Simulations Plus Inc. (NASDAQ:SLP) reported better-than-expected results for its second quarter of fiscal 2026 on Thursday, while issuing mixed guidance for the full year.
Simulations Plus offers drug discovery software and solutions.
The company reported sales of $24.29 million, representing an increase of 8% year-over-year, edging higher from the consensus estimate of $21.67 million.
Simulations Plus reported adjusted earnings of 35 cents per share, beating the consensus of 20 cents, up from 31 cents a year ago.
Segments Show Balanced Growth
Revenue breakdown showed a 9% increase in software revenue to $14.6 million and a 8% increase in services revenue to $9.7 million.
Gross profit was $16.1 million and gross margin was 66%, compared to $13.1 million and 59% a year ago.
Adjusted EBITDA of $8.7 million, representing 36% of total revenue, compared to $6.6 million, representing 29% of total revenue.
Shawn O’Connor, CEO of Simulations Plus, said the company posted solid second-quarter performance, with revenue rising 8%. He noted that software growth was fueled by strong demand for discovery and development solutions, though this was partly offset by a planned decline in clinical operations software.
The company also benefited from adding new customers and expanding relationships with existing clients. Growth in services revenue was mainly driven by development solutions, while strong bookings contributed to an approximately 18% increase in backlog.
Guidance
Looking ahead, Simulations Plus lowered its fiscal 2026 adjusted earnings guidance from $1.03-$1.10 to 75-85 cents compared to the consensus of 54 cents.
The company affirms 2026 sales guidance of $79 million-$82 million versus the consensus of $80.47 million.
Simulations Plus expects a 2026 adjusted EBITDA margin of 26%-30%.
Favorable Market Trends
O’Connor added that market conditions continue to support growth. He highlighted factors such as global pricing agreements, easing tariff concerns, and improving funding conditions, all of which are helping clients.
He also pointed to recent regulatory guidance on new approach methodologies as a driver of increased customer activity. This momentum is evident in strong software renewals, new client wins, and services bookings.
Overall, he said the company is satisfied with its performance in the first half of fiscal 2026 and remains optimistic about continued business momentum.
Analyst View: AI And Regulatory Shifts
William Blair on Friday noted, “On top of the more constructive overall environment, Simulations Plus is benefiting from growing regulatory guidance around adoption of NAMs, specifically in the discovery and clinical spaces, as well as growing interest in AI, which is accelerating the industry’s transition toward data-driven drug development.”
SLP Price Action: Simulations Plus shares were down 1.31% at $12.82 at the time of publication on Friday, according to Benzinga Pro data.
Image via Shutterstock
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