Simulations Plus Stock Slides on Revenue Miss and Flat Growth Forecast
Company's weak fiscal 2026 guidance and a $77 million impairment charge overshadow its adjusted quarterly earnings.
Shares of Simulations Plus (NASDAQ: SLP) faced significant selling pressure after the company reported a miss on fourth-quarter revenue and issued a tepid forecast for fiscal 2026, signaling near-zero growth. The software provider for the pharmaceutical industry also disclosed a massive non-cash impairment charge, deepening investor concerns about its growth trajectory.
For the fourth quarter ending August 31, the company reported revenue of $17.5 million, a decline of 6% year-over-year and short of Wall Street's consensus estimate of approximately $17.9 million. On an adjusted basis, Simulations Plus posted earnings per share of $0.10, which was in line with analyst expectations. However, this figure was overshadowed by a significant $77.2 million non-cash goodwill impairment charge recorded during the year.
Goodwill impairment charges are typically recorded when the value of a previously acquired company declines, and the substantial write-down at Simulations Plus has raised questions about the performance of its past acquisitions and overall asset value.
The market's primary concern, however, stemmed from the company's forward-looking guidance. Simulations Plus management reaffirmed its forecast for fiscal 2026 revenue to be in the range of $79 million to $82 million. Based on the company's trailing twelve-month revenue of approximately $80.4 million, the midpoint of this guidance suggests growth of less than 1%, confirming fears of a significant business slowdown.
This forecast reflects what the company described as a 'cautious' demand environment from its clients in the pharmaceutical and biotechnology sectors, which are facing their own set of economic pressures. Simulations Plus provides modeling and simulation software used to accelerate drug discovery and development, a field that is sensitive to shifts in research and development spending.
In response to the report, the company’s stock, which has already seen a difficult year, continued to trade significantly below its 52-week high of $37.67. The weak outlook has compounded investor anxiety, even as the current Wall Street consensus remains a "Hold" with an average price target of around $24.40, according to data from MarketBeat.
While the company managed to meet adjusted profit expectations, the combination of declining quarterly revenue, a substantial asset write-down, and a forecast for stagnant growth has provided a bearish outlook for investors. The coming quarters will be critical for Simulations Plus to demonstrate it can navigate the challenging demand landscape and find new avenues for growth to restore confidence in its long-term strategy.