Schrodinger, Inc. ((SDGR)) has held its Q1 earnings call. Read on for the main highlights of the call.
The recent earnings call for Schrödinger, Inc. painted a picture of robust growth and strategic advancements, despite facing certain financial challenges. The company reported strong revenue growth and made significant strides in partnerships and research and development, particularly in software and drug discovery. However, challenges such as a decline in professional services revenue, lower software gross margins, and an increased net loss were also highlighted. Nevertheless, the outlook for 2025 remains optimistic.
Strong Revenue Growth
Schrödinger, Inc. reported a total revenue of $59.6 million for Q1 2025, marking a 63% increase compared to the same period in 2024. This growth was largely driven by software revenue, which increased by 46% to $48.8 million, thanks to larger customer renewals and expansions. Drug discovery revenue also saw a significant rise, reaching $10.7 million compared to $3.2 million in the previous year.
Strategic Partnerships and Collaborations
The company has recognized revenue from its collaboration with Novartis and expanded other collaborations, which contributed to the growth in drug discovery revenue. These strategic partnerships are playing a crucial role in driving the company’s revenue and market presence.
Progress in R&D and Clinical Programs
Schrödinger is making notable progress in its research and development efforts. Initial Phase I data for SGR-1505, a MALT1 inhibitor, is expected in mid-June. Other programs, such as the CDC7 inhibitor SGR-2921 and Wee1/Myt1 co-inhibitor SGR-3515, are also advancing well, with data expected later in the year.
Advancement in Software and Predictive Toxicology
The company has released a software update with major enhancements and is advancing its predictive toxicology initiative, aiming for a beta release later this year. These advancements are expected to bolster Schrödinger’s position in the software market.
Decline in Professional Services Revenue
Professional services revenue declined by 31% as service contracts from prior periods were completed. This decline poses a challenge, but the company seems focused on other revenue streams to offset this decrease.
Lower Software Gross Margin
The software gross margin was reported at 72%, down from 76% in Q1 2024. This decline is attributed to changes in the revenue mix associated with the Gates grant, indicating a shift in the company’s revenue structure.
Net Loss Increase
Schrödinger reported a net loss after taxes of $60 million or $0.82 per share, compared to a net loss of $54.7 million or $0.76 per share in Q1 2024. This increase in net loss highlights the financial challenges the company is facing, despite its revenue growth.
Forward-Looking Guidance
Looking ahead, Schrödinger’s management reiterated its full-year 2025 guidance. The company expects software revenue growth between 10% and 15%, with drug discovery revenue projected to be in the range of $45 million to $50 million. A full-year software gross margin is anticipated to be between 74% and 75%. Operating expense growth is projected to be under 5% for the year, and a significant reduction in cash burn compared to the previous year is expected.
In conclusion, Schrödinger, Inc.’s earnings call highlighted a mix of strong growth and strategic advancements, alongside some financial challenges. The company’s positive outlook for 2025, driven by its robust revenue growth and strategic partnerships, provides a promising future despite the hurdles it currently faces.