Financial Data and Key Metrics Changes - The company reported $256 million in revenue for 2025, reflecting a 23% growth compared to the previous year [12] - Software revenue was $199.5 million, with an annual contract value (ACV) of $198.5 million, showing strong growth from commercial customers [12][16] - Drug discovery revenue more than doubled to $56.4 million, indicating successful execution across collaborative programs [12][13] - The net loss for the year was $103 million, an improvement from a net loss of $187 million in 2024 [14] Business Line Data and Key Metrics Changes - Software revenue increased by 11%, while drug discovery revenue saw significant growth due to successful collaborations [12][13] - The software gross margin decreased to 74% from 80% in 2024, attributed to higher costs associated with contribution revenue from grants [13] - The company achieved a 96% gross dollar retention rate, indicating strong renewal performance among existing customers [18] Market Data and Key Metrics Changes - The company expanded its top 20 pharma relationships, with ACV for this cohort growing by 15% [16] - The materials science business grew from $15 million to $17 million as new capabilities were introduced [19] - The company is targeting additional budgets within existing customers and unlocking opportunities in large markets such as biologics and toxicology [11] Company Strategy and Development Direction - The company aims for 10%-15% software ACV growth and plans to transition approximately 75% of software revenue to hosted contracts by 2028 [10][24] - The strategic focus includes accelerating the growth of the software business and advancing the therapeutics portfolio [3][10] - The company is leveraging AI and computational methods to enhance drug and materials discovery, positioning itself as a leader in the field [8][9] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving financial and operational goals, despite a challenging macro environment [34] - The company anticipates continued demand for its technology driven by the adoption of AI and the expansion of its computational platform [54] - The outlook for 2026 includes expectations for ACV in the range of $218 million to $228 million, reflecting 10%-15% growth [24][25] Other Important Information - The company is transitioning to a hosted model, which will result in more predictable revenue but may compress gross margins in the near term [20][22] - The predictive toxicology solution is expected to contribute to growth, with positive feedback from beta testing [40][61] - The company maintains a strong balance sheet with over $400 million in cash, supporting its growth initiatives [12][26] Q&A Session Summary Question: Impact of transitioning to hosted contracts on profitability - Management indicated that the transition to hosted contracts is expected to support long-term profitability goals, with a focus on maintaining expense discipline [38][39] Question: Growth expectations from new products like Predictive Tox - Management confirmed that new products, including Predictive Tox, are expected to contribute to growth, with both existing and new customers likely to adopt these solutions [40][61] Question: Customer engagement with the transition to hosted solutions - Management noted that customers are increasingly preferring hosted deployments, which allow for faster deployment and enhanced support [50][51] Question: Expectations for ACV growth and its relation to revenue - Management clarified that ACV reflects the value of contracts, while revenue recognition may vary due to the transition to hosted contracts [73][74] Question: Biotech funding environment and its impact on growth - Management anticipates a recovery in the biotech sector over the next three years, which could positively influence growth [69]

Financial Data and Key Metrics Changes - Schrödinger reported a total revenue of $256 million for 2025, reflecting a 23% growth compared to the previous year [12] - The software business generated approximately $199.5 million in revenue, with an annual contract value (ACV) of $198.5 million, showing strong growth from commercial customers [12][16] - Drug discovery revenue reached $56.4 million, more than doubling from the prior year [12][13] - The net loss for the year was $103 million, an improvement from a net loss of $187 million in 2024 [14] Business Line Data and Key Metrics Changes - Software revenue increased by 11%, while drug discovery revenue more than doubled, indicating balanced growth across business lines [12][13] - Software gross margin was 74%, down from 80% in 2024, due to higher costs associated with contribution revenue from grants [13] - Total operating expenses decreased by approximately 9% to $310 million, reflecting cost reduction initiatives [13] Market Data and Key Metrics Changes - The company experienced a challenging backdrop of tight pharma budgets and difficult biotech capital markets, yet managed to achieve significant revenue growth [12] - The materials science business grew from $15 million to $17 million as new capabilities were introduced [19] Company Strategy and Development Direction - Schrödinger aims to achieve 10%-15% software ACV growth and transition to a primarily hosted model by 2028 [10][24] - The company is focused on expanding its platform capabilities and driving increased adoption through product innovation [10][11] - The strategic pivot initiated last year is expected to position the company for long-term success [34] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's future, citing strong performance in 2025 and a robust cash position of over $400 million [9][27] - The company anticipates continued growth in drug discovery revenue, targeting approximately $50 million annually [27] - Management acknowledged the challenges in the biotech sector but expects a recovery over the next three years [68] Other Important Information - The company is transitioning to hosted contracts, which will result in more predictable revenue but may compress gross margins in the near term [20][22] - Schrödinger's predictive toxicology solution is expected to drive additional growth, with positive feedback from beta testing [40] Q&A Session Summary Question: Impact of transitioning to hosted contracts on profitability - Management indicated that the goal for profitability by 2028 is based on growth across the software business and disciplined operating expenses [38] Question: Value of predictive toxicology in ACV guidance - Management confirmed that growth from new products, including predictive toxicology, is included in the 10%-15% growth expectation [42] Question: Dynamics of first quarter ACV versus full year - Management explained that Q1 is typically smaller due to customer budgeting cycles, and the full year guidance reflects expected growth [46] Question: Customer engagement with hosted platform transition - Management noted that customers are increasingly preferring hosted deployments, which allow for faster deployment and enhanced support [49] Question: Changes in pharma customer conversations regarding AI - Management stated that the adoption of AI is increasing demand for their software, and they are exploring integration with agentic AI solutions [53][54] Question: Customer split evolution towards ACV growth goal - Management expects recovery in biotech and new product releases to positively impact all customer segments [85]

Financial Data and Key Metrics Changes - Schrödinger reported a total revenue of $256 million for 2025, reflecting a 23% growth compared to the previous year [12] - The software business generated approximately $199.5 million in revenue, with an annual contract value (ACV) of $198.5 million, showing strong growth from commercial customers [12][9] - Drug discovery revenue more than doubled to $56.4 million, indicating successful execution across collaborative programs [12][13] - The net loss for the year was $103 million, an improvement from a net loss of $187 million in 2024 [15] Business Line Data and Key Metrics Changes - Software revenue increased by 11%, while drug discovery revenue saw significant growth, more than doubling compared to the prior year [12][13] - The software gross margin decreased to 74% from 80% in 2024, attributed to higher costs associated with contribution revenue from grants [13] - Total operating expenses were $310 million, a decrease of approximately 9% compared to 2024, reflecting cost reduction initiatives [13][14] Market Data and Key Metrics Changes - The company experienced a challenging backdrop of tight pharma budgets and difficult biotech capital markets, yet managed to achieve balanced growth [12] - The materials science business grew from $15 million to $17 million as new capabilities were introduced [20] - The company is targeting additional budgets within existing customers and unlocking opportunities in large markets such as biologics and toxicology [11] Company Strategy and Development Direction - Schrödinger aims to achieve 10%-15% software ACV growth and maintain expense discipline while transitioning to a primarily hosted model [10][26] - The company plans to complete phase 1 studies for SGR-1505 and SGR-3515 and advance collaborative programs [10] - The strategic pivot initiated last year is expected to position the company for long-term success, with a target of achieving positive adjusted EBITDA by the end of 2028 [36][28] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the strategic direction and the potential for growth driven by new product launches, including the predictive toxicology platform [10][41] - The company views the adoption of AI as a tailwind, increasing demand for its software and enhancing its competitive position [56] - Management acknowledged the challenges in the biotech sector but anticipates a recovery over the next three years [72] Other Important Information - The company is transitioning to hosted contracts, which will result in more predictable revenue but may compress gross margins and adjusted EBITDA in the near term [24][66] - Schrödinger's platform is uniquely positioned to leverage AI in drug and materials discovery, with a focus on physics-based simulations [11][8] Q&A Session Summary Question: Impact of transitioning to hosted contracts on profitability - Management confirmed that the transition to hosted contracts is an ongoing process and remains a critical component of the business strategy [39][40] Question: Growth expectations from new products like Predictive Tox - Management indicated that new products, including Predictive Tox, are expected to contribute to growth, with positive feedback from beta testing [41][42] Question: Customer engagement with the transition to hosted platforms - Management noted that customers are increasingly preferring hosted deployments, which allow for faster deployment and enhanced support [51][52] Question: Assumptions regarding biotech recovery and capital allocation - Management expects a normalization of growth in the biotech sector over the next three years and prefers to invest cash into growth opportunities rather than share buybacks [72][71] Question: Clarification on ACV definition and its impact on revenue - Management explained that ACV reflects the value of contracts, while revenue recognition varies based on contract type, with hosted contracts resulting in more predictable revenue [76][78]

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]