A maker of computer software that lets pharmaceutical companies test drugs "on screen" before they ever reach a lab or a patient. Its tools—like GastroPlus, ADMET Predictor, and DILIsym—predict how a compound moves through the body and whether it might harm the liver, and its services help with modeling and clinical trial training. Founder Walt Woltosz started the company in 1996 after bringing aerospace-style simulation ideas into drug development. Its name simply joins "simulations" with a "plus," a nod to the extra technology baked in.
Gross margin rose to 69.1% as lower amortization from a prior-year impairment and services efficiency lifted operating income to $4.5M.
The Pro-ficiency is now reshaping the cost structure. rose 7.5% to $21.9 million and expanded 5.1 points to 69.1%, as software costs fell sharply after last year's $77.2 million , while R&D spending nearly tripled to build an AI-enabled platform. A pending acquisition by Altaris now freezes capital allocation and makes the deal's close the only near-term catalyst that matters.
Key takeaways
expanded 5.1 points to 69.1%, driven by lower software costs following the $77.2 million of Pro-ficiency recorded in Q3 FY2025, and by improved services efficiency.
rose 7.5% to $21.9 million, with services revenue up 20% to $9.3 million while software revenue was flat at $12.6 million.
R&D expense rose 180% to $3.4 million, reaching 15.5% of , as the company shifted internal resources toward an AI-enabled, cloud-based modeling ecosystem.
Section summaries
Management's Discussion and Analysis
Q3 FY2026 revenue rose 7% to $21.9M on services growth; net income swung to $3.6M from a $67.3M loss a year ago.
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Total increased 7% to $21.9M, driven by a 20% jump in services revenue to $9.3M, while software revenue was flat at $12.6M.
expanded to 69% from 64%, helped by lower software after a prior-year and improved services efficiency.
swung to a $4.5 million profit from a $74.2 million loss a year ago, when the $77.2 million non-cash charge was recorded.
was $3.6 million, compared to a $67.3 million loss a year ago, and was $0.18 versus -$3.35.
A pending merger agreement with Altaris imposes interim operating covenants that restrict share repurchases, dividends, and other capital actions, and introduces deal-failure risk if shareholder or regulatory approvals are not obtained.
What changed
The 69.1% answers the question flagged after Q3 FY2025 of whether the 64% level was sustainable or could improve further: it rose another 5.1 points sequentially as the benefit of lower Pro-ficiency continued to flow through.
The R&D spending flagged after Q2 FY2026 accelerated further, rising 180% to $3.4 million, confirming the shift of resources toward the AI-enabled platform; the question of whether this translates into renewed software growth remains open, as software revenue was flat this quarter.
The $30 million authorization flagged repeatedly in prior filings is now effectively frozen by the Altaris merger agreement's interim operating covenants, which restrict share repurchases and dividends.
The risk of further at the Pro-ficiency units, flagged after the FY2025 , did not materialize this quarter; software was flat rather than declining further, and the lower costs from the prior impairment are now a to .
What to watch
Whether the Altaris merger closes as expected or faces delays from shareholder or regulatory hurdles, and whether employee retention or customer relationships weaken during the pendency period as flagged in the updated risk factors.
Whether the 180% increase in R&D spending begins to produce measurable software growth in subsequent quarters, or whether flat software revenue this quarter signals that the payoff is further out.
Whether the 69.1% is sustainable once the benefit of lower Pro-ficiency is fully annualized, or whether it normalizes at a lower level as the cost base rebuilds.
Whether services growth of 20% this quarter can continue to offset flat software revenue, or whether the mix shift toward lower-margin services pressures over time.
R&D expense surged 180% to $3.4M as the company shifted internal resources toward an AI-enabled, cloud-based modeling ecosystem.
swung to a $4.5M profit from a $74.2M loss, largely because the prior-year period included $77.2M in non-cash charges.
rose to $19.4M for the nine-month period, and the company held $35.3M in cash plus $14.7M in short-term investments.
A pending merger agreement imposes interim operating covenants that restrict share repurchases, dividends, and other capital actions.
For a description of our material pending legal proceedings, please see Note 4, Commitments and Contingencies, to our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report. Table of Contents
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For a description of our material pending legal proceedings, please see Note 4, Commitments and Contingencies, to our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report.
Table of Contents