Schrodinger, Inc. Q4 FY2024 earnings call

• 2024 was an exciting year with software revenue exceeding expectations, new drug discovery collaborations, and advancements in platform science like predictive toxicity and biologics informatics. Co-founded companies made progress, and Morphic was acquired by Lilly.
• 2025 priorities include driving adoption of computational technology, releasing new products/solutions, and advancing collaborative and proprietary pipelines with initial Phase I clinical data from three lead programs.
• Financials: Q4 2024 total revenue $88.3 million (up 19% YoY). Software gross margin in Q4 2024 was 83% (down from 87.4% in Q4 2023). Full year 2024 revenue $208 million (down from $217 million in 2023). Operating loss in Q4 2024 was $21 million (better than $29.6 million in Q4 2023), net loss after taxes Q4 2024 was $40.2 million ($0.55 per diluted share).

Software Revenue: In Q4 2024, software revenue was $79.7 million, a 16% increase compared to Q4 2023. Full year 2024 software revenue was $180 million, a 13.3% growth from $159 million in 2023. Hosted revenue contributed 14% of Q4 2024 software revenue, up from 9% in Q4 2023. For full year 2024, hosted revenue grew from $20 million to $35 million, accounting for 20% of software revenue vs. 13% in 2023. Drug Discovery Revenue: Q4 2024 drug discovery revenue was $8.7 million, up from $5.5 million in Q4 2023. Full year 2024 drug discovery revenue was $27 million, down from $58 million in 2023.

• Software revenue growth expected 10%-15% in 2025; drug discovery revenue expected $45M-$50M.
• Q1 2025 software revenue expected $44M-$48M. Software gross margin likely 74%-75% in 2025.
• Operating expenses to grow <5% in 2025. Net cash used in operating activities expected lower in 2025 than 2024.

• Factors that could materially affect results include risk factors in SEC filings, such as clinical trial timings, compound properties, cash resources, and future expenses.

Q: What is your assumption behind your 2025 drug discovery revenue guidance?

A: Ramy Farid said the increase in drug discovery revenue is broad-based from various collaborations including Novartis, Lilly, and Otsuka, with amortization of upfront payments from Novartis and progress in multiple programs contributing.

Q: What do customers take into consideration when moving from on-prem to hosted?

A: Ramy Farid said it's more seamless to deliver licenses, and Geoff Porges mentioned a cadence of transition from on-prem to hosted, with a reasonable expectation of continuation of the trend.

Q: Thoughts on small biotech adoption?

A: Ramy Farid and Geoff Porges discussed that small biotech companies use software but broader adoption needs renewed capital for drug discovery in emerging biotech, with the industry environment currently tepid.