our second quarter of fiscal 2023 financial results conference call.
With me today is our CEO, Shawn O'Connor, and our CFO will project.
After their portion of the call, we will open the floor to questions.
Before we begin I want to remind everyone that except for historical information. The matters discussed in this presentation are forward looking statements involve risks and uncertainties words like believe expect anticipate referred to our best estimates as of this call and there can be no assurances that we will watch, but these will actually take place so our actual.
Future results could differ significantly from these statements.
Information on the company's risk factors is contained in the company's quarterly and annual reports.
And filed with the U S. S E C.
With that said, I would like to turn the call over to Shawn O'Connor. Shawn.
Thank you, Brian, and thank you all for joining us on our second-quarter conference call.
This was a solid quarter for Simulations Plus. Second quarter revenue grew 6% year over year. Our software business grew 7%, generally in line with expectations, reflecting the changes we proactively made in our renewal program.
And the service business grew by 4% year over year highlighted by the PK PD and PB PK offerings.
From a profitability perspective, we maintained solid margins and saw improvement over the first quarter as revenues grew, leading to $4.2 million of net income or $0.20 per diluted share.
This result exceeded our guidance for the quarter.
We continue to successfully navigate a challenging economy.
And its impact on our sales cycle.
Drug developers are delaying purchases and lengthening the sales cycle.
For the most part, we have not lost opportunities, but this did impact our growth in the second quarter.
I reiterate that we have taken this into account when preparing our full-year outlook for 2023.
The second quarter was highlighted by significant collaborative work with both partners and in support of our clients.
To begin with, we have, in the last month, announced two collaborations involving our artificial intelligence machine learning technologies.
Both the Institute of Medical Biology of the Polish Academy of Sciences.
The Sino American Cancer Foundation partnership will leverage our expertise in AI and machine learning technologies to help with the discovery of novel molecules against two different emerging cancer targets.
Computational and medicinal chemists and our early drug discovery services team will work with them to utilize the cutting edge AI technology, and our AD met predictor software platform to accelerate the design and optimization of novel lead molecules.
Our primary objective in these collaborations is to demonstrate the value of our AI and machine learning technology.
And the capabilities of our drug discovery team are supportive of our software licensing and consulting service practice, and then our market growth in these two areas.
In addition, both collaborations do provide for incremental benefits of joint compound ownership for milestone payments if successful.
We're excited about these opportunities.
Opportunities. These two collateral collaborations represent.
We entered into a new PKA collaboration with a large agrochemical company, extending machine learning models into a new and different space.
And broadening our addressable market.
Our team will use the partner company's proprietary measurements, drawn from its vast internal databases, to build and refine a predictive model capable of accurately predicting the PK values of various chemical compound additions.
Additionally, we will create and evaluate new algorithms and techniques to further enhance the predictive capabilities of the model.
We also submitted FDA grant applications: one for ocular Pvp K and another for lipid-based formulations.
And finally, P b PK precision dosing and virtual B he worked for clothes.
Our relationship and collaborations with the FDA to extend modeling functionalities have always been a strength for Simulations Plus.
A global biopharmaceutical company strategically partnered with us to apply GastroPlus PBPK modeling for the biosimilars project pre.
Preclinical and clinical PBPK models are developed for the reference antibody injectable formulation and applied to predict bioequivalents for the prototype test formulations in development.
Simulation results helped the company decide on the final formulation to advance into the pivotal study and minimize the risk of the sales outcome.
Applications of gastro plus in the biologics and Biosimilars market is an emerging opportunity for us.
Our clinical-stage precision medicine company outsourced GastroPlus PBPK modeling support to our experts for the lead and backup compounds, with the simulation results informing their clinical candidate selection and the upcoming first-in-human study designs for the IND filing.
The confidence our partner gained from these activities helped convince them to onboard the software for use internally across their entire pipeline.
This quarter.
The Stimulation Plus Service Team provided pharmacometric modeling and simulation support for multiple high-profile regulatory submissions, including one compound offering novel treatment for a rare genetic disease and two other compounds considered to be among the most anticipated drug launches in 'twenty-two.
'twenty three.
Finally, we expanded our growing opportunities as a consultant for investors, successfully selling our services for an even larger USP project. We provided insight to an investment group looking to invest in public-private companies. This follows the success of Nash.
Jack last quarter.
Our ability to utilize public data and information to help investors make informed decisions is creating a new opportunity for us.
These highlights demonstrate the numerous ways, we assist our clients utilizing model informed drug development approaches.
Moving to our software business, revenues were up 7% in the quarter.
As we have previously stated, we are taking deliberate actions with our software customers to align software renewal timing, which we expect to impact our first-quarter revenue seasonality, with our second through fourth-quarter revenues being more evenly dispersed in absolute dollars.
This trend line and new seasonality pattern were evident in the second fiscal quarter.
We believe the renewal harmonization initiative is having the expected results of efficiency for ourselves and our customers and should be completed during the fiscal year.
Quarterly software revenue growth rates are being impacted by this change in seasonality. We anticipate its impact on year-over-year software revenue growth to be minimal, and it's contemplated in our guidance.
Our sales cycle is being impacted by economic concerns, as sales to several potential new clients were pushed out but not lost.
We also had several smaller biotechs not renewed due to cost containment measures implemented more dramatically in this market segment and the economic headwinds that are impacting funding for that part of the market.
At the same time, we are achieving success in rolling out price increases that reflect our increased costs. This somewhat offsets the slower new sales sites and contributes to higher gross margins and higher average revenue per account.
Gastro Plus was hit hardest in the first quarter by renewal alignment, but as expected, it rebounded nicely with 18% growth in the second quarter.
We added six new customers, including business sourced in China.
Of note, we brought a brand new distributor on in Brazil, which booked its first sale during the quarter.
We also made six upsells to existing customers and saw 25 peer-reviewed published journal articles.
They're all positive data points.
Why didn't suite revenue decline 8% in the quarter due mostly to the software harmonization process and foreign exchange impact?
However, we added five new customers and made six upsells to existing customers during the quarter. We feel good about returning to growth over the next few quarters.
Admit Predictor, which experienced the largest impact from the loss of small biotech customers, saw revenue decline by 2% in the second quarter.
This we added one new commercial customer and made eight up sells to existing customers in the quarter.
Our University Plus program continued to grow and now represents 278 licenses in 54 countries.
The program integrates our software into educational facilities and incorporates it into advanced curricula.
While seeding the market for next-generation modeling and simulation professionals to drive future growth.
Momentum in our services business continued in the second quarter with 4% revenue growth and backlog growth to $15.4 million.
Operationally, we hired two consultants, adding to the five we hired in the first quarter. We believe these professionals will help convert backlog to revenue in the coming quarters.
Performed 188 projects during the quarter.
PK PD revenue increased by 19% this quarter. We continued to experience a shift to higher-margin time and material contracts from fixed-price projects, which contributed to the expansion of our services gross margin.
Q S peak U S T revenue decreased by 32% for the quarter due to the more volatile nature of these high-dollar-value, excuse me, longer lifecycle projects.
As a reminder, in the second quarter last year, we had significant CRO pass-through revenue, creating a challenging comparison for this business.
PV PK revenue increased 29% for the quarter, reflecting the deeper implementation PB PK modeling, including an overall expansion of use cases and higher perceived value and impact.
Yeah.
As we discussed last quarter, we have their entire capital allocation strategy, including the implementation of an accelerated share repurchase program, which began in January.
And an ongoing cash dividend.
As a reminder, we have three areas of focus.
First, internal investment, which drives organic growth.
Second is corporate development, which drives inorganic growth and finally returns capital to shareholders.
Regarding the return of capital to shareholders, the board approved a $50 million buyback program.
Given our current cash position and free cash flow, we believe we can still execute corporate development initiatives while offsetting a portion of the dilution from the 2020 capital rates.
We initiated the share repurchase program with a $20 million ASR, which is currently being executed with an anticipated conclusion in the third quarter.
Looking forward to the remainder of fiscal 2023, we maintain the guidance we provided at the beginning of our fiscal year.
As a reminder, our full-year revenue target is 10% to 15% organic growth, which translates to $59.3 million to $62 million.
As we mentioned 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 that 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 long-term revenue growth while returning to a model with strong operating leverage.
We expect to achieve diluted earnings per share of <unk> 63 to 67.
Which translates to 5% to 10% growth.
Let me see.
Well, to discuss the financial results.
Yeah.
Thank you Sean.
Total revenue increased by 6% for the quarter, comprising 7% software growth and 4% services growth.
Software represented 67% of revenue during the quarter.
Total revenue increased 2% year to date comprised of a 3% decrease in software revenue and 11% services growth.
Software represented 60% of revenue during the year.
Gross margin for the quarter improved year over year to 83%, reflecting the higher software mix and improved services margins.
Gross margin remained flat at 92%, and services margin increased to 66% compared to last year, due to increased pricing and improved utilization.
Gross margin year-to-date improved year-over-year to 81%, reflecting improved services margins.
Software gross margin decreased slightly to 90% and services margin increased to 68%.
For the quarter, Gastro Plus represented 55% of software revenue, Monolithic Suite was 20%, Avnet Predictor was 18%, and other software was 7%.
Year-to-date, Gastro Plus represented 53% of software revenue; Monolithic Suite was 22%, Avnet Predictor was 18%, and other software was 7%.
For the quarter, our customer renewal rate was 94% based on fees and 80% based on accounts.
These lower rates reflect the renewal timing changes that Sean mentioned, as well as the impact from smaller biotech customer non-renewals.
Generally, the smaller customer non-renewals were offset by our price increases, as reflected in the higher fee-based renewal rates.
The increase in average revenue per customer is reflective of the higher prices combined with the loss from smaller biotech companies as well as the seasonality of our software business.
We expect quarterly comparisons to previous periods to fluctuate throughout the fiscal year with our new seasonal expectations.
Year to date, our customer renewal rate was 93% based on fees and 81% based on accounts.
Average revenue per customer increased to $103,000.
Shifting to our services business, the services revenue breakdown for the quarter was 50% from PK PD services, 20% from QS Peak US T services, 23% from PV PK services, and 7% from other services.
The services revenue breakdown year to date was 49% from PK PD services, 19% from TSP Qs T services.
4% from PV, PK services, and 8% from other services.
Other services primarily consist of regulatory services we provide to our customers to help them meet global regulatory compliance and quality requirements.
We also offer comprehensive learning services focused on modeling and simulation training with various options to help our customers succeed.
Total service projects worked on during the quarter decreased by 6% compared to last year, and backlog decreased by approximately $2 million from last year to approximately $15 million.
The decreases are primarily due to the unknown services business.
Turning to our consolidated income statement for the quarter, total R&D costs were $21 million, or 14% of revenue, compared to $16 million, or 11% of revenue, last year.
R&D expenses were $1 $3 million or 8% of revenue compared to <unk> $9 million or 6% of revenue last year.
Capitalized R&D was <unk> $8 million or 5% of revenue compared to <unk> $7 million also 5% of revenue last year.
SG&A expense was $7-8 million, or 49% of revenue, compared to $5-6 million, or 38% of revenue last year.
Scientific headcount and compensation increases were the most significant drivers of this increase.
Income from operations decreased 26% to $4 million, while operating margin was 26 compared to 26% compared to 37% last year.
Interest and other income was $1 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 $9 million compared to $1.1 million last year, reflecting an effective tax rate of 18% this year compared to 20% last year.
Net income decreased 5% to $4.2 million and diluted earnings per share decreased by 20 cents.
The revenue impact for the quarter from foreign currency exchange was <unk> $2 million, and expenses related to M&A during the quarter were point $1 million, for a total of $3 million, or about one <unk> in diluted earnings per share.
Adjusted EBITDA was $6 $2 million and adjusted EBITDA margin was 40% compared to adjusted EBITDA of $7 $2 million or 48% margin last year.
As a reminder, we calculate adjusted 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.
Turning to our consolidated income statement, year-to-date total R&D costs were $4.2 million or 15% of revenue, compared to $3.3 million or 12% of revenue last year.
R&D expenses were $25 million or 9% of revenue compared to $1.8 million or 7% of revenue last year.
Capitalized R&D was $17 million or 6% of revenue, compared to $15 million, also 6% of revenue, last year.
SG&A expense was $15 million or 54% of revenue, compared to $10.6 million or 39% of revenue last year.
Income from operations decreased 47% to $4.9 million, while operating margin was 18% compared to 34% last year.
Interest and other income were $1.8 million versus $0.1 million last year.
Income tax expense was $3 million compared to $2 million last year, reflecting an effective tax rate of 19% this year compared to 21% last year.
We expect our effective tax rate for the fiscal year to be in the range of 19% to 20%.
Net income decreased 27% to $54 million and diluted earnings per share decreased to 26 cents.
The revenue impact year-to-date from foreign currency exchange was $0.5 million in expenses related to M&A. During the year, we allocated $0.4 million for a total of $9 million, or about four cents in diluted earnings per share.
Adjusted EBITDA was $9.2 million, and the adjusted EBITDA margin was 33% compared to adjusted EBITDA of $12.4 million or a 46% margin last year.
We ended the quarter with cash and short-term investments of $115 million and no debt.
During the quarter, we paid Morgan Stanley $20 million under our accelerated stock repurchase agreement and received an initial delivery of 408,685 shares of our common stock.
These shares were retired and are treated as authorized unissued shares.
The final number of shares to be repurchased will be based on the volume-weighted average price of our common stock during the term of the ASR agreement, less a discount, and subject to adjustments.
The final settlement is expected to be completed during the third quarter, and we currently estimate the final share delivery to be approximately 85,000 to 95,000 shares.
We continue to be well-capitalized, and combined with our free cash flow, we believe we have sufficient resources to support our capital allocation initiatives and continued pursuit of strategic acquisitions and investments.
I'll now turn the call back to you, Sean.
Thank you well.
The quarter generally unfolded as we expected and.
And the adjustments to our renewal strategy are progressing well."
Putting us on track to achieve our full-year goals.
Foreign exchange rates continued to create headwinds in the general economy as a whole, impacting our sales cycle, particularly for smaller biotech companies.
But we are navigating these challenges, driving profitable growth, generating cash, and returning capital to shareholders.
I'm proud that we continue to deliver on our commitment to science, driving greater adoption of in-silicon 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.
In conclusion, we are confident in our ability to execute against our plan and achieve our guidance for fiscal 2023.
Thank you for your time and attention.
Now I'll turn the call over to the operator for the question-and-answer session.
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Our first question comes from the line of Francois, primarily with Oppenheimer. Please proceed with your question.
Okay.
Alright, Thanks for taking the question just a first one for me is just.
In terms of the revenue growth in the confidence and hitting the end of your guidance can you just maybe help us just clarify what metrics or maybe qualitatively. What it is just based on on the quarter here that that keeps you confidence confident in achieving that that year end revenue go.
Hey, Frank.
The renewal harmonization program really judges.
Jumbo for Noel gauge throughout the course of the year and impacting.
Our quarterly delivery of the software revenue.
The activity through the first couple of quarters in that regard has gone as anticipated, and we still believe pretty strongly that the renewal rates will be complete, and that harmonization process will be complete by the end of the year. So, on a year-over-year basis.
We should see normalized.
Revenue growth in terms of the software business that inevitably meant that our with our seasonality pattern last year low person fourth quarter and this year with a low first quarter, you can lower first quarter and a more comparable second third and fourth quarter. If you look where you are.
Revenue, but the you know.
Growth rates in terms of the first half of the year are going to be depressed in the growth rates in the third quarter, and especially the fourth quarter, where last year, it was a very low revenue quarter.
Would be" would be exaggerated in the fourth-quarter evening out as we get to the end of the year.
So, the qualitative indicators.
Indicators that we're on that path or in the harmonization program.
But again, pretty much as anticipated going into the year.
Okay, great great. So that that extension in sales cycles that we expected the new seasonality it is not.
You wouldn't say this quarter it kind of shows that, look, it was a little bit worse than expected, it's still fairly in line, and we're dealing with it.
Yeah, no, it's fairly in line in terms of a harmonization program, certainly.
No, we are assuming more elongation of some sales cycles here.
Independent of the harmonization program.
And as we see weak macro.
Economic environment slowed down.
Purchasing departments in our in our clients' industries.
And especially in that segment are in biotech so were.
Managing our way through that and then on.
On the other side.
You know a price increase that we put in place at the beginning of the year before at the beginning of the year is is yielding a pretty good contribution to offset those so.
Economic challenges that were running into number of variables coming into place.
All of which have come down and net out to a.
Reconfirmation of our guidance is provided at the beginning.
No.
Okay, great, and then on the site, you know, given the economic backdrop and what's been going on, that.
That part of the prepared remarks, discussing the new hires that we're making – these are very specialized hires.
Can you maybe comment is it all of the new hires or has there been a lost of personnel as well on the other side or if there is a loss as they kind of normal no more weight of lost in there just trying to get a feel for whether or not there's more people net net or pretty much the same kind of.
Salesforce I guess their consultant force.
Yes, primarily card system in scientific consulting group.
It's a net plus for the organization and the year-to-date or through two quarters.
Good good recruiting good hiring success.
On that side and on retention.
So, I'm very positive I can't say that there we haven't lost anyone.
But certainly compared to last year.
Retention side ensured that we invested quite a bit at the end of last year.
In terms of the.
Our review of.
All aspects of working for working for simulations plus.
Permanence of witches' compensation, but other factors.
And then in some programs that we thought it would be."
Contribute to it.
Tapering off in terms of retention challenges that we've had, with the demand coming from.
The marketplace for skilled people that we that we have on board.
And support our recruitment efforts.
Full year 2003, I'm quite pleased with the.
The results of that investment to date.
Okay, great. That's it for me. Thank you and congrats on the progress.
Yeah. Thank you, everyone.
Our next question comes from the line of Matt Hewitt with Craig Hallum. Please proceed with your question.
Good afternoon, and thank you for taking the questions. Maybe first up, regarding the synchronization process: it sounds like you're pretty much complete on the gastro-plus side. It also sounds like you've got a little bit more work to do on the.
Is the monolithic suite side of the equation something you expect to wrap up here in the third quarter, or is that maybe a...?
A one- or two-quarter process to complete that.
Yeah, Matt its Ed.
By the A&D end-of-the-year process.
Wouldn't characterize the processes, even before Gastro Plus, what we did.
It seems that growth rate bounce back up to 18% in the second quarter. There is still a combination of movement on the renewal side there with that project still hospital has to play out so I think.
Certainly halfway through it, if you will, halfway through the year, making progress, but there's still some hard work to do by the team.
Okay, and then I think will you you provided a little bit of color on the renewal rates that dipped a little bit here in the second quarter.
Is that and is that pretty much a function of the synchronization process, or is there maybe something else? Does that speak to a little bit on the delays in signing new contracts that I think you spoke to, Shah?
Yeah, it's a combination of.
Some of the smaller biotechs that arent renewing just with the environment out them out there for them to get financing and then the rest of it is tied to the securitization process.
<unk> for those renewals.
Got it, and then regarding the new collaborations.
Obviously, congratulations on both of those, and I'm just curious.
How should we be thinking about the size of those potential milestones?
Will there be is there the potential for royalties if those molecules are ultimately approved by regulatory agencies, who will own the molecule any additional color on the on the maybe the structure of the contracts would be helpful. Sure sure.
Very excited about the two partnerships that we've put in place and want to emphasize that our focus here is in terms of demonstrating the unknown.
<unk> and capabilities of our AI and machine learning technology.
Working with to two organizations that will supply the.
The data in many cases, the knowledge of the target.
And the candidates are our services.
Support 14, all will provide the support along with our technology too.
Apply are.
No technology too.
Generally, general generation.
Assets there.
Very helpful guys.
Producing a success with a focus on being one.
Driver in terms of our software licensing business.
And our consulting business in this city.
Having those case studies and success stories that is what will drive that and as you know our focus has been in terms of being a tool provider to our clients as opposed to a drug developer.
You enter into these relationships, and one of the benefits is that move.
That's very common for.
Some shared success.
Triggers to be involved and in one case. It is a joint ownership of our compounds that may come out of the program.
And then the other case, it's a it's a dip.
The royalty stream associated with them.
So, while that's not our primary focus.
So someone vacate opportunity.
Stand with these programs do take some time to come to fruition. So I don't see any impact from those two opportunities in the near term future of course, but.
It's certainly a nice opportunity in the long run.
Oh, that's great and obviously, we'll.
Oh hope, you'll you'll keep us apprised as those progress and then maybe one last one and I'm not sure if youre going to have this antibody. So I'll throw it out there anyway. You did mentioned you you're basically moving into a couple of new markets.
And I'm just curious, being one outside of therapeutics, that sounded like.
Are there times associated with those market opportunities, or is it that you were in these more early-stage, one-off situations? If, depending on how things go, it may become a new market for you. Thank you.
Yes, Matt, the agrochemical partnership, but the collaboration that we've been working on certainly opens up more business opportunities for our support in that industry segment. We have a very small footprint as of now; today, only 5% of our business is done outside of it.
The pharma world is supportive.
Cosmetics industry.
And other adjacencies.
Go into that.
Certainly good.
Some tam to our opportunity on a go forward basis.
The other one I think you might be referring to is the biologics so collaboration and that certainly is not a brand new market for us we do participate in that market already but are increasing.
Increasing our functionality footprint and experience in that area gives us more opportunity to take care of or gain market share in that segment.
Got it. Alright, thank you so much.
Thank you Matt.
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. First, just curious and it.
On the chart now you are seeing out of small biotech accounts, if that's continuing now into the third quarter and is is it.
Stabilizing or is it even moving onto maybe medium size companies.
Oh, it continues into the third quarter and is evolving in terms of scaling up. Well, I mean, you know, large pharma and <unk>.
You know, large or medium-sized biotech companies have experienced a.
Slow down as well, so it's not virgin territory in those other categories, but it's been more dramatic in the small ones.
Hotel space, who are funding, is a little bit more credit critical. Near-term funding is critical, smaller.
Pipelines are candidates and so on and so forth. So.
Certainly the challenges that they face continue into this quarter.
I know that at the market level, we're seeing more activity in terms of potential funding opening up in the biotech space. It takes a while for that to trickle back down into the marketplace, putting cash in the hands of small biotechs and opening up their purchasing.
Oh plans so well.
While, macro, there might be some positive signs.
On the ground level, it's still it's still a battle for them.
Okay, thanks. And also, I'm just coming back to the recent hires.
Yes.
That's included in the guidance in terms of expected contribution or is that more of a fiscal 'twenty four.
I don't think we've seen new hires come.
And running and contributing our billable time quite quickly.
In terms of our most recent experience so a.
We won't be waiting for them to contribute until the next fiscal year, but but now we're not changing our guidance range at rates up because we've done it successfully battle net accrued incentives.
Yeah.
Okay and then thanks, and then finally on inorganic opportunities I know you've mentioned in the past you have a lot of.
[unk] been evaluating, but.
Nothing.
Closed so to speak and just wondering.
Your level of optimism, given the current environment, and yes.
Our strong cash position et cetera.
We should be expecting something on that front over the next 12 months.
Yeah, you know Mitra.
It's hard to ever put any time constraints around the around those things.
It is a very active area for us; a number of discussions on.
And I've heard some great investment.
In that space, and I'm sure that's.
Will.
We find ourselves happily making an announcement at some point here.
Down the road, but I can't really can't really put brackets around the timing of that.
Okay, no, that's great. Well, thanks again for taking the questions.
Very good to take care of itself.
As a reminder.
Starz Your star one to ask a question.
Okay.
Our next question comes from the line.
Dane Leone with Raymond James. Please proceed with your question.
Hi, Thanks, very much two questions from me one could you just give us a.
Estimate in terms of the expected EPS impact from the buyback this year and then.
Secondly, are there any particular therapeutic verticals that...
You saw in the corner that it had more strength in terms of projects.
We were particularly weak, driving some of the drop in service revenue. Thank you.
Okay.
I'll go backwards in terms of the service revenue in the therapeutic areas.
No real change in the dynamic that we've seen as to spending in the oncologist's oncology from the neuroscience front.
Those areas are quite are quite active.
Across multiple therapeutic areas.
The service revenue dropped this.
This quarter really focused in terms of large U.S. P. Kyosti.
The consulting business, where that business, because it's a sort of typical million-dollar, sometimes 2-million-dollar projects that performance can be relatively lumpy.
And you know not really therapeutic driven.
And in terms of the cadence of projects.
So, it's not really a therapeutic area challenge – for it's just the timing of a large project. Can last year, we had.
The significant revenue quarter in the second quarter for that group, so they're comparable because there was a bit of a tailwind.
Well you want to help out on the on the ETF side in terms of the impact of the stock buyback.
Sure, with the ASR that we've got underway.
You know netted against the cash that we used in the interest we could earn its about call. It about a one cent.
Improvement to EPS.
<unk>, which is which is included in our guidance.
There are no further questions in the queue. I'd like to hand the call back to Sean O'Connor for closing remarks.
Very good. Well, I appreciate everyone's attention today and support of Simulations Plus, and I look forward to.
Speaking on the two months within our third quarter results, take care everyone.
Ladies and gentlemen, this concludes today's teleconference. Thank you for your participation; you may disconnect your lines at this time and have a wonderful day.