Sequential improvement is likely in upcoming quarters. The renewal rate remains close to 100%. Most cancellations occur due to mergers or when scientists change jobs. Those scientists tend to place new orders once they resurface. Recent product upgrades have led some corporate buyers to purchase more copies of the software, moreover. Additional features also have created new sales opportunities. Simulations Plus encounters direct competition on a niche by niche basis across its entire product line, but the company generally leads in all segments and remains the only broad based supplier. The Words Plus text to speech line has benefited from product upgrades, as well. Our estimates assume a neutral contribution from that segment although a modest degree of profitability recently was achieved.
We continue to estimate fiscal 2011 (August) non-GAAP income will rise 29% to $.18 a share. Share repurchases have enhanced comparisons over the past several quarters, and that program may be continued. Sales could rise 21% to $13.0 million. Faster growth could be realized if Simulations Plus leveraged its established distribution system with additional software products and services. The company has eyed a number of prospective acquisitions in the past but hasn't pulled the trigger due to pricing and other concerns. The decision to retain the Words Plus operation (which earns little or nothing), and the buyback program (which yields a 5%-7% return on investment,depending on whether trailing or estimated EPS is used in the calculation), suggests that caution will remain the order of the day. Still, worthwhile appreciation is possible even in the absence of a more dynamic corporate development strategy.
( Click on Table to Enlarge. )