Summary of Schrödinger (SDGR) 2025 Conference Call Company Overview - Schrödinger combines physics-based methods with artificial intelligence (AI) and machine learning to accelerate the discovery of novel chemical materials for life sciences and material sciences applications [2][5] - The company has approximately 1,800 global customers, primarily in the life sciences sector, including nearly every academic institution studying chemistry [3][4] Financial Performance - In the previous year, Schrödinger reported $180 million in software revenue, growing at 13% [6] - Drug discovery revenue was $27 million, down from $57 million due to a large milestone payment in 2023 [7] - Q1 revenue reached nearly $60 million, a 63% year-over-year increase, with software revenue at $48.8 million (46% growth) and drug discovery revenue at $10.7 million [8][9] - The company forecasts total software revenue growth of 10% to 15% for the year, with drug discovery revenue expected to recover to $45 million to $50 million [9] Business Model and Revenue Streams - Schrödinger's business model includes software licensing, drug discovery collaborations, and a proprietary pipeline with over eight active programs, three of which are in clinical stages [5][6] - The company benefits from cash inflows from collaborations and equity investments in co-founded companies that have gone public or been acquired [8] Strategic Priorities - The focus is on increasing adoption of computational technology among existing customers rather than acquiring new customers [12] - Enhancements to the platform will enable its use for biologics and predicting toxicology risks, aligning with FDA initiatives to phase out animal testing [12][51] Clinical Programs and Pipeline - The company is advancing three proprietary clinical programs, with data readouts expected in the second half of the year [10][20] - Preliminary efficacy data for SGR1505, a MALT1 inhibitor, shows promising results in heavily pretreated patients [14][15] Collaborations and Partnerships - Recent collaborations include a significant deal with Novartis, which involved a $150 million upfront milestone payment for drug discovery collaboration [33] - The partnership with Novartis has led to a substantial increase in software revenue, with Novartis now among the top tier of customers [36][62] Market Dynamics and Customer Insights - The company has observed no significant cutbacks in R&D spending among large pharmaceutical companies despite macroeconomic challenges [60] - Retention rates among large customers are exceptionally high at 99.9% [61] Competitive Landscape - Schrödinger differentiates itself through its unique combination of physics-based methods and machine learning, with limited direct competition in this niche [72][74] - The company views the current AI boom in drug discovery as beneficial, as it may lead to increased use of structure-based drug design, which aligns with Schrödinger's platform [73][74] Conclusion - Schrödinger is well-positioned for growth with a robust business model, strong financial performance, and strategic collaborations, while also adapting to industry trends and regulatory changes in drug discovery and development.

Company Performance - Schrodinger, Inc. reported a quarterly loss of $0.82 per share, which was worse than the Zacks Consensus Estimate of a loss of $0.71, and compared to a loss of $0.76 per share a year ago, indicating a negative earnings surprise of -15.49% [1] - The company posted revenues of $59.55 million for the quarter ended March 2025, exceeding the Zacks Consensus Estimate by 6.81%, and showing significant growth from year-ago revenues of $36.6 million [2] - Over the last four quarters, Schrodinger has surpassed consensus revenue estimates three times, but has only exceeded EPS estimates once [2] Stock Outlook - Schrodinger shares have increased approximately 22.1% since the beginning of the year, contrasting with a -4.7% decline in the S&P 500 [3] - The company's earnings outlook will be crucial for future stock performance, with current consensus EPS estimates at -$0.76 for the coming quarter and -$2.47 for the current fiscal year [4][7] - The estimate revisions trend for Schrodinger is currently mixed, resulting in a Zacks Rank 3 (Hold), suggesting the stock is expected to perform in line with the market in the near future [6] Industry Context - The Medical Info Systems industry, to which Schrodinger belongs, is currently ranked in the top 27% of over 250 Zacks industries, indicating a favorable outlook compared to the bottom 50% [8] - Empirical research indicates a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can be tracked by investors [5]

Financial Data and Key Metrics Changes - Total revenue for Q1 2025 was $59.6 million, representing a 63% increase compared to Q1 2024 [13] - Software revenue was $48.8 million, reflecting a 46% growth year-over-year [14] - Drug discovery revenue increased to $10.7 million from $3.2 million in Q1 2024, driven by collaborations and upfront payments [16] Business Line Data and Key Metrics Changes - Software revenue growth was primarily due to larger customer renewals and expansions of existing contracts, with on-prem software increasing by 44% to $25.4 million and hosted revenue growing by 52% to $10.9 million [14] - Professional services revenue declined by 31% to $3.8 million as previous contracts were completed [15] - Drug discovery revenue growth was attributed to the recognition of upfront payments from Novartis and other collaborations [16] Market Data and Key Metrics Changes - The company noted that the small and emerging biotech segment is not growing, but growth is driven by large accounts, with no pushback on renewals from major customers [54] - The company has a small direct exposure to revenue from China, with less than 4% of software revenue coming from U.S. academic institutions and government organizations [23] Company Strategy and Development Direction - The company aims to accelerate the growth of its software business and advance its drug discovery programs, with a focus on predictive toxicology and reducing preclinical animal testing [7][9] - The company plans to release a beta version of its predictive toxicology solution to select customers later this year, with broader availability expected after testing [9] - The company maintains its full-year financial guidance, expecting software revenue growth of 10% to 15% and drug discovery revenue between $45 million and $50 million [25] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the revenue outlook for 2025, despite potential macroeconomic challenges [7] - The company is optimistic about the FDA's goal to reduce animal testing, which aligns with its computational drug discovery technology [8][24] - Management highlighted a strong cash position and reduced operating expenses, indicating resilience against market volatility [12][20] Other Important Information - The company reported a net loss of $60 million for Q1 2025, compared to a net loss of $54.7 million in Q1 2024 [20] - Cash and marketable securities increased from $367 million at year-end 2024 to $512 million at the end of Q1 2025 [21] Q&A Session Summary Question: Expectations around the SGR1505 presentation - Management is excited to share initial data from the SGR1505 trial, focusing on safety, pharmacokinetics, and preliminary efficacy [39] Question: Financial guidance on cash burn - Management does not foresee a substantial increase in cash burn next year, maintaining optionality with ongoing programs [40] Question: Differentiation of predictive toxicology model - The company is developing highly accurate models that leverage physics and machine learning, differentiating its offering from other preclinical simulators [45] Question: Trends observed in customer dynamics - The company is not seeing pushback on renewals and is maintaining growth driven by large accounts, despite challenges in the small biotech segment [54] Question: Threats from AI-native companies - Management believes there is currently no evidence of a threat from AI-native companies, emphasizing the importance of their deep understanding of technology [56] Question: Customer sentiment and FDA guidance on animal testing - Customers are looking for impactful technology that improves molecule design success rates, and the company has solutions that contribute to reducing animal testing [63][67] Question: Appetite for business development and partnerships - The company is constantly in conversation with other companies regarding potential partnerships and is evaluating new programs for high potential [98]

Financial Data and Key Metrics Changes - Total revenue for Q1 2025 was $59.6 million, representing a 63% increase compared to Q1 2024 [12][19] - Software revenue was $48.8 million, up 46% year-over-year, driven by larger customer renewals and expansions [13][19] - Drug discovery revenue increased to $10.7 million from $3.2 million in Q1 2024, boosted by revenue recognition from the Novartis collaboration [14][19] - Operating expenses decreased to $82 million from $86 million in Q1 2024, primarily due to lower R&D expenses [18][19] - Net loss after taxes was $60 million, or $0.82 per share, compared to a net loss of $54.7 million, or $0.76 per share in Q1 2024 [19] Business Line Data and Key Metrics Changes - Software cost of revenue increased to $13.5 million from $8 million in Q1 2024, attributed to the Gates Predictive Tox initiative [15] - Professional services revenue declined by 31% to $3.8 million due to the completion of prior service contracts [14] - On-prem software revenue grew by 44% to $25.4 million, while hosted revenue increased by 52% to $10.9 million [13] Market Data and Key Metrics Changes - The company noted that its direct exposure to revenue from China is small, with low single-digit percentages of software revenue coming from Chinese entities [22] - The FDA's goal to reduce preclinical animal testing is seen as a positive development for the company's technology and offerings [6][23] Company Strategy and Development Direction - The company aims to accelerate the growth of its software business and advance its drug discovery programs [3][5] - Management is optimistic about the potential of its predictive toxicology initiative and plans to release a beta version to select customers later this year [8][9] - The company expects to maintain its full-year financial guidance, projecting software revenue growth of 10% to 15% and drug discovery revenue between $45 million and $50 million [24][25] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's financial position and its ability to navigate the current macroeconomic challenges [11][12] - The company is not currently experiencing resistance to purchasing conversations, although it is monitoring potential regulatory impacts [21][22] - Management remains positive about the outlook for the year, anticipating strong performance driven by clinical data presentations and ongoing collaborations [25][26] Other Important Information - The company has advanced several programs into the clinic and partnered early-stage programs with companies like Novartis and Lilly [31][76] - The predictive toxicology initiative aims to scale existing solutions to hundreds of off-targets, enhancing the company's offerings [70] Q&A Session Summary Question: Expectations around the upcoming presentation of SGR1505 - Management is excited to share initial data from the dose escalation study, focusing on safety, pharmacokinetics, and initial signs of activity [40][41] Question: Financial guidance on cash burn and R&D investments - Management indicated that cash burn is not expected to increase significantly next year, maintaining optionality with ongoing programs [41] Question: Differentiation of the predictive toxicology model - The company is developing highly accurate models that leverage both physics and machine learning, which differentiates its offering from other preclinical simulators [47] Question: Trends observed in customer dynamics - Management noted that while small biotech segments are not growing, large accounts continue to drive growth without pushback on renewals [55] Question: Threats from AI-native companies - Management emphasized that there is currently no evidence of a threat and highlighted the importance of their deep understanding of the technology [59] Question: Customer expectations and FDA guidance on animal testing - Customers are looking for impact from the technology, and the predictive toxicology initiative is expected to significantly contribute to reducing animal testing [64][68]

Financial Performance (Q1 2025) - Total revenue reached $59.6 million, a 63% increase compared to $36.6 million in Q1 2024 [13, 28] - Software revenue grew to $48.8 million, a 46% increase from $33.4 million in Q1 2024 [13, 28] - Drug discovery revenue significantly increased to $10.7 million, a 237% increase compared to $3.2 million in Q1 2024 [13, 28] - Cash and marketable securities increased by 18% to $512.1 million as of March 31, 2025, compared to $435.7 million as of March 31, 2024 [28] - Deferred revenue, current and long term, increased by 265% to $210.0 million as of March 31, 2025, compared to $57.5 million as of March 31, 2024 [28] Financial Guidance (2025) - The company projects software revenue growth of 10% - 15% for the full year 2025 [13, 37] - Drug discovery revenue is expected to be between $45 million and $50 million for 2025 [13, 37] - Operating expense growth is anticipated to be less than 5% for 2025 [13, 37] - Software revenue for the second quarter of 2025 is projected to be in the range of $38 million to $42 million [13, 37] Proprietary Pipeline Milestones - Initial Phase 1 clinical data for SGR-1505 (MALT1) in R/R B-cell malignancies is expected in June 2025 [13, 40] - Initial Phase 1 clinical data for SGR-2921 (CDC7) in R/R AML/MDS is expected in the second half of 2025 [13, 40] - Initial Phase 1 clinical data for SGR-3515 (Wee1/Myt1) in solid tumors is expected in the second half of 2025 [13, 40]

Financial Performance - Revenue for the three months ended March 31, 2025, was $59.6 million, representing a year-over-year increase of 63% from $36.6 million in the same period of 2024[185]. - The company reported a net loss of $59.8 million for the three months ended March 31, 2025, compared to a net loss of $54.7 million for the same period in 2024[185]. - Total revenues for the three months ended March 31, 2025, increased by 63% to $59,551,000 compared to $36,598,000 in the same period of 2024[211]. - The net loss for the three months ended March 31, 2025, was $59,808,000, compared to a net loss of $54,724,000 in the same period of 2024[211]. - Gross profit rose by 65% to $31,124,000, with total cost of revenues increasing by 61% to $28,427,000[211]. Drug Discovery and Development - The FDA cleared the IND for the MALT1 inhibitor SGR-1505 in June 2022, with initial data from the ongoing Phase 1 clinical trial expected in Q2 2025[170]. - The FDA granted orphan drug designation to SGR-1505 for the potential treatment of mantle cell lymphoma in August 2023[171]. - The company has initiated dosing in a Phase 1 clinical trial for the CDC7 inhibitor SGR-2921, with initial data expected in the second half of 2025[172][173]. - Drug discovery revenue surged by 237% to $10,735,000, driven by collaborations and milestone achievements[211]. - The company expects fluctuations in drug discovery revenue due to the uncertain nature of milestone achievements[194]. Collaborations and Partnerships - The company has entered into a collaboration with Novartis, receiving an upfront fee of $150 million and is eligible for up to $2.272 billion in total milestone payments[184]. - The collaboration with Bristol-Myers Squibb includes potential milestone payments of up to $482 million and tiered royalties on net sales ranging from mid-single digits to low double digits[182]. Research and Development Expenses - Research and development expenses decreased by 9% to $45,844,000, reflecting a strategic focus on proprietary drug discovery programs[211]. - Total research and development expense decreased by 9% to $45.8 million for the three months ended March 31, 2025, compared to $50.6 million in the same period of 2024[224]. - External costs for programs in preclinical and clinical development decreased by 15% to $12.7 million, primarily due to a reduction in costs for early-stage product candidates[224]. - Internal costs for discovery, preclinical, and clinical development decreased by 13% to $9.3 million, mainly due to a reduction in personnel-related expenses[225]. Cash Flow and Financial Position - Net cash provided by operating activities was $144.1 million for the three months ended March 31, 2025, compared to a cash outflow of $39.3 million in the same period of 2024[247]. - As of March 31, 2025, the company had cash, cash equivalents, restricted cash, and marketable securities totaling $512.1 million[239]. - The company plans to utilize existing cash and marketable securities primarily to fund software and drug discovery activities[241]. - The accumulated deficit as of March 31, 2025, was $585.3 million, reflecting a history of significant operating losses[235]. - Financing activities for Q1 2025 generated approximately $0.4 million in cash, primarily from stock option exercises[253]. Operating Expenses - Sales and marketing expenses increased by 2% to $10.2 million, primarily driven by a $0.2 million increase in personnel-related expenses[227]. - General and administrative expenses increased by 1% to $25.5 million, with increases in professional services and cloud computing expenses[229]. - The change in fair value of equity investments resulted in an unrealized loss of $13.1 million for the three months ended March 31, 2025[231]. Software Segment - The company operates through two reportable segments: software and drug discovery, with the software segment generating revenue from various sources including software licenses and subscriptions[178]. - The increase in software contribution revenue was due to agreements with the Bill & Melinda Gates Foundation aimed at accelerating the computational software platform[217]. - The gross margin for software products and services was 72%, down from 76% in the previous year, attributed to increased expenses related to collaborations[220][221]. Market Risks - There have been no material changes in reported market risks or risk management policies since the last Annual Report filed on February 26, 2025[254].

Exhibit 99.1 Schrödinger Reports Strong First Quarter 2025 Financial Results First Quarter Total Revenue of $59.6 Million, Software Revenue of $48.8 Million Initial SGR-1505 Phase 1 Clinical Data to be Presented in June Maintains 2025 Financial Guidance New York, May 7, 2025 – Schrödinger, Inc. (Nasdaq: SDGR) today announced financial results for the quarter ended March 31, 2025. "We are very pleased with Schrödinger's performance in the first quarter of 2025, with strong software and drug discovery revenue ...

Core Insights - The market has experienced volatility due to unexpected tariff policy changes, leading to uneven recovery among firms, with some stocks emerging as high-momentum plays [1][2] Group 1: Software-Based Drug Development - Certara Inc. has seen a 30% year-to-date increase in stock price, driven by strong outlook and a $100 million share buyback program [3][6] - Certara's revenue guidance for 2025 is projected between $415 million and $425 million, with adjusted earnings per share expected to be between 42 cents and 46 cents [4] - Schrödinger Inc. has also experienced a 25% year-to-date increase, attributed to FDA policy shifts favoring human-relevant testing and a legal settlement [9][10] Group 2: Modular Furniture Industry - The Lovesac Co. reported a 23% increase in stock price following an earnings beat and the launch of new product platforms, with EPS exceeding expectations by 33 cents [12][14] - Lovesac's modular design allows for increased supply chain flexibility, enabling the company to adapt to geopolitical changes [14] - Analysts project a 57.86% upside for Lovesac's stock, with a current price of $20.06 and a 12-month forecast of $31.67 [13][14]

Company Overview - Schrodinger, Inc. (SDGR) shares increased by 27.4% to close at $24.49, following a period of 12.4% loss over the past four weeks, indicating a significant turnaround in investor sentiment [1][2]. Legal Settlement and Upcoming Data Presentation - The price surge was driven by investor optimism after Schrodinger announced a settlement in a legal dispute regarding compensation practices for non-employee directors [2]. - The company is scheduled to present new preclinical data on SGR-3515 and SGR-4174 at the American Association for Cancer Research (AACR) Annual Meeting 2025, which will take place from April 25 to 30, 2025, in Chicago, IL [2]. Financial Expectations - Schrodinger is expected to report a quarterly loss of $0.71 per share, reflecting a year-over-year change of +6.6%, while revenues are anticipated to reach $55.76 million, marking a 52.3% increase from the previous year [3]. - The consensus EPS estimate for the upcoming quarter has been revised 2.8% higher over the last 30 days, suggesting a positive trend that could lead to price appreciation [4]. Industry Context - Schrodinger operates within the Zacks Medical Info Systems industry, where another company, TruBridge (TBRG), has seen a 0.7% decline in its stock price, with a -10.5% return over the past month [4]. - TruBridge's consensus EPS estimate remains unchanged at $0.37, representing a +94.7% change from the previous year [5].

Core Insights - The article provides an overview of the investment landscape, emphasizing the importance of independent research and verification of information before making investment decisions [2][3]. Group 1 - The content is not intended as exhaustive analysis of any featured company, highlighting the need for readers to conduct their own research [2]. - The predictions and opinions presented are based on a probabilistic approach, indicating that they do not guarantee absolute certainty [2]. - The article stresses that past performance is not indicative of future results, underscoring the inherent volatility and risks associated with stock investments [3].