Simulations Plus, Inc. (SLP)

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Simulations Plus, Inc. (SLP)

F1Q08 Earnings Call

January 14, 2008 4:15 pm ET

Executives

Walter S. Waltosz – Chairman of the Board, President & Chief Financial Officer

Analysts

Howard Halpern – Taglich Brothers

Dick Mills – Private Investor

Frank Gristina – MicroCapital

Fred Milligan – Sanders Morris Harris Group Inc.

Presentation

Operator

Thanks so much for holding everyone. Welcome to the Simulations Plus first quarter fiscal year 2008 financial results conference call. Just a reminder today’s conference is being recorded. And now at this time I would like to turn the conference over to our host Mr. Walter Woltosz, Chief Executive Officer. Please go ahead sir.

Walter S. Waltosz

Thank you very much and welcome everyone to our conference call to discuss the first quarter of fiscal year 2008 which ended on November 30th. I am required to read this Safe Harbor statement so with the exception of historical information the matters discussed in this presentation are forward-looking statements that involve a number of risks and uncertainties. The actual results of the company could differ significantly from those statements. Factors that could cause or contribute to such differences include but or not limited to, continuing demand for the company’s products, competitive factors, the company’s ability to finance future growth, the company’s ability to produce and market new products in a timely fashion, the company’s ability to continue to attract and retain skilled personal, the company’s ability to identify evaluate and close suitable acquisitions and the company’s ability to sustain or improve current levels of productivity. 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.

Okay, so the lawyers are happy now and now we can have a discussion. First, I’ll discuss the first quarter 2008 results and then a brief discussion of our strategy going forward and then I will welcome any questions that you might have.

In the first quarter our gross revenues were $1.98 million. This is up over 36% from first quarter of 2007. Our pharmaceutical software and services portion of the business was $1.438 million up about 75% or 74.5% from the first quarter last year. That was in large part due to a large order where the customer renewed in November to avoid having a gap in some software licenses at some of their sites. That order was received in December of last year. We expect that it will be in November from now on because of the licensing timing they don’t want to have a gap where the software is unusable for a few days. However, the pharmaceuticals software and services business would have exceeded first quarter of 07 without it. Someone is going to ask me by how much and if I tell you that you will know how much the order was for and I am not allowed to reveal that by contract, so I can’t be any more specific than that.

Words + subsidiary revenues were $545,000 this was down 13.8% from first quarter of last year. This was largely due to an inability to ship the handheld PDA system that we call Say-it!SAM. It is based on a Hewlett Packard PDA, personal digital assistant. For most of the quarter we just began shipping those in the last few days of the quarter. We had a delay in some injection molding cases that we have customized for this product and finally got all of that resolved and began shipping right at the end of November and then really good shipments in December which were greater than any month in all of last fiscal year.

SG&A for the first quarter was $930,000 this is 47% of sales, down from 52% of sales in the first quarter of 07. R&D expenses were $226,000 for the quarter up from $184,000 in the first quarter of 07. Income before income taxes $405,000 that is up 332% from $94,000 from the first quarter of 2007. As most of you know in the software business once we exceed breakeven the margins go up quite nicely and so the additional revenues on the pharmaceutical side here contributed to that very large increase in income before income taxes. Net income $243,000 or about $0.013 per fully diluted share and that is up 232% from about $0.043 per share in first quarter of 2007. That is also with an increase of almost 8% in the number of fully diluted shares over that time. Cash position now approaching $5 million, $4.854 million. That is up 118% from the first quarter of last year. And, shareholders equity which is a number I tend to pay a lot of attention to is a little over $8 million, $8.075 million that is up 40.3% from the first quarter of last year and amounts to an increase of 5.3% just during the first quarter.

I am going to have a short discussion of income tax because I know that has been on everybody’s mind. Why did we have the glitch that we had last year on our income tax estimate? We’ve had some long discussion with our independent accounting firm to try and understand our tax situation better and how we can communicate things a little bit better. First of all and I have to admit that some of this is a little bit new information even for me after 10 years. Tax returns are filed after the 10K so the taxes are estimated for the 10K and they sometimes change as the returns are prepared because of changes in rules for tax credits and other accounting factors from year-to-year. So we often don’t know exactly what the taxes are and we have to make an estimate at the filing of the 10K.

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