Schrödinger, Inc. Q1 FY2026 earnings call

• Started strong in 2026 with $28.4 million ACV, 12% increase vs Q1 last year. Broad - based growth from usage scale - ups, new customers, and new products. - Lilly's $2.3 billion acquisition of Ajax Therapeutics, a co - founded company with Schrodinger having ~6% equity stake, showcases the power of the platform. - Positive progress in transitioning customers to hosted licensing, with good conversion dynamics on renewals and some early conversions of on - premise deals. - Encouraged by improving biopharmaceutical funding environment and evolving regulatory environment with predictive toxicology initiative. - Excited about upcoming release of Bunsen, an agentic AI co - scientist, to enhance productivity. - Therapeutics business creating significant value with multiple co - discovered molecule deals and progress in therapeutics portfolio.

In Q1 2026, ACV was $28.4 million, a 12% increase vs Q1 last year. Drug discovery revenue was $23 million. Software revenue was $35.6 million, with hosted revenue contributing $12.1 million (34% of software total in Q1 2026, 27% on trailing four - quarter basis). Contribution revenue was $0.1 million in Q1 2026 vs $4.3 million in Q1 2025. Direct discovery revenue was $22.9 million vs $10.2 million in same period last year. Total operating expenses for Q1 were $78 million, a 4% decrease vs Q1 2025.

• Maintaining full year 2026 guidance: ACV expected in range of $218 to $228 million (10% - 15% growth). Drug discovery revenue expected between $55 and $65 million. - Operating expenses expected less than 2025 with select investments in sales and marketing. - Clinical activities largely complete by end of 2026, incurring ~10 - 15 million R&D for full year 2026. - Q2 2026 ACV guidance 19 - 23 million excluding contribution ACV, vs $23.3 million in Q2 2025 which included $5 million contribution ACV.

Q: Talk more about how agentic AI is driving utilization of high compute calculations, impact on business, upside potential as adoption increases, and how it shows up in customer contracts.

A: Bunsen, an agentic AI system for automating complex workflows, has had extraordinary impact on productivity internally. It eliminates barriers to large - scale deployment, acts as a co - scientist improving efficiency for experts and non - experts. Upcoming release in summer, and throughput - based licensing benefits from it.

Q: What percentage of customers or contract value are previously on - prem renewing to hosted?

A: Hosted revenue was 34% of software revenue in Q1 2026 and 27% on trailing four - quarter basis, aiming to get to 75% by three - year period, with some early transitions before renewal dates.

Q: How much velocity in M&A activity in private biotech markets would start tinkering with drug discovery revenue guidance?

A: Software side seeing pick - up in new customers, drug discovery business has robust interactions with biotech and pharma regarding new collaborations but not guiding to specific BD events.

Q: Predictive Talks launch revenue breakdown and Bunsen go - to - market strategy?

A: Predictive Talks feedback positive. Bunsen democratizes access to sophisticated technology, expected to be available to all customers, details of pricing and rollout with close partners for early access.

Q: Thoughts on new way of guiding ACV, contribution ACV, and Ajax flowing through P&L?

A: Q2 2026 guidance excludes contribution ACV as last year included $5 million contribution. Ajax sale impact is cash, with 6% equity stake, upfront not disclosed but will impact cash, and milestones may contribute.

Q: Operating expense structure change related to moving things to later preclinical or clinical and R&D percent for drugs?

A: Drug discovery business highly synergistic with software business, vast majority of R&D activities in collaborations, and investment in R&D for creating value with royalties from programs.

Q: Rollout of Bunsen phasing and whether it's premium add - on or part of standard offering?

A: Working out details, will work with close partners for early access, expectation is to make it available to all customers, pricing to be worked out based on early access feedback.

Q: Conversion over next couple of quarters before Q4 and update on internal molecule discovery side?

A: Q4 expected to be largest ACV quarter, but may pull forward conversions on margin. Internal molecule discovery side not planning ever - growing early stage portfolio, but updating as partners are identified for programs.