[July 03, 2014]

Simulations Plus Reports Third Quarter FY2014 Financial Results

Simulations Plus, Inc. (NASDAQ: SLP), a leading provider of simulation and modeling software for pharmaceutical discovery and development, today reported financial results for its third quarter of fiscal year 2014 ended May 31, 2014 (3QFY14) and first nine months of fiscal year 2014 (9moFY14) compared to the third quarter (3QFY13) and first nine months of fiscal year 2013 (9moFY13).

3QFY14 highlights compared with 3QFY13:

• Net sales increased 20.9% to $3.741 million, an increase of $646,000 from $3.095 million
  • A large renewal order and one study contract slipped from Q2 into Q3 ($300,000)
  • Excluding this shift, the Company set a new record for revenues (11.2% increase)
• Gross profit was up 32.9% to $3.513 million, an increase of $870,000 from $2.643 million
• SG&A was $1.204 million, an increase of 33.3% or $301,000 from $0.904 million
  • Increased commissions on higher Asian sales, as well as increased marketing labor and travel, consulting and professional fees, and increases in salaries and wages, drove the increased SG&A
• R&D expenditures were $552,000, an increase of $94,000 or 20.5% over $458,000
  • In 3QFY14, $317,000 was capitalized and $235,000 was expensed
  • In 3QFY13, $252,000 was capitalized and $206,000 was expensed
  • Increases were due to expanded staff, and increases in salaries and stock-based compensation for existing employees
• Income before taxes increased 35.2% to $2.089 million, an increase of $544,000 from $1.546 million
• Net income increased 31.6% to $1.307 million , an increase of $314,000 from $993,000
• Diluted earnings per share increased 30.7% to $0.079 from $0.061

9moFY14 highlights compared with 9moFY13:

• Net sales were $9.463 million, an increase of $960,000 or 11.3% from $8.503 million
• Gross profit was $8.295 million, an increase of $1.129 million or 15.8% from $7.165 million
• SG&A was $3.379 million, an increase of $689,000 or 25.6% from $2.690 million
  • Increased commissions on higher Asian sales, as well as increased marketing labor and travel, consulting and professional fees, and increases in salaries and wages, drove the increased SG&A
• R&D expenditures were $1.803 million , an increase of $335,000, or 22.8% over $1.468 million
  • In 3QFY14, $1,052,000 was capitalized and $751,000 was expensed
  • In 3QFY13, $834,000 was capitalized and $634,000 was expensed
  • Increases were due to expanded staff, and increases in salaries and stock-based compensation for existing employees
• Income before taxes increased 5.3% to $4.225 million, an increase of $212,000 from $4.014 million
• Net income increased 6.1% to $2.803 million , an increase of $161,000 from $2.642 million
• Diluted earnings per share was $0.171, an increase of 5.7% from $0.162

Mr. John Kneisel, chief financial officer of Simulations Plus, said: "Simulations Plus delivered record revenue growth of 20.9%, of which 8.7% was attributable to customer budget realignments. In fact, the quarter would have been a record even excluding the $300,000 in orders which shifted from the second quarter into this quarter. As expected with this growth, we experienced an increase in commission expense. Our marketing expenses have increased as we continue our aggressive sales strategy of attending more trade shows and conferences, both domestically and internationally. During this last quarter, we negotiated an agreement with TSRL, which led to increased professional fees. We anticipate this agreement will have a significant positive impact on future earnings, as we will no longer be paying royalties on GastroPlus™, but will have a fixed amortization expense of $150,000 per quarter. R&D expenses increased due to increased scientific staff. After distributing just over $800,000 in dividends during 3QFY14, and disbursing $2.5 million to TSRL, cash on May 31 was a healthy $7.8 million."

Walt Woltosz, chairman and chief executive officer of Simulations Plus, added: "Simulations Plus continues to grow both software license sales and our consulting services business. Renewals continue to be strong, coming in at 91% for the quarter, and 20 new customers joined the Simulations Plus family of users. Also, as we announced yesterday, the Environmental Protection Agency acquired several new software licenses during this fourth quarter. Our strategy for expansion into the Asian market is proving effective, as 18% of revenue came from that territory. We continue to enhance our software products to maintain our best-in-class standing across the products line. We added to our talent in this quarter, hiring new scientists and engineers to grow organically and we continue to seek accretive acquisition possibilities. Our dividend provides a nice return to our shareholders, and although the Board of Directors reserves the right to modify or discontinue the dividend at any time to meet the needs of the business, we do not anticipate any changes at this time."

Investor Conference Call

The Company will hold an investor conference call on Tuesday, July 8, at 1:15 PM PT/4:15 PM ET. The call will be webcast live and may be joined by registering at the following website: https://www2.gotomeeting.com/register/915571978. Upon registering, you will receive a confirmation e-mail with a unique link and instructions for joining the call. Please dial in five to ten minutes prior to the scheduled start time. For listen-only mode, you may dial (646) 307-1724, and enter access code 649-164-171.

About Simulations Plus, Inc.

Simulations Plus, Inc., is a premier developer of groundbreaking drug discovery and development simulation and modeling software, which is licensed to and used in the conduct of drug research by major pharmaceutical, biotechnology, agrochemical, and food industry companies worldwide. Simulations Plus, Inc., is headquartered in Southern California and trades on the NASDAQ Capital Market under the symbol "SLP." For more information, visit our Web site at www.simulations-plus.com.

Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995 - With the exception of historical information, the matters discussed in this press release are forward-looking statements that involve a number of risks and uncertainties. Words like "believe," "expect" and "anticipate" mean that these are our best estimates as of this writing, but that there can be no assurances that expected or anticipated results or events will actually take place, so our actual future results could differ significantly from those statements. Factors that could cause or contribute to such differences include, but are not limited to: our ability to maintain our competitive advantages, acceptance of new software and improved versions of our existing software by our customers, the general economics of the pharmaceutical industry, our ability to finance growth, our ability to continue to attract and retain highly qualified technical staff, our ability to identify and close acquisitions on terms favorable to the Company, and a sustainable market. Further information on our risk factors is contained in our quarterly and annual reports as filed with the Securities and Exchange Commission.

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