Renee Bouche - IR Walt Woltosz - Chairman & CEO John Kneisel - CFO John DiBella - Division President Ted Grasela - Division President Brett Howell - Division President.

Analysts:.

Good afternoon. It is Tuesday, November 14, 2017 and on behalf of Simulations Plus, I welcome you to our Fourth Quarter Fiscal Year 2017 Financial Results Conference Call and Webinar.

Presenting this afternoon will be CEO and Chairman, Walt Woltosz; Chief Financial Officer, John Kneisel; and Division President, John DiBella, Ted Grasela and Brett Howell. An opportunity to ask questions will follow today's presentation.

You may send your written question using the questions pane on your control panel or you may use the hand-raising feature on your control panel to ask your question directly. Please be sure to enter the unique audio PIN displayed when you join the call. This call is being recorded for playback at our website, www.simulations-plus.com.

Before we begin with today's presentation, I shall read our Safe Harbor Statement. 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 are 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 personnel 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. Now it’s my pleasure to introduce you to Walt Woltosz, CEO and Chairman of Simulations Plus..

Thank you Renee, and thanks to everyone who's attending today. So just to give a quick overview and the details will follow from our CFO and the division presidents and then I'll wrap it up at the end.

For those of you who maybe tuning in for the first time, Simulations Plus is the global provider of software and consulting services for R&D primarily in the pharmaceutical industry, but now also in food, cosmetics and general chemical industry and looking to support efforts in some other industries such as aerospace and general healthcare.

On the pharmaceutical side, we have products and services ranging from all the way the very earliest discovery when a chemist first draws a molecule or uses a computer program to generate perhaps million or several million of them that never existed before.

And then our tools can allow him to screen those molecules and get rid of the obvious losers right away without ever having to make them and test them.

Into preclinical development where selected molecules move into laboratory test and in vitro test we call them and animal test, reviewer test, and then all the way into first to human trials in Phase 1, we also work in safety research and risk assessment and processing Phase 2 and Phase 3 clinical trial data and beyond patent life to supporting generic companies and that something with 30 or 40 generic companies now that are using our software in services.

And also a major contract in our Cognigen division for integration of data for multinational R&D efforts where we have researchers around the world working on particular problem or disease and to allow them to communicate with each other efficiently and to avoid duplication of effort plus approaches in our key new software platform that's provided a very valuable service.

For the fourth quarter which ended August 31st, we did complete the acquisition of DILIsym Services Incorporated Research Triangle Park, North Carolina on June 1st. So fourth quarter June-July-August was our first quarter including the operations of DILIsym Services. Our revenues were up for the quarter $2.3 million and about 58.3% from $6.3 million.

The net income was up $362,000 or just about 46% to $1.15 million. Our diluted earnings per share for the quarter up about 42% to $0.65 a share for the quarter. And our software renewal rates 89% based on accounts number of accounts at 93% based on number of fees.

The difference there is that some accounts are very low price accounts for academics, and often these are for graduate students who is working on perhaps the Ph.D. or master's thesis, graduates, leaves and software is no longer needed in that institution when other student comes along to use it.

But on fees, that's our commercial customers that make up the vast majority of that, and so you can see that ready already it's quite nice. We did add the quarter 20 new software clients, and our consulting pipeline has really been inflated lately. I think inflated maybe a wrong word to use, but it's been growing strongly lately.

We see more and more consulting work coming in for all of the divisions. For the entire fiscal year, again September 1, 2016 through August 31, 2017, our revenues were up about $4.2 million just about 21% to a little over $24 million.

Our net income up $837,000 or just about 17% to $5.8 million, diluted earnings per share up almost 15% to $0.33 per share beating the analyst estimate, and 88 new software clients were added during the last fiscal year. So give you an idea of what we do across the three divisions.

These boxes show the various software programs and then the consulting services in collaborations down to bottom that span the entire spectrum of pharmaceutical drug development from discovery through preclinical and clinical and again beyond patent to the generics.

On the left hand side, the ADMET Predictor Software is a program that takes in molecular structure such as a drawing you see in the upper left corner another word discovery can take in one of those or 100s of 1000s and millions of those. And it will predict about 150 properties of those molecules even though they never existed.

With ballpark accuracy, nothing can be predicted perfectly, but the predictions are good enough that we can screen out of a large library of molecules. Typically 80% or 90% of those molecules can be rejected because there are just too many things that the predictions say it would not be favorable for those molecules to become a drug. They might toxic.

They might not be able to be dissolved If you can’t get it dissolved then you can’t get it absorbed. Then maybe unable to penetrate through cells to get into the tissues where the target would be.

So a variety of properties can render a drug like molecule that looks like a drug molecule to be not very suitable for something that you would put into an animal or human. The MedChem Studio and MedChem Designer are software just below that is used on screening data from high throughput screens, also is used in designing new molecules.

So in fact we’ve used the combination of ADMET Predictor and MedChem Studio, and MedChem Designer.

Then the program in the upper right there, GastroPlus, in two projects where we actually designed molecules, had them made and had them tested to see if using our software in public domain data, if we could design molecules that would hit certain biological targets. Every molecule that we designed in both of those projects hit their targets.

And with the second project actually it is required for each molecule to hit two different targets and every molecule hit both targets. So we could show that the approach to in silico drug design works and it’s something that we are very proud of that we’re able to do that.

We announced that before we synthesized the molecules, in fact before we even selected the molecules, we announced we were going to do that, and we certainly would announce whether we were successful in that. Fortunately, we were but we had great faith that we will do.

DDDPlus and MembranePlus in the center are simulations of in vitro or laboratory experiments. So these are experiments involving how drugs dissolve in the case of DDDPlus or MembranePlus, how well the drug molecule is able to go through membranes or get into cells of various types. PKPlus is a new product released about a year ago.

Version 1 and version 2 is nearly complete. Version 1 gave us the opportunity to have very serious evaluations done by a large number of organizations.

We have a smaller number of sales so far, but we got a tremendous amount of feedback from version 1 where people said “Wow! This is really split but can you make it do worse than that?” And so for the last year, we have been making it new replacement with or we nearly from that and nearly complete and hope to release that product very, very shortly.

KIWI is the data integration platform from our Cognigen Division, Buffalo. This is a large data management system and it’s the one that’s being used on the large $5 million foundation grant that we have to integrate research data and communicate between research teams across the world working on malaria.

DILIsym and NAFLDsym below that are two products from our new division in RTP North Carolina, DILIsym Services Incorporated. DILIsym, D-I-L-I stands for drug induced liver injury.

Many drugs can cause injury to the liver when taken over a long period of time and the mechanism by which that happens -- there are a number of mechanisms, theses are simulated. And so these simulations are a little different than our other simulations in that these simulations deal with what’s going on inside of the cells delivered hepatocytes.

So these are very complex models, modeling the biology, the protein-protein interactions and such that happened inside of a cell when drug molecules get in there and interfere with those path ways.

The NAFLDsym is a different idea where DILIsym says these are drugs that are likely to cause drug injury, NAFLDsym says we have the disease non-alcoholic fatty liver disease, can we find a drug to help treat that.

And in the case of DILIsym, you can think of that sort of as software package that you can license to a number of different companies and work for all of them. In the case of NAFLDsym, each version of NAFLDsym is tailored for a specific company and a specific mechanism of action or mechanisms of action that their drug candidates would use.

And so it has to be tailored for each company. The general platform is there, but there is always some customization that is required to make it addressed these specific issues as specific drug molecules for a particular customer.

And then across the board on the bottom now you can see consulting services and collaboration with drug companies with the universities and with regulatory agencies. We have several funded efforts from the FDA over the years two of them still active right now, and we've had great success on each one of those.

Recently, a new commissioner for the FDA was appointed Scott Gottlieb and Scott was quoted recently he said, the FDA will soon unveil a comprehensive innovation initiative that'll be aimed at making sure our regulatory processes are modern efficient, so the safe, effectiveness and technologies can reach patients in the timely manner.

We need to make sure that our regulatory principles are efficient and informed by the most up to date science.

And then he says, I want to highlight one example of these steps which we're investing in and we'll be expanding on as part of our broader innovation initiative is the use of in silico tools and clinical trials for improving drug development and making regulation more efficient.

The FDA's Center for Drug Evaluation and Research, CEDAR, is currently using modeling Simulations to predict clinical outcomes and foreign clinical trial designs, support evidence of effectiveness, optimize dosing, predict product safety and evaluate potential adverse event mechanisms.

And so there is a great emphasis from the new FDA commissioner on simulation and modeling and we think that just bodes well for Simulations Plus and other companies like us who provide the tools to the FDA and to the industry to do that.

As far as our consulting from Simulations Plus that relates to regulatory interactions, there is a nice slide here that I'm developed prepared. That shows the various types of analysis that we have done that resulted in some results to the regulatory agencies.

And you can see formulation optimization 14 different signals, preclinical developments first in human 14 different ways.

Drug-drug interaction predictions, 9 different ways, virtual bioequivalence trials Simulations 8 of those and so on, 8 for pediatric, 7 for food effects, 7 for pulmonary, dermo, ocular or oral cavity product development different from the typical oral pill that you sallow, these are different routes of the administration, 6 for parent metabolite and pro drug modeling and 5 for mechanistic in vitro in vivo correlations.

Our two year stock performance I usually try to show this chart, in the top blue line in Simulations Plus regulatory at the Nasdaq, Jones and the S&P 500. We need to see we'd outperform all of the other three industries there quite handily. I'll now turn the microphone over to John Kneisel.

And then I'll try to anticipate, but I don't say if I don't do it in time, t this time I'll return it to you..

Alright thanks, Walt. We can go to the first slide well then. Alright, we'll go over the fourth quarter results then we'll cover the year-to-date. As Walt indicated, our revenues for the fourth quarter were up 58.3% or 2.31 it is our best fourth quarter ever.

The 6.27 of revenues were from Lancaster which were up $219,000 which was a good fourth quarter for Lancaster. But Buffalo was up 33.6% they were up $851,000 over the prior year. DILIsym for their first quarter have $1.24 million of revenues that was a really nice fourth quarter.

In comparison to our third quarter which isn't shown here, we are down about $0.5 million off our third quarter. And for those of you who follow us and will look at the quarterly information later on. This is normally our fourth quarter is one of our lower quarters and this is one of our second best quarters ever, with the advent of DILIsym coming in.

So we're happy with that. For the quarter, our software revenue was up 12.2% or $300,000 and our consulting, was up almost $2 million. So consulting really helped us in this quarter. Gross profits were up 48.2%, $1.4 million.

Lancaster was up about 7%, $155,000 and Cognigen was up $560,900 or 81.7% and DILIsym ended up with $683,000 for the period and ended up with 55.2% margin in the period. SG&A expenses for this period, we're up one of the big issues that created the increase was a large piece for M&A for the acquisition of DILIsym.

We had $323,000 worth of one-time charges in this quarter for that acquisition. So it sort of skewed some of the numbers in the period. Overall, we were up $818,000 to $2.43 million that totaled $1.64 million over the prior period. Actually, selling expenses were down a little bit in the period.

Asian reps accounted for $40,000 drop and our advertising was down $27,000 with a lot of that was website, redevelopment that we incurred last year. Our professional fees were up $85,000, a majority of that first time are audit fees and such for stocks and stocks and accounting work that was performed in the last quarter.

And the salaries for the year were up about $156,000 a good portion of that some of the stock compensation cost for their non-cash cost and some bonuses and such that we accrued in the period that we normally would do in December. We have accelerated some of that this year.

Also DILIsym accounted for about $274,000 of expenses and part of the increase. So we will talk a little bit more about that later on. Moving down to net income for the quarter. As Walt said, we are up 45.9% or $362,000 to $1.15 million in the quarter over $790,000 last quarter last year.

Cognigen contributed $329,000 of that and DILIsym contributed about $206,000 of that. Lancaster actually was down a little bit from prior year but that includes the one-time charge of the $323,000 other than that they would have been up slightly over the prior year.

Earnings per share, we are up $0.019 or really $0.02 the way the rounding works on this it looks like its $0.01, but it was really 6.24 -- $0.064 a share, so I rounded down and we are 4.6 last year so I rounded up. And EBITDA was up 32% $480,000 to just under $2 million for the quarter. Moving on to the year-to-date numbers.

Total revenues for the year are $24.1 million or up 20.9% or $4 million. $1.75 million of that increase was revenues generated by Buffalo, our Cognigen New York a great increase of 31.4% over the prior year. Lancaster increased $1.18 million or about 8.2% to $15.6 million from 2016.

And again DILIsym recorded $1.24 million in revenues in the fourth quarter. Our software licenses for the year were rounded to about a little over a $1 million while consulting increase was about $3.1 million of the increase for overall year.

Cost of revenues which are shown here, they were up $1.7 million to $6.31 million and labor was about a $1 million of that and then other costs that went into that were pretty -- were the amortization which was up some for the year and excuse me -- the salaries accounted for the majority of the increase.

Going down to the margins, consolidated gross margins increased $2.46 million or about 16% for the year. $805,000 of that increase came from California which showed about 83% margins for the year the holding we normally expect. Buffalo division increased $972,000 up 30.2% with margins up 58% and DILIsym showed $683,000 of the 55.2% margin.

Overall, our gross margin decreased to 73.9% from 77 last year and that increase is basically just a higher salary cost associated with the mix of business moving a little bit more to consulting with the acquisition and the work in Buffalo just a little bit of higher cost work that we've added there. Our selling and G&A.

Again overall the Company incurred about $620,000 worth of cost associated with the acquisition of DILIsym those are expense within the period in which we incur them.

So they go right to the bottom line to expense where commissions for the year were up about $62,000 total overall we were up what $1.5 million for the year, which helped the increase but that's again $620,000 is one time charges and the as you can see here, I think we've got $270,000 of SG&A at DILIsym, so two of those make up a good portion of the increase in the cost for the year.

Overall SG&A costs salaries and wages increased by about $400,000. Again a portion that's increase in stock compensation cost and a regular salary increases and some salary accruals from dividend and our salary and bonus accruals that we did in August this year.

Insurance expense also increased about $95,000 and $86,000 of which was health-related medical cost and $33,000 of that came from DILIsysm. Payroll taxes were up and legal expenses were also up, another $61,000 due to some document review and other strategic initiatives where we're going during the year.

Amortization increases came from the acquisition of DILI and those were about $53,000 making up the overall $1.5 million or 22% of increase in SG&A for the year. And we had one major decrease in expenses and that came in advertising.

And again most of that related to a little bit of reduced web services but mostly in the cost of the website that we developed in the prior year fiscal year.

Research and development, during the year we incurred about $2.8 million of research and development cost, that amount we capitalized about 1.38 and we expensed about $1.36 million of or $1.37 million and in the prior year, we'd incurred about 2.6 and we'd expensed about $1.45 million. And $71,000 of that was incurred by DILIsym.

Our provision for income taxes for the year was $2.45 million and important thing here is our effective tax rate actually decreased this year to 29.8% from 31.6% that decrease came as a result of some stock-based compensation issues some people actually sold some stock and we got some tax benefits from people selling their options little bit early and so we actually got a little bit of benefit for that during this fiscal year.

And that is never guarantee that we're always going to get that so our margins, I can’t expect to have that at that level over the year, but that’s what created that reduction.

Net income for the year increased $837,000 or 16.9% to 5.79 million from 4.95 million and again it was of note that with about the stock compensation increasing, which was non-cash and increased by about $238,000 over last year and along $620,000 at the pre-tax cost incurred for the acquisition of DILIsym. Moving on.

Here are some slides where you can see the growth here in the fourth quarter of our quarterly revenue slide. Again, things are going up. Hopefully we can repeat that next year in the quarter. Next slide, same thing just filled the fourth quarter again with revenue and profit and it’s been a fairly steady growth curve across the period.

EPS again looks good for the fourth quarter. It’s been a solid year and each quarter has been moving up as we have gone; EBITDA, again solid performance throughout each one of the periods. We will change the slide around a little bit. Throughout the last three to four years we have done some major changes.

We renegotiated our royalty agreement with GastroPlus for TSRL and we spent about $5 million on that project. We paid out about $10 million in dividends, a little over $10 million in dividends. We have acquired DILIsym and we have acquired Cognigen and spent about $2.8 million in cash on that.

But I think as you can see our cash balances has remained really solid with an excellent cash position continue to pay out dividends and actually the Board increased the dividend payment for November to $0.06 a share. And so it’s just real solid performance. The ratios continue to be solid.

We took on some liabilities in this fourth quarter with the acquisition of DILIsym for some of the liabilities for the acquisition and so some of the ratios will change a little bit this next quarter as some of those things move up in the current liabilities. But cash per share current assets ratios are still solid and our equity is strong.

I am happy to be where we are at with cash position still. With that, I’ll turn it over to John..

Okay. Thank you, John. And hello everyone from sunny San Diego where Brett and I are attending the AAPS Annual Meeting and seeing a lot of really nice work presented on the use of our solutions to support internal R&D and regulatory interactions.

Diving a little bit deeper into the products that Walt described earlier, the software development team at Lancaster is working very hard on new releases of our programs.

The next version of GastroPlus, the flagship product is set to release in early 2018 and this version really has something for everyone, including new population models for clinical pharmacology departments and enhancements to our mechanistic absorption models for pharmaceutical science.

So these and hopefully other enhancements should really expand the types of consulting support we can provide and also help us further penetrate into the clinical space with GastroPlus. ADMET Predictor 8.5 will be released this month. In fact we hosted a webinar last week on some of the new features that drew over 330 registrants.

We have integrated some of the GastroPlus PBPK models into ADMET Predictor to really push Discovery PBPK approaches into early discovery. Getting PBPK modeling into the hands of chemist to more efficiently select lead molecules and also help with lead optimizations.

We've also incorporated the full MedChem Studio capabilities now into ADMET Predictor so we've got a complete platform to support additional chemistry activities. We've released MembranePlus Version 2 in September and expect to release DDDPlus Version 6 in early spring 2018.

These in vitro simulation tools as Walt mentioned earlier help inform inputs for GastroPlus PBPK models and we really expect the new features to lead to continued growth in their sales. And then finally PKPlus Version 2 is expected within the next few weeks.

The new items been implemented come directly from user feedback and we're really excited to get this new release into the hands of scientists or looking to bring in PKPlus and just needed a few extra items, additional functionality added. Next slide please. John has already discussed the Company's strong performance overall in Q4.

Here I'd like to describe a few highlights for the Lancaster division. We saw growth for the quarter over 8% which was driven by very strong demand for our PBPK consulting services. The pipeline remains full and we've also successfully scaled up our staff to meet these increased demands.

Software revenue growth was deemed a little bit by a couple of company's not renewing the software due to budgetary issues not due to switching platforms or not news. But we still had really solid growth in terms of new license customers.

As you can see on the bar chart in the upper right, we've realized an 8% increase in the number of software license units that were sold for the quarter. We added 25 new software clients including 14 commercial companies with several outside our core pharmaceutical space so we continue to penetrate chemicals consumers good and so forth.

As a reminder for us a new client is defined a brand new company or organization which is never licensed before, or an existing group that added licenses in new departments or research sites.

For the quarter we can see in the lower right, software renewal, license revenue was about 67% of the total with new software license revenue coming in over 20% and consulting training services making up the remaining 11%. Next slide please.

For the year, the Lancaster division revenue growth was over 8% very strong gain seen in both consulting and training services. We added 88 new software clients for the year including new licenses at all of the major regulatory agencies in the U.S. and China.

Software renewal license revenue was about 75% of the total as we see in the lower right with new software license revenue coming in at 16% and consulting and training services making up the remaining 9%. Next slide.

We continue to see a really nice distribution of software license revenue globally 47% coming from North America, 26% in Europe 27% in Asia.

We see nice growth in Japan and China, the distributors that we've had there in place now for years are doing a really nice job pushing sales to more and more domestic companies as they continue to add licenses in those territories.

And the newest distributors in Korea and India that we signed up about six months ago have done a really nice job organizing workshops over the past couple of months and we expect them to be able to drive more sales in those growing markets for us as head into 2018.

And then finally in terms of marketing activities, the marketing group spent a lot of time creating a new video content for the website which is seen double digit growth in traffic versus the preceding quarter.

And the team is also working really hard on migrating content from the Cognigen and DILIsym services website to have one location where visitors can appreciate and understand all of the solutions that we provide. Additionally, our scientists were busy hosting workshops and onsite training seminars around the globe for the year.

we had very successful workshop weeks in all major territories training on PBPK and POPPK modeling solutions, and this will continue to be a strategic focus for us heading into 2018 as educating more people on the technology should help with the expansion of our user base.

And finally to help with promotional activities, we hosted eight webinars for the year on various modeling applications with several hundred registered for each one and we maintained a very robust social media presence that has seen a significant increase in engagement over the past year.

And so with that, I am happy to invite Ted to give an update on the Cognigen operations.

Ted?.

Thank you, John. I would like to take this time to explain a little bit about what’s going in Cognigen and some of the initiatives that are behind the growth in revenue that we have seen over this past year.

So an awful lot of effort in the past year was gone into successfully recruiting and on boarding both software engineers that are going to be necessary to build out the KIWI modeling and communication platform as well as hiring new scientists.

And we have been successful in bringing on board younger scientists but also some senior scientists who are going to be able to work with and grow the younger scientists. We have a number of new marketing initiatives and working out different business and sales models and I will explain about that in a moment.

And an important part of all of this continues to be the increasing in synergies and cross-selling between the divisions, in particular between Lancaster and Cognigen. And we are really looking forward to being able to do the same thing with our colleagues at DILIsym. And as I mentioned we’re working to accelerate KIWI development and on deployment.

In fiscal year 2017 we’ve had relationships 27 companies working on 41 drugs a total 74 projects. There were nine new companies in '17 that we had not worked with previously, 36 new projects that were not carryover from fiscal year '16.

And as frequently happens, a number of projects that we work on as clients become aware of the value of the work that we do they expand its scope to cover additional questions and issues and that happened in 40 different projects.

There were a small number of projects, three of them got into that being reduced in scope because the efficacy and safety profile for the drugs involved didn’t pan out as the sponsor had anticipated. And at the present time we have 32 outstanding proposals with 20 different companies. So we have a very healthy pipeline of consulting projects.

There has been marked expansion in the global health initiatives that we have been working on and a number of new consulting projects that came to bear in 2017 or different aspects of drug development as well as other types of applications using modeling and simulation to get out complicated problems.

A number of the projects that we have done were performed with an idea of bridging data between different countries and helping to support regulatory submissions across regulatory agencies in different regions of the world. And we have been working to embed pharmacometric services from first in human studies to commercialization of new medicines.

And this is an expansion of things that we have been doing in the past but now with the additional software that’s available to us like physiologically based PK modeling as well as ADMET Predictor, we are hoping to be able to extend our reach to even earlier in research and development so that we can walk in projects at the early stages of R&D.

From a marketing perspective, a big part of that is the work that we present at scientific meetings as well as publications. And in fiscal year 2017, we presented nine posters at different scientific meetings. We had three peer reviewed publications, four invited presentation and one book chapter that was published.

And we are currently working on 20 publications and five conference abstracts, all illustrating the value of our work to our clients. The most common therapeutic area that we're working on is oncology followed by neurology, endocrinology and infectious disease. And a little under half of all of our projects directly resulted regulatory interactions.

And some of that is due to the fact that we get started working on the project early. And so regulatory submissions may not happen until later in the lifecycle and we'll keep those as we go along.

A lot of work is going into the KIWI platform we continue to work on the contract to design develop and implement a modeling and simulation and communication platform for scientists working in model informed drug development. We are deploying KIWI Version 2 in November of 2017.

And this includes a pharmecometric centric data repository to bridge interorganizational and interdisciplinary knowledge sharing.

We're finding that in a number of projects there is an important need to be able to bring all the existing data together and organize it in a way so that it's readily accessible to the scientists performing modeling and simulation and the repository that we're building this design to do exactly that.

We've been working on additional model diagnostic visualization tools and working on data visualization improvements within the KIWI platform so that it becomes a one stop place to do all of the activities that are associated with modeling and simulation and communication.

We're also working on establishing an International Health Initiative collaboration that's going to be centralized around the use of the KIWI Platform to perform modeling simulation and a number of different tropical diseases including malaria.

And as part of that we're actively establishing academic partnerships so that we can introduce students very early to the strategy of working in the KIWI platform to accelerate their work. And hopefully as they get used to working with the program they'll bring that interest in working with that as they take their jobs.

And of course we've been continuing to do ongoing KIWI demonstrations at all of the scientific meetings that we've attended. So we're seeing an increase in marketing and sales activities. Our services continue to expand and we have a healthy pipeline of new projects including the Global Health Initiative projects that I've talked about before.

And working to and get ourselves even further into client organizations as we pick up projects that's been the lifecycle of research and development.

We've had good cross selling opportunity with Simulations Plus and I look forward to working with our colleagues at DILIsym to create an even broader spectrum of business relationships with our clients and expanding scientific synergies across the companies.

And we're continuing to work on the KIWI platform and working to accelerate the deployment and we now have a complement of our team hired and trained and so we expect to be able to produce work on KIWI even faster than we have in the past. Thank you. And with that, I'll turn it over to Brett..

Okay, thank you Ted. Well, obviously, the DILIsym Services are new to the Simulations Plus family.

So what if I can do today is just present the couple of slides that give a general introduction of who we are and some of the things that we do at what worth mention at the beginning of the call today and then I have one slide on where we're headed with some of our current ongoing initiatives. So DILIsym is that really our flagship product.

It is focused on as well said assessing the safety of drugs with respect to deliver. It's been applied a number of different important clinical decisions the companies have made or development decisions. It can be applied at various places throughout the drug development pipeline.

And companies use the software to make the decisions like should they advance their drug to the next stage, should they invest a molecule versus other molecule how does their particular molecule compared to a competitors' molecule or which molecule should they pick from a handful of molecules that they're considering taking forward and investing a large amount of money in.

All of these with respect to the potential liver safety of the drug. And we've been developing this software over the last seven or eight years. It's now been used in 13 different -- it has been used or is planned to being used 13 different regulatory submissions with regulatory agencies around the globe.

One of one the ones I just wanted to highlight here on bullet 3 is Food And Drug Administration Advisory Committee meeting in 2016 focused on antimicrobials for the drugs solithromycin and DILIsym with the feature part of that advisory committee meeting, company works to try and get the drug approved.

It’s currently used DILIsym by large, mid and small pharma to address various liver safety issues.

And one of the things that was really nice about joining Simulations Plus is the complementarity on the software side with many of the tools that Simulations Plus offers, including GastroPlus and ADMET Predictor and how those software products really advance and relate to DILIsym and allow it to work more efficiently, more quickly.

So there really is some nice synergy on the product side between the different groups. So next slide please. So DILIsym has been developed in the context of what’s called the DILIsym Initiative and for help of clarification that’s DILIsym with an “I” as you can see at the top of the slide here.

And this is a consortium of pharmaceutical companies mostly large pharmaceutical companies that have contributed to the development of the software both monetarily but also scientifically with ideas and their priorities, the things that they would like to see in the software, voice to us over the last seven, eight years.

And currently we have the 12 companies that you see on the slide in the consortium. The year of 2017 we’ve had 17 and soon to be 18 of the major pharmaceutical companies in the world have just taken this.

And so this has been going on for a while and what’s allowed us to do is to really understand what’s going to be the most important questions that DILIsym needs to address.

So each of these companies has received the licensing software during a membership term and one of the things that we have done with the software is also use it for consulting, which is currently a fairly large portion of our revenue at DILIsym services, is the DILIsym consulting projects that we do partly for our pharma partners and partly for our non-consortium members.

You see the FDA, I am highlighting at the bottom of the screen here. They have been a contributor to this both by supporting monetarily researchers in our Group developing software but also through scientific insight and evaluation that they’ve provided over the last several years. Next slide.

So just to comment on several things that are happening within DILIsym, the DILIsym Initiative is moving into a stage 3 now which covers the down period of 2018 through 2020.

We are focused on adding new science to the software which includes adaptive immunology, new simulated populations that focus on additional diseases and disease states and then also advancing our integration with GastroPlus. So those software products can be even more complementary and make use even more efficient for the users.

So we are currently renewing our contracts for those next three years. Some of the consortium members have annual contracts. Some of them have multi-year contracts.

In addition as we said we continue to consult with DILIsym we have been for a long time now using DILIsym to address clinically related questions but we are increasingly seeing preclinical stage projects where companies want to understand what may happen in the future as they move to the clinic and take drugs forward to develop them and also we have seen a number of companies focused on differentiation from competitors.

So they use the software to help them determine where they sit with respect to a competitor’s drug on this issue of safety. NAFLDsym, I haven’t spoken much about that yet but this is software that we are greatly enhancing right now to account a large pharma company contract.

And it currently includes certain aspects of fatty liver disease or non-alcoholic steatohepatitis, NASH, and we are adding two of the additional components that are necessary, fibrosis and information to software to cover all aspects of that disease.

So we have already used it for three consulting contracts and we have a very nice pipeline of additional companies who would like us to use the software to address questions of the efficacy of their molecules.

And finally, we do have a number of other products that we are thinking developing, one in particular focused on drug-induced kidney injury that we will be moving forward with soon.

So in the future we anticipate additional products coming out that will complement the others that we have and also be complementary to the software that we offer as a whole at Simulations Plus..

Okay. Thank you Brett and Ted and John and John. Just to wrap it up now summarize, so fourth quarter revenues up by 58%, net income up about 46%. For the whole fiscal year, revenues up about 21% and net income up about 17% and diluted earnings per share up about 15%, so very nice year for us.

All divisions all three divisions California, Buffalo, and North Carolina are performing very well. They're realizing the synergies between California and Buffalo now for three years that we've been working together.

That's work at extremely well, and now just in the last few months where we'll be beginning to see the synergies between California and North Carolina and we expect Buffalo and North Carolina will also be able to realize synergies of operations there.

We are addressing the regulatory agency focus of the planned PBPK model in the clinical pharmacology and in safety research. So our PBPK capability and GastroPlus relates to both have work done in Buffalo for clinical pharmacology and for the safety research done in the research clinical part.

New guidance documents coming up by the FDA and the European Medical Agency are helping to drive this interest, and we're also executing well on our five year $4.7 million contract at Cognigen with a major research renovation. And this contract offers a potential for additional similar contracts with other organizations.

We'd expanded our offerings now with the DILIsym Services acquisition in systems toxicology it's an exciting new area. That becoming an area to deal and it will be very detailed interactions that happened inside of cells.

We believe again the Simulation Plus continues to lead the trend towards the greater use of modeling in simulation and research and development and that something that the FDA and new FDA commissioner is very fond of and is encouraging. And so we believe that smooth sale is ahead.

We'd have some links here but I want to stay on the summary slide because I find that that works better for folks that may want to ask questions. Now, I'll turn it back to Renee to moderate any questions..

Thank you, Walt. Our first question concerns the revenue growth at Cognigen, the question is.

What is driving the revenue growth at Cognigen? And can it be sustained going forward?.

I'll take that, so thank you. Sorry, yes I guess several things are driving revenue growth one is we've been able to bring on additional scientists to take on additional consulting contracts which is always been the major source of revenue for Cognigen so that's one thing.

Second we've picked up some consulting projects in the global health space which represents a new area for us and that's kept the number of us very busy.

And the third part of this has to do with trying to figure out how to make sure that sorry there is an echo, that we can illustrate the value of KIWI as a modeling simulation and communication platform.

So while we don't make predictions about the future we're continuing to put effort into securing new consulting projects and then also continuing to push KIWI as an additional source of revenue. .

Thank you, Ted. Our next question I think will be for John DiBella.

What does the feedback tell you about the potential for new customers purchasing the PKPlus offering once Version 2 released?.

Okay, that's a good question. The feedback told us first from a positive perspective that people really like the streamlined point and click workflow, that's really easy to use. But that Version 1 it's the functionality was a bit limited. And so I think we've been able to address this by adding features that make the program stickier so to speak.

Scientists using the program to do more prediction activities now to complement some of the data analysis that they were already doing with PKPlus Version 1, so I think we're going to make it also easier for users to be able to reuse some of their preferred templates that they've established for mapping certain datasets and generating certain reports which would also save time running datasets through the programs.

So overall I think scientists in the preclinical development stages can now do more both from model fitting and also prediction, both in a validated and non-validated environment.

So ease of use coupled with the additional functionality now that we have bought into version 2 I think can really help us push sales to the PK and toxicology study managers into preclinical stages that need to generate reports more quickly..

Thank you, John. The next question I think will be for John Kneisel.

Is the SG&A expense of approximately $275,000 for DILIsym and of 2017 representative of what we can anticipate going forward?.

I think it’s a fair representation there. Obviously there is some labor cost that will change as there is growth. But the unit is fairly fixed cost unit. So I think it’s a fair representation..

Okay. Don’t go away, this next one I think is for you as well. I have not seen the 10-K yet.

But will your segment information section have DILIsym’s broken out separately in the K and future 10-Qs?.

Yes, there is segment reporting for DILIsym in the K -- in the Q..

Okay. And the next question is.

What are some of the additional synergies you see to facilitate growth at DILIsym?.

So I think there are several synergies that we could point to that will help us grow and lead the growth overall. One of them is this more tight integration that I referenced between some of the existing products such as ADMET Predictor and GastroPlus with DILIsym.

So part of what you have to do in DILIsym to run a simulation and to do the technical work is build models for the exposure of drugs, to predict exposure of drugs and GastroPlus and ADMET Predictor do that very well with rudimentary basic information.

And so I think that will really enhance the ability to move DILIsym into the discovery space earlier in development. So that’s one of the things that we are actively working on that will help drive growth.

There’s obviously some nice marketing synergies as DILIsym is a smaller company and can benefit from some other marketing initiatives as you know as well as with Cognigen doing in terms of number of odds seeing being involved in the process of knowing the products and what they can do.

The other within DILIsym, I think NAFLDsym can also benefit from some of the products that are part of the Simulations Plus overall umbrella. And also as I mentioned is being enhanced with a lot of new features right now that are important to allow NAFLDsym to really expand its consulting to a lot of additional companies.

NAFLD NASH is probably the number one disease target for new development in drugs right now with many, many, many billions in terms of the market size for drugs in that area.

So we believe there is really big market for what we can do with steatosis fibrosis and information using NAFLDsym once we have it complete and we do have the dollars already coming in to support that project over the next 12 to 18 months.

So there is some areas for growth as well as producing new products as well as some other organs, I mentioned that too.

Is there other, Walt, or others have anything add to that?.

Yes, I would just -- it was implied in what Brett said but just to make it more exclusive. The outputs of GastroPlus are inputs for -- part of the inputs for DILIsym and for NAFLDsym. So we already have GastroPlus to cleanly export a file that can be loaded right into DILIsym without a lot of extra work that used to be required.

That’s something we’ve already got very, very far along on and then we will be in the next release of GastroPlus here in the next month or two. So that synergy is a very important one.

It really streamlines the process going from the PBPK simulation which generates the concentrations in the liver for different populations over long periods of time and then goes directly into dose and to work with the other inputs that come from the lab and other places to do the drug and discovery injury NAFLDsym types simulations..

Thank you, Walt. The next question.

Can you provide some additional color as to the steady growth your consulting services is having in Lancaster, John?.

I'd say green..

Okay. So I'll add a little bit more color beyond that. Walt mentioned it I think and it's listed there on the summary slide that the U.S. and European regulatory agencies released the very first guidance documents that we're focused on PBPK modeling in 2016.

In total now there are over 15 guidance documents that reference the use of modeling and simulation to support some form of drug development for different activities.

And so on a counter of all of this, there is a big push from the regulatory side, management at company have now certainly realized the importance of modeling and simulation the real value that it provides and see real opportunities being able to engage with regulatory groups to identify ways in which modeling in simulation could potentially be utilized in lieu of certain clinical studies or at least to strengthen the case that has been made in some of the sponsor company application.

The issue is that there is still a lack of trained scientists that are available to properly utilize mechanistic modeling and simulation in-house so more of this is being outsourced to our consulting teams and experts. And this includes companies both large and small.

And as Walt showed at the beginning of the presentation it does cover a wide variety of application at different stages of research to really again support these regulatory interactions. .

Okay. Our next question is with your stock now trading at more than 12 times trailing revenues.

Has the Board considered raising cash through an opportunistic equity raise to get the Company M&A flexibility?.

I guess I should that one, the number is no. We have been told that if we needed to raise cash that getting a loan for up to $20 million or $30 million are not be an issue. And that was actually several years ago before we've had the additional success with what we've had since then. So we don't really take the approach of raising cash.

There is some we needed and we want to diluting our current shareholders or paying interest on loans. When we acquired DILIsym it was all cash no stock. We paid it out of the treasury and you can see from the cash chart that there get back where we were the quarter before we did the acquisition even with the $4 million to $5 million going out.

So the answer is no. .

Okay, Walt. Thank you.

The next question what is an annual license cost for PKPlus? And what are your expectations for number of unit sales within the next year, John?.

License fees are in the single digit thousands. It's always been a low cost potentially high volume product offering for us. And we hope to see a solid growth rate for the program in fiscal year 2018 I think similar to what we have seen with some of our other programs like DDDPlus over the years as new versions are release.

That's the extent of what I would project today. .

Thank you, John. The next question concerns the malaria and anti-inflammatory projects.

Asking what is the status and are there any plans to monetize?.

Okay, so those were our two new chemical entity projects. We don't plan to take those any further. The molecules that we have were able to hit all their targets.

They had many good properties that to take a lead molecule like that and go all the way through all of the preclinical development clinical development would be a major investment that is way beyond what a company of our size is got to afford to do. And again those are lead molecules. Those would not be the final drug molecule.

So there would be a lot of iteration that would need to be done a lot of additional testing, synthesis of new molecules. We spent a total of under $200,000 across both of those products combined. We're talking many, many millions of dollars to take it onto the next stage.

And as we've I don't think that anyone would jump on and try to license those leads.

We are publishing results at the work including the molecular structure so that people can see if they were to license our tools and use the internal data that they have that we did not have access to, we only have access to public domain and data which is pretty lengthy. And yet we are very successful in both projects.

But the drug companies are not going to put their best step out there in the public domain. They have got significant data basis in their internal servers that they could use right off the bed and take sooner approach that we did to design the molecules. That’s really our -- it's what we do.

We are providing the tools and not really trying to be a drug company. .

Okay, well. Thank you. We have one last question and just in general, I am not going to make this question specific. But if members of management to sell, their large portion for shares is below what the stock is trading at.

Should shareholders interpret anything from this, I don’t know if you can address that well?.

Well, I have a 10b5-1 program which sells a certain number of shares every month. 10b5-1 program gives me no control whatsoever over those sales whatever the price is, neither the broker decides to sell on certain days or certain times of day, I have no influence over that.

So we have 10b5-1 program work so that anything I know has no effect on those sales. They are going to happen good times and bad times, if there are bad times, luckily so far we haven’t had any. And I don’t see any one selling shares below the market. I would really -- that would surprise me.

I have never seen it happen and we’d not expect that that happen..

Okay. I think that’s the last of our written question. Let me see if anybody is raising a hand. I don’t see any further questions. I think that addresses all the questions today..

Okay. Why don’t you wrap it up Renee? Thanks everybody..

Alright. Well thank you Walt. Thank you John, John, Ted and Brett at this point for a great presentations. Before we would like to go today, we have two investor conferences coming up in December that we want to tell you about.

We will presenting at LD Micro’s 10th Annual Main Event at the Luxe Sunset Boulevard Hotel and our presentation is on Wednesday December 6th and we will also be at Benchmark Microcap Discovery one-on-one conference in Chicago on Thursday December 14th and we hope that some of you might be able to meet us there.

So this concludes today’s conference and webinar. If you’ve missed any part of today’s presentation, a replay will be available at our website www.simulations-plus.com. Thank you all for joining us today and we wish all of you the very best in the coming holiday season..