Schrödinger, Inc. Q4 FY2025 earnings call

• Schrodinger is a leader in computational methods for molecular discovery with a physics-first AI platform. • 2025 saw 23% total revenue growth and $402 million cash position. • Focus on 10%-15% software ACV growth, transition to hosted model, and advancing therapeutics portfolio. • In therapeutics, over 25 active programs, multiple Fast Track and Orphan Drug Designations, and ~$650 million in cash, upfronts, and milestones generated. • Expense discipline with total operating expenses down 9% in 2025.

Software business generated approximately $200 million in annual contract value in 2025. Software revenue in 2025 was $199.5 million, with 11% growth. Drug discovery business generated $56.4 million in revenue in 2025. Software gross margin was 74% in 2025 compared to 80% in 2024. Total operating expenses were $310 million, a decrease of ~9% compared to 2024. Fourth quarter 2025 software revenue was $69.3 million, a 13% decrease from Q4 2024 due to transition to hosted. Total ACV increased to $198.5 million in 2025 from $190.8 million in 2024, with 4% overall growth. Commercial ACV grew 7% to $177.4 million, and top 20 pharma ACV grew 15%. Materials science business grew from $15 million to $17 million. Predictive toxicology and battery chemistry modeling initiatives are ongoing.

• 2026 ACV expected to be $218 million - $228 million (10%-15% growth). • Q1 2026 ACV expected $24 million - $28 million. • Drug discovery revenue expected $55 million - $65 million in 2026. • Target positive adjusted EBITDA by 2028, with annual software ACV growth 10%-15%, substantially complete transition to hosted contracts, and return gross margin to high 70s. • Drug discovery revenue anticipated ~$50 million annually.

Q: Mani Foroohar asked about partnering out assets and impact on 2028 profit metric.

A: Karen Akinsanya said partnering is ongoing, Richie Jain noted goal for adjusted EBITDA is function of software growth, drug discovery revenue, and expense discipline.

Q: Mani Foroohar asked about predictive toxicology impact on growth.

A: Ramy Farid said new products including predictive tox expected to drive growth, feedback on beta positive.

Q: Scott Schoenhaus asked about Q1 ACV dynamics.

A: Richie Jain said Q1 is smaller quarter due to budgeting cycles, ACV reflects deals closed, and 2026 ACV guidance is $218M - $228M.

Q: Alex asked about AI impact on Schrodinger.

A: Ramy Farid said AI tailwind increases demand for Schrodinger's technology, working with Anthropic on integration.

Q: Alex asked about largest customers acquired.

A: Richie Jain said it's positive long-term signal as acquirers have same approach.

Q: Brendan Smith asked about predictive tox go-to-market.

A: Ramy Farid said it's both add-on to existing customers and new touch points, Richie Jain said new products reach new end customers.

Q: Toph asked about 2028 adjusted EBITDA and buybacks.

A: Richie Jain said prefer to invest in growth, assuming biotech rebound.

Q: Kyle Yang asked about ACV definition and revenue translation.

A: Richie Jain explained ACV definition, said revenue not guided for 2026, and transition to hosted impacts revenue recognition.

Q: Conor MacKay asked about customer split evolution.

A: Ramy Farid said expect biotech recovery and new products to impact segments.

Q: [Morgan] asked about $1M+ customers.

A: Richie Jain said $1M threshold reflects scale adoption, average ACV increased, and variance within cohort.