Greetings, and welcome to today's Simulations Plus conference call to discuss the company's acquisition of Pro-ficiency. 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 call is being recorded. It is now my pleasure to introduce Lisa Fortuna from Financial Profiles. Ms. Fortuna, you may now begin. Good afternoon, everyone. Welcome to the Simulations Plus conference call to discuss the company's acquisition of Pro-ficiency. With me today are Sean O'Connor, Chief Executive Officer; Will Frederick, Chief Financial Officer and Chief Operating Officer of Simulations Plus; and Michael Raymer, Chief Executive Officer of Pro-ficiency. Please note that there is a presentation that will serve as a supplement to today's prepared remarks. You can access the presentation on our investor relations website at www.simulationsplus.com. After management's commentary, we will open the call for questions. As a reminder, the information discussed today may include forward-looking statements that involve risks and uncertainties. Words like believe, expect, and anticipate refer to our best estimates as of this call, and our actual future results could differ significantly from these statements. 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'll turn the call over to Sean O'Connor. Please go ahead. Thank you, Lisa. Good afternoon, everyone, and thank you for joining our call to discuss the acquisition of Pro-ficiency that we announced this morning before market opened. We're excited to discuss the strategic rationale for this transaction and how we expect it to add value for all of our stakeholders, clients, employees, and shareholders. Starting with an overview of the transaction, we acquired Pro-ficiency for approximately $100 million, the largest acquisition in the history of our company. The transaction is being funded from the approximately $119 million in cash and investments that we have on our balance sheet. We believe the acquisition is a productive use of the capital that we raised from our August 2020 follow-on public offering. As you know, we've been active in M&A over the years with our recent transactions, smaller bolt-ons to expand our existing software products and services within the biosimulation market. We've also been evaluating opportunities to support our long-term growth through expansion into adjacent markets that add to our overall market opportunity or TAM. We've been particularly interested in the attractive clinical trial operations and commercial launch markets, where budgets are large and the operational tools and methods have not been fully modernized or delivered with robust analytical precision utilizing current technologies. With the acquisition of Pro-ficiency, we are bringing together complementary expertise in simulations, AI technologies, and a focus on science, creating a one-of-a-kind platform that spans across the drug development continuum. Simulations Plus utilizes data simulation, including AI-based data analytics, that are applied to drug discovery, clinical protocol optimization, and decision-making, while Pro-ficiency provides experience and content simulation developed with AI technologies to enhance clinical trial success, data analytics, and medical communications. Ultimately, these activities support increased confidence in regulatory success for our clients. This holistic approach can improve our clients' drug development and commercialization success rates through the integration of advanced software technologies and services that can deliver cost efficiencies and speed to market. We believe this is a powerful combination that will generate significant value creation. The transaction is expected to be accretive to our fiscal 2025 EPS, and as a reminder, our fiscal year 2025 begins on September 1, 2024. Next, I'll provide a snapshot of Pro-ficiency. Excuse me. Pro-ficiency is a leading provider of simulation-enabled performance and intelligence solutions for clinical and commercial drug development. Its portfolio of software and services, developed with AI technologies, is highly complementary and synergistic to Simulations Plus's platform by expanding our capabilities to enhance clinical trial and launch training, data analytics, and outcomes. The company serves medical affairs, clinical trial operations, and commercial market launch teams, and the current client base spans the pharma biotech industry and includes approximately 40 companies. Pro-ficiency will add around 40 skilled and valuable employees to our team, and in calendar year 2023, it delivered revenues of approximately $15 million. Michael Raymer, Chief Executive Officer of Pro-ficiency, will join Simulations Plus as the president of our newly formed Clinical Simulations and Medical Communications business unit, and we're delighted to have Michael on our senior leadership team. Moving on to the strategic rationale of the transaction, the addition of Pro-ficiency expands Simulations Plus's presence along the drug development value chain, leveraging its scientific skills, drug development expertise, data management acumen, productive analytics, and biosimulations capabilities. It also broadens and differentiates Simulations Plus' holistic offering to include clinical trial operations, medical affairs, and communications. This transaction doubles our total addressable market, adding $4 billion of clinical simulations, training, analytics, and medical communications to our $4 billion biosimulation market for a total TAM of $8 billion. Importantly, we now have meaningful cross-selling opportunities to our shared target customer base in life sciences. Finally, this deal broadens Simulations Plus' platform and accelerates scale, increasing our aperture for continued M&A strategy and improving our right to win as a strategic partner of choice. We currently serve 18 of the top 20 pharmaceutical companies, while Pro-ficiency currently serves less than half. This presents a significant cross-selling opportunity that leverages Simulations Plus' established strong relationships. With this transaction, we can also expand beyond our traditional markets to now include clinical trial operations, medical affairs, and commercial. Not only are our product strengths highly complementary, but so too are our cultures. Simulations Plus and Pro-ficiency have a shared vision and dedication to advance and deliver leading-edge technologies and services to support more efficient and timely drug development for the benefit of patients. In addition, the acquisition meaningfully expands our customer return on investment by helping them achieve accelerated clinical trial cycles, reduced protocol deviations, reduced cost of clinical trial operations, and improved market awareness and adoption of both diseases and products. The resulting combined product and service portfolio results in offerings across the pharma value chain. Simulations Plus software and products and services serve pharma clients from discovery through to approval. Pro-ficiency software, products, and services serve pharma clients from preclinical through to commercialization. The integration of Pro-ficiency's suite of clinical solutions and services will expand our capabilities from discovery through commercialization. Following this acquisition, we are updating our fiscal 2024 guidance targets to the following. Total revenue is now expected to range between $69-$72 million. Diluted earnings per share is expected to be between $0.54 and $0.56, and we do not expect any change to our guidance for software and services mix of 55%-60% and 40%-45%, respectively. In conclusion, I'd like to summarize the key takeaways of our acquisition of Pro-ficiency. First, we believe the transaction brings together two businesses with complementary capabilities, with expertise and services that are grounded in science. Together, we will continue to focus on applying advanced technologies, including AI, to enhance actionable data analytics. Pro-ficiency also advances Simulations Plus' mission to accelerate and reduce the cost of R&D through innovative science-based software and consulting solutions that optimize treatment options and improve patient lives. It also doubles our total addressable market to $8 billion by unlocking an additional $4 billion dollar market opportunity that is incremental to our biosimulation market. Our integrated businesses will deepen our client engagement capabilities and present significant cross-selling opportunities to our shared life science customers. It also provides a distinct competitive advantage and heightens our ability to drive innovation. Finally, the addition of Pro-ficiency enhances our leadership team and expands our internal expertise to include clinical simulations and medical communications. Thank you for your time today. With that, I'll now turn the call over to the operator for questions. Thank you, Mr. O'Connor. We will now be conducting a question-and-answer session. If you would like to ask a question, please 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'd 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 keys. One moment, please, while we poll for questions. Thank you. Our first question is from Francois Brisebois with Oppenheimer and Company. Please proceed with your question. Hi, thanks for taking the questions, and congrats on the acquisition. I just, in terms of, you know, obviously you gave some guidance for, for this year, for fiscal 2024. Is it, you know, in terms of 2025, you, you didn't mention it and, you know, I just want to see how much I can, see how much you guys will answer this. But you talked about the $15 million in revenue. Can you just help us understand maybe, is this just a bolt-on of 15, or is there something synergistically where, you guys think that, you know, by doubling the TAM, this 15 from Pro-ficiency can, can significantly grow? And just maybe help us with the cadence of, you know, what goes into this acquisition? When, you know, do you expect it to be fully up and running? Just any details there for us to gauge the cadence a little bit. Sure, Frank. Appreciate the questions. Let me try and weave my way through them. The integration cadence, we've started today, in terms of moving the ball forward in terms of bringing the teams together and obviously integration steps on the front end. But one of the key leverage points that we see in the combination is our ability to bring their product and services to, from the 40 customers that they bring to us to begin with, to our over 300 customers, in terms of our installed base. So go-to-market strategies or sales and business development efforts and cross-selling activities will get a priority and a focus here. Yeah, they closed their 2023 calendar year with $15 million in revenues. As we look forward, we've given you some guidance in terms of impact this year, which is basically an uplift of about $3 million to our guidance for their Q4 contribution, or at least the partial Q4 contribution to our results, August thirty-first. As we look into next year, we'll get better guidance as we get to our normal cadence of our own guidance in terms of the end of the year in October, and we'll be more precise, obviously, in that regard. But we would anticipate that that $15 million revenue flow could contribute $15-$18 million in our fiscal year 2025. Okay, that's very helpful. And then in terms of the software to services mix, it's always been very important for you guys in terms of profitability. When you say that they have a similar software to service ratio to SLP, but at the same time it's very complementary, where it's not the biosimulation type of software. So can you just help us understand long term, how does that impact your software to services ratio? And maybe better understand the relationship there between just software as a whole and biosimulation as a part of software? Thanks. Excuse me. Yeah. You know, our mix is typically historically been 60%-65% software revenue in terms of contribution to our total revenue stream. As they come on board here, they're probably not up to that 60-65, but not far off. And when we dissected their mix of software versus revenue, software side of that business is growing much more rapidly than the service side. So hence, you know, our guidance, no change in our short-term guidance Q4 in terms of mix, their software to service. And while they'll be a little service rich compared to our percentage mix, as we enter fiscal year 25, anticipate, you know, very quickly and, and in the long run, their mix will be, comparable to our existing or historical 60%-65% software, software mix. Their solutions are not, in that umbrella of biosimulation market. Their products and services, are in clinical operations and training, and support, and med communications. And so there's no, you know, competitive overlap. There's no overlap between those two $4 billion market, opportunities. That's helpful. And if I could sneak in a last one here, just that you guys have 18 of 20 of the large pharma. You mentioned they had 8 out of 20. Any chance their 8 has the 2 that you don't have? The answer there, unfortunately, is no. You know one of those out of our, you know, in our mix with 18, one of them is a newly elevated name into the top 20 with growth, and then the other one is a, you know, primarily do it in-house scenario. But thanks for asking. All right. Congrats. Thank you. That's it for me. Thank you. Our next question is from Matt Hewitt with Craig-Hallum Capital Group. Please proceed with your question. Good afternoon. Congratulations on the transaction, and welcome, Michael, to the team. Maybe first up, and I don't know if you've got this handy, but how should we be thinking about the growth rate for the new business? $15 million last year. Do you know, or can you kind of guide us to what the growth rate was on that business and how you're thinking about it? I think you mentioned $15 million-$18 million next year. But how should we be thinking about the growth rate over the recent past? Yeah, I can look back. Obviously, when we give guidance for next year, we'll dissect it a little bit more granularly. But looking back over the last 2-3-year window of time, the latter has exceeded the former in terms of revenue growth. So, you know, we are adding a complementary set of products and services that today is growing faster than Simulations suite of services and products. Got it. And then, you know, given that obviously this is nice from a, it expands your market opportunity, there's cross-selling opportunities. I'm just curious, are these, they're different budgets, it sounds like. So are they different call points, and how does that, does that represent a little bit of a challenge, or is that an opportunity? Yeah, it's, you know, it's both a challenge and an opportunity. Like a lot of good things, there's some pluses and minuses there. You know, the most immediate plus is, you know, often in Pro-ficiency being called in to do work in support of a clinical trial, often it comes between that short window of protocol lock and clinical trial performance. And that short window is detrimental to engaging new clients because large pharma likes to first establish an MSA, a vendor relationship agreement. That takes more than, you know, a short window of time to put in place. So we are immediately going to be able to harvest an opportunity where with MSAs in hand on Simulations Plus' part, the Pro-ficiency ability to, you know, not in terms of the service that they give, but in terms of the closing of a contract, be able to accelerate that, that step, quite, quite significantly. In terms of budget differentials and different call points into the client. Hey, you know, we've been working at SLP to broaden our network. We've talked about concierge programs in which we are drawing more of the silos within our clients together to introduce them, but more importantly, identify cross-selling opportunities on our part. While those have been primarily in modeling and simulation departments, we've growingly brought into those conversations the clinical teams, non-modeling and simulation people, introducing them to the benefits of modeling and simulation. My point here is that we have experience already in terms of spiderwebbing our reach within our clients' organizations into other departments. So that will be a task at hand, something that we've you know accomplished to date fairly well. And they are separate budgets, which means that we are accessing more available dollars to spend in our clients' budgets, if you will. The equivalent of increasing you know our TAM from $4-$8 billion. I don't know what the equivalent is exactly in terms of doubling our budget opportunity when we knock on one of our key accounts. So, yeah, you know, they, we see tremendous opportunity in terms of cross-selling here and facilitating and, hopefully, you know, accelerating the growth in terms of the Pro-ficiency products and services, which are growing quite nicely already. Got it. And then maybe one last one, I'll hop back in the queue. But a question has come up repeatedly today from investors regarding competitors to Pro-ficiency. So, you know, I think on the surface, people look and they say, okay, Veeva and IQVIA, maybe Dassault with their Medidata, Oracle with Phase Forward. But it sounds like this is more of a training tool, a development tool, a data tool. So is the competition really more in-house than it is external companies, or how should we think about the competition here? Yeah, maybe I'll have Michael comment on this, but just, you know, briefly. Yeah, these are not data management tools per se. These are the Veevas of the world in those shops. We are gathering data and providing training, simulation, and support, and certainly analytics in terms of the success of those clinical trial operations. Michael, you want to walk through a little bit of the competitive profile? Sure. Surprisingly, our competitors today are primarily showing PowerPoint slides in a hotel room or worse yet, over Zoom. So that's the state of play. You know, we do have competitors that don't provide a simulation-based experience, but provide more PowerPoint and minor animation via video. But we don't have any direct competitors in the simulation training space for clinical trials. Our medical communication side is it has more competitors associated with it. But you know, on the and we're bringing simulation into that side of the business, with some new offerings that are already getting traction with the existing logos that we have in place already with medical affairs and commercialization teams. We're unique because we combine three things: a very deep tech stack. We supplement that with the art of how we create these experiences. Think TikTok, sub-minute videos, 160 of them in a trial. Very engaging. We get 87% top box scores from docs on their training. So we're super unique, and, you know, the biggest challenge we've had is just market access. And so we're very hopeful that having 18 of the top 20 pharma with MSAs in place will greatly accelerate, you know, opportunities for the business. That's super helpful. Thank you very much. Thank you. Our next question is from David Larson with BTIG. Please proceed with your question. Hi, congratulations on the transaction. Sean or, or Michael, can you maybe just describe the nature of the business in a little more detail? It sounds like when we use the phrase clinical trial operations, what comes to my mind is a CRO. But it sounds like you're not actually, like, selecting clinical trial sites, selecting the physicians, sort of recording the response that patients are getting from various clinical trials. It sounds like what we say when we say clinical operations, it's more the training videos. Is that correct? Yeah, Dave, you're on target there. We're not, you know, sourcing patients or patient recruitment, conducting the clinical trial. What we are doing is ensuring that that clinical trial is optimized for successful performance through the training and development of the protocol and translating that to those that are, you know, conducting the clinical trial. Michael, you want to jump in here? Sure. No, you nailed it, Sean. There is the element of CROs, you know, provide broader range of services. Our offerings are targeted at very efficiently driving training experiences that improve the execution of clinicians inside a trial, inside a launch. And so that's how we're different, and our product is very narrow in its focus. Okay. Then when we use the phrase like life science customers, commercial, and like medical communications, is it—what that sounds to me like is you're trying to bring the approved drug to market. You're helping to identify which physicians can actually use it and prescribe it for their patients, and you're somehow communicating with them. Is that like a text message or an email or a phone call? Can you maybe just describe what you mean when you say commercialization and life science customers, please? Thank you. Sure, Dave. Well, you know, I'll let Michael walk through the details there. The medical communication is a broad scope of support activities to pharma biotech companies as they look to both before approval and after approval introduce their market to commercialize their product. Michael, you want to walk through, you know, sort of the major categories of med communications? Sure. So if you look at the technology side of the business, we use simulation to enhance the non-personal promotion, ad boards, and continuing medical education of the clinician. In addition to the historical simulation offerings from Pro-ficiency in the past year via acquisition, we added a digital platform for managing key opinion leaders or KOLs to maximize the success of the launch. So if you think about the commercialization space, you know, it's been changed dramatically from a regulatory standpoint, and we provide novel and new ways to get access to physicians. Our medical communications business is an agency of record business, so they assist with all kind of marketing launch activities as a contracted service back to the sponsor. But as Sean indicated, the growth rate of our digital products are outpacing the growth rate of the service products, and that's where, you know, even prior to the acquisition by SLP, that has been our number one focus is how to take, you know, customers we have today and, and convert more and more to a digital wallet as opposed to analog services. Okay, that's, that's very helpful. I, I mean, it sounds to me like you're competing with DocMatter, Doximity and Sharecare to an extent. It sounds like it's. It would fall into the digital ad spend bucket within pharma R&D. Is that correct? It's, it's essentially digital ad spend. Not exactly. So I would have never thought of Doximity being a direct competitor to what we do. You know, keep in mind, our programs are very, very targeted, targeted to a launch. So, considering medical education, I would think that piece of the business would be more competitive to like, WebMD, Medscape WebMD, where they and a number of companies have medical training, continuing medical education training. Our strategy has been in that space to be more of a channel, and so we use those companies in that space to be a channel for our simulation platform. It's one of our faster growing product lines last year in 2023. So, we're not really a digital ad spin play. We are a very targeted play by the launch team of creating unique ways to on-ramp physicians on their knowledge of the therapeutic. And so, you know, when we work with teams, they say no one's they've never seen anything like we deliver to them. So, we're still new in the commercialization space for simulation, but the initial feedback has been very positive from our current installed base. Then maybe just one last one from me, perhaps for Will. Where are we going to record this acquisition on the P&L? So, like, for software, is it going to be sort of it's a new line item, or would it be more in, like, PBPK or CPP? And then also on the service side, where will this like land in the on the service P&L side? And then just any thoughts on the price? $100 million bucks, $15 million in revenue. Just any thoughts there? I'm assuming that it's about breakeven EBITDA or, or very low EBITDA. Thanks a lot. Sure. It'll sit in the software and services at the top line, so it'll roll up in there. And then, I think we mentioned in the deck that went out, this is a new business unit, so clinical simulations and medical communications. So it'll be a sixth business unit, and similar to how we do the business units within software and services, we'll add this in there as well, and that'll start with the Q4 reporting. Great. And the price seems reasonable, actually, relative to where the stock is trading now. Just any thoughts on how you arrived at, I think, you know, maybe 7x revenue, and is there any EBITDA? Yeah, there, there's EBITDA. I mean, we, we went through a couple of different valuation methods that we, we typically do with all of our transactions. It's similar to prior acquisitions. It was a deal that made sense from that standpoint. Okay, great. Thanks. I'll hop back in the queue. Thank you. Our next question is from Max Smock with William Blair. Please proceed with your question. Good afternoon. Thanks for taking our questions. I wanted to ask one around, you know, what this acquisition means for your strategy of growing the business here. I certainly appreciate the strategic rationale for the acquisition, but you did use, essentially all of your cash on hand to fund this acquisition. It does seem like there's still a lot of opportunity for you all in the Biosimulation space. So just wanted to see how comfortable you are with your ability to pursue inorganic opportunities in that Biosimulation space moving forward, and what this means or what this acquisition says about how you're feeling about the opportunity in that Biosimulation market specifically. Thank you. Sure, Max. You got a good question. Yeah, still focused on biosimulation markets. Still feel very robust and good future in terms of that business. We've always acquired and supplemented our presence in biosimulation through our combined organic and acquisition strategy. At the same time, in terms of long-term growth perspective of the company, I've also always looked at adjacencies. Adjacencies that would bring greater market opportunity to the company on a longer term basis. Adjacencies that shared our focus on science, our use of predictive technologies, and fit in terms of the business and Pro-ficiency. We found one of those. The cash and the valuation were a larger acquisition than we've done in the past. We raised that money 4 years ago with the intent to use it in the M&A process, and thankfully, we finally achieved that goal with a very good quality acquisition. Our go forward sort of perspective still look to have a combined strategy of organic growth and acquisition. We have remaining cash on the balance sheet. We have a very cash-generating business model that can add to it, and should other acquisition opportunities present themselves, we'll pursue them just as aggressively as we've pursued them in the past, and would look, if need be, to supplement our resources in order to accomplish that. That's helpful. Thank you. Maybe just following up, I appreciate the commentary around the mix today between software and services being broadly in line. But is there anything to call out in terms of how their gross—the gross margins associated with their software and services maybe differ from your margins for each of those buckets today? And then any commentary around what their consolidated margins look like, today, in terms of adjusted EBITDA and where you think you can get those to over time? Yeah, I mean, generally speaking, their, their software margins are a little bit less than our software margins. As they scale up, they've actually got a lot of leverage, excuse me, in that arena through the use of AI technologies to accelerate the building of those models for specific programs. And so, that margin opportunity is accelerating to our level of software margins. On the service side, their margins are comparable, maybe a little bit below, but comparable, and again, benefiting from scale as they move forward. Their contribution on the bottom line, it is positive. It is accretive, this transaction, in fiscal year 2025, and we'd look to still drive towards our profitability targets or EBITDA targets, which have been on an adjusted EBITDA sort of line item in the 35%-40% range. Got it. Maybe just one more for me. Just following up on a question earlier about, you know, CROs were mentioned, and I'd be curious if you could just elaborate on Pro-ficiency's relationship with CROs to the extent that they're utilizing the software or services today, when they're actually out running clinical trials. Like, are you selling into CROs at all today? Are they a potential customer group? Like, how should we think about your relationship and, and the interaction between CROs and how they expect to use Pro-ficiency software and services moving forward? Yeah, Michael, correct me if I'm wrong, but not in the customer base, but would be in that arena of partners, potential partners, potential channels down the road, but not leveraged in a big way right now. Am I accurate there, Michael? No, you're spot on. We have, y ou know, the only CRO partner that we have a formal relationship with is Fortrea, and it's not they bring us into selected transactions, but our preferred route to market is great, direct to the sponsor. And the acquisition by SLP now gets us access to the MSAs that have historically been the barrier for faster penetration into top 20, top 25 pharma. So our preferred route to market is direct to sponsor. Understood. Thanks for taking our questions. Thank you. There are no further questions at this time. I'd like to hand the floor back over to Mr. O'Connor for closing remarks. Very good. Well, I appreciate everyone's attendance today and interest in learning more about the acquisition. Obviously, the exciting part is now in front of us and look forward to reporting on progress not too many weeks down the line in terms of our Q3 earnings announcement coming up early in July and beyond. Thanks for your attendance and your interest. Take care, everyone. This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.