Simulations Plus Reports Second Quarter Fiscal 2026 Financial Results, Highlighting Revenue Growth and Strong Software Performance
Simulations Plus, Inc. (Nasdaq: SLP), a global leader in model-informed drug development (MIDD) and AI-accelerated solutions for the biopharmaceutical industry, today announced its financial results for the second quarter of fiscal 2026, ended February 28, 2026. The company continues to demonstrate steady operational execution, supported by growth in both its software and services segments, alongside improving profitability metrics and sustained demand for its drug development simulation technologies.
The results reflect continued adoption of Simulations Plus’ platform across pharmaceutical and biotech customers seeking to accelerate drug discovery, improve clinical efficiency, and reduce overall development costs through advanced computational modeling and artificial intelligence-driven solutions.
Second Quarter Fiscal 2026 Financial Performance
Simulations Plus reported solid year-over-year growth in the second quarter of fiscal 2026, with overall revenue increasing 8% to $24.3 million, compared to the same period in fiscal 2025.
Revenue Breakdown
- Software revenue increased 9% to $14.6 million, representing approximately 60% of total revenue. This growth was driven primarily by strong demand for discovery and development-focused software solutions.
- Services revenue increased 8% to $9.7 million, accounting for 40% of total revenue, supported by increased project activity and expansion in development-related consulting services.
The balanced growth across both segments highlights Simulations Plus’ diversified business model, which combines recurring software revenue with high-value scientific consulting services.
Profitability and Margin Expansion
The company demonstrated significant improvement in profitability during the quarter, driven by higher revenue, operational efficiency, and favorable product mix.
- Gross profit increased to $16.1 million, compared to $13.1 million in the prior-year quarter
- Gross margin expanded to 66%, up from 59% in the second quarter of fiscal 2025
This margin expansion reflects continued scaling of software revenue and improved operational leverage within the business.
On the bottom line:
- Net income rose to $4.5 million, compared to $3.1 million in the prior-year period
- Diluted earnings per share (EPS) increased to $0.22, up from $0.15
The company also reported strong adjusted profitability metrics:
- Adjusted EBITDA increased to $8.7 million, representing 36% of total revenue, compared to $6.6 million (29%) in the prior year
- Adjusted net income rose to $7.0 million, compared to $6.2 million
- Adjusted diluted EPS increased to $0.35, compared to $0.31
These results underscore the company’s ability to translate revenue growth into improved operating performance while maintaining disciplined cost management.
Six-Month Fiscal 2026 Financial Results
For the first six months of fiscal 2026, Simulations Plus delivered steady overall growth, despite mixed performance across its software and services segments.
Revenue Performance
- Total revenue increased 3% to $42.7 million
- Software revenue declined 3% to $23.5 million, representing 55% of total revenue
- Services revenue increased 12% to $19.2 million, representing 45% of total revenue
The decline in software revenue was primarily attributed to softness in clinical operations software, partially offset by strong performance in discovery and development solutions. Services growth, on the other hand, benefited from increased demand for consulting and model-based development support.
Profitability Metrics
Simulations Plus reported improved profitability over the six-month period:
- Gross profit increased to $27.0 million, compared to $23.3 million in the prior year
- Gross margin improved to 63%, compared to 56%
On a net basis:
- Net income increased to $5.2 million, compared to $3.3 million
- Diluted EPS increased to $0.26, compared to $0.16
Adjusted metrics remained strong:
- Adjusted EBITDA increased to $12.3 million, representing 29% of revenue (vs. 27% prior year)
- Adjusted net income was $9.6 million, approximately flat year-over-year
- Adjusted diluted EPS was $0.48, broadly consistent with the prior period
Overall, the six-month results reflect resilience in profitability despite variability in software segment performance.
Management Commentary and Business Outlook
Commenting on the results, Shawn O’Connor, Chief Executive Officer of Simulations Plus, highlighted the company’s solid execution and continued momentum in key business areas.
He noted that second-quarter revenue growth was driven by strong performance in discovery and development solutions, while clinical operations software experienced a modest, expected decline. The company also benefited from increased customer acquisition, with new client wins (“new logos”) and expansion within existing accounts contributing to overall growth.
O’Connor emphasized that services revenue remained a key growth driver during the quarter, supported by increased demand for development-related solutions and consulting engagements. Additionally, bookings strength led to an approximately 18% increase in backlog, signaling continued demand visibility for future periods.
From a macroeconomic perspective, management described the broader environment as favorable. Key drivers included:
- Ongoing “most-favored-nation” pricing agreements supporting industry stability
- Reduced tariff-related uncertainty improving global operational confidence
- An improving funding environment for biopharmaceutical clients
- Increased adoption of regulatory frameworks supporting new approach methodologies (NAMs), which favor simulation-based drug development
According to management, these factors are translating into stronger software renewals, increased customer engagement, and higher services bookings across the portfolio.
O’Connor concluded that the company is pleased with first-half fiscal 2026 performance and remains optimistic about continued momentum across both software and services segments.
Fiscal 2026 Updated Guidance
Simulations Plus updated its fiscal 2026 guidance to reflect a revised tax outlook while maintaining all other previously issued operational expectations.
The company revised its adjusted diluted EPS guidance downward due to an expected increase in the effective tax rate.
Updated Guidance Summary
- Revenue: $79 million – $82 million
- Revenue growth: 0% – 4%
- Software mix: 57% – 62%
- Adjusted EBITDA margin: 26% – 30%
- Adjusted diluted EPS: $0.75 – $0.85
The adjustment reflects an increase in the expected effective tax rate for fiscal 2026, now projected at 23% – 25%, up from the previous range of 12% – 14%. Management clarified that all other guidance metrics remain unchanged.
The revision indicates that while operational performance expectations remain stable, tax-related factors are expected to have a material impact on reported earnings per share.
Simulations Plus announced that senior leadership, including CEO Shawn O’Connor and Executive Vice President and Chief Financial Officer Will Frederick, will host a conference call and webcast to discuss the financial results and forward-looking guidance.
The call is scheduled for April 9 at 5:00 p.m. Eastern Time and will be accessible via registration or direct dial-in for both domestic and international participants. A webcast will also be available on the company’s investor relations website, with a replay accessible approximately one hour after the conclusion of the call.
This investor engagement provides stakeholders with an opportunity to gain deeper insight into the company’s strategic direction, operational performance, and market outlook.
Non-GAAP Financial Measures and Reporting Framework
Simulations Plus emphasized the importance of non-GAAP financial metrics in evaluating its operational performance. The company regularly reports adjusted measures such as Adjusted EBITDA and Adjusted Diluted EPS to provide investors with a clearer view of underlying business performance.
Adjusted EBITDA
Adjusted EBITDA excludes items such as:
- Interest expense or income
- Income taxes
- Depreciation and amortization
- Equity-based compensation
- Foreign currency gains or losses
- Impairment charges
- Acquisition, integration, and restructuring expenses
- Other non-recurring or non-operational items
These metrics exclude similar non-operational items and adjust for tax impacts associated with those exclusions.
Management uses these measures internally for planning, forecasting, and performance evaluation, and believes they offer meaningful comparability across reporting periods and peer companies.
However, the company also notes that non-GAAP measures should not be viewed as substitutes for GAAP-based financial results, such as net income or cash flow, as they may exclude material items that affect overall financial performance.
Simulations Plus delivered a stable and strategically aligned second quarter fiscal 2026 performance, supported by continued strength in software and services demand, margin expansion, and improving profitability metrics.
While full-year guidance was adjusted due to tax-related factors, the underlying business fundamentals remain strong, with increasing backlog, healthy customer activity, and favorable industry conditions supporting continued momentum.
As pharmaceutical and biotechnology industries continue to adopt AI-driven and model-based approaches to drug development, Simulations Plus remains well positioned as a key enabler of digital transformation in the life sciences sector.
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