Schrödinger, Inc. Q2 FY2025 earnings call

• Revenue Growth: Total revenue up 16% y-o-y; software revenue up 15% y-o-y; drug discovery revenue up 19% y-o-y.
• Pipeline Progress: Presented encouraging Phase I data from SGR-1505; expect initial Phase I data from SGR-2921 and SGR-3515 in Q4 2025.
• Platform Improvements: Continued enhancing software platform performance/usability; released beta version of virtual kinase panel for predictive toxicology.
• Expense Management: R&D expenses down over 15% due to shifts in expenses and cost reduction; operating expenses down 6% y-o-y.

Total revenue in the second quarter of 2025 was $54.8 million, a 16% increase from Q2 2024. Software revenue was $40.5 million, representing 15% year-over-year growth. Drug discovery revenue was $14.2 million, showing growth in the collaborative portfolio. Software revenue contributed a significant portion to total revenue, with drug discovery revenue also demonstrating growth.

• Revenue Guidance: Maintaining full-year software revenue growth guidance of 10%-15% and drug discovery revenue guidance of $45M to $50M.
• Third Quarter Outlook: Expect software revenue in Q3 2025 to be in the range of $36M to $40M.
• Expense Outlook: Operating expenses expected to be lower in 2025 than 2024 due to $30M expense reduction initiative.

• Macroeconomic Uncertainties: Challenges include regulatory, tariff, capital market, and drug pricing pressures.
• Clinical Trial Timing: Uncertainties around clinical trial initiation/readouts and potential differences between expected and actual results.

Q: How has the tone of conversations with customers changed regarding investments in the platform?

A: Discussions are positive with clear demand for predictive technologies.

Q: Why out-license Phase I program at this stage?

A: Best developed in mid/late-stage by a partner with expertise in hematology development/commercialization.

Q: On-prem software revenue down year-over-year, what's the cloud vs on-prem percentage?

A: On-prem down due to multi-year deals last year; hosted revenue growing, with continued growth in existing customer relationships.

Q: Adoption and growth of predictive tox feature?

A: Beta released, with excitement and demand, but details on number of clients not disclosed; separately priced as an add-on module.

Q: Rationale for headcount reduction despite strong balance sheet?

A: Across-the-board reduction not tied to specific project, aimed to align with strategic direction.

Q: Timeline for feedback on predictive tox beta and full version rollout?

A: Beta released recently, feedback pace unknown; margins impacted by Gates grant timing, which started Q3 2024 and lasts ~2 years.

Q: Granularity of data for SGR-2921 and SGR-3515 in 4Q and strategic opportunities?

A: Expect safety, PK/PD, and preliminary clinical activity data; aim to work with partners for further development.

Q: Impact of expanded collaboration with Ajax on milestones/revenue?

A: Modest impact in 2025, with potential for future milestones and royalties.

Q: Customer spending trends?

A: Rare for customers to decrease spend; 100% retention rate with customers >$0.5 million.

Q: Interaction with FDA on predictive tox and animal testing pilot?

A: Informal discussions with FDA, but premature to talk about adoption until beta feedback received.