Financial Data and Key Metrics Changes - Total revenue for Q2 2025 was $54.8 million, a 16% increase from Q2 2024 [6][10] - Software revenue reached $40.5 million, reflecting a 15% year-over-year growth [6][11] - Drug Discovery revenue was $14.2 million, marking a 19% increase compared to Q2 2024 [12] - Software gross margin decreased to 68% from 80% in 2024 due to changes in revenue mix and investments in predictive toxicology [12] - Net loss for the quarter was $43 million, or $0.59 per share, compared to a net loss of $54 million, or $0.74 per share in Q2 2024 [14] Business Line Data and Key Metrics Changes - Software revenue growth was primarily driven by higher revenue from hosted contracts and contributions from the Gates Foundation grant [11] - Drug Discovery revenue growth was attributed to the recognition of a $150 million upfront payment from the Novartis collaboration [12] Market Data and Key Metrics Changes - The macroeconomic environment remains uncertain, but demand for the software platform is strong due to the industry's need for validated computational approaches [7] - The biotech segment has faced challenges, while discussions with pharmaceutical customers remain constructive [38] Company Strategy and Development Direction - The company aims to accelerate the growth of its software business and advance its drug discovery programs [4] - There is a focus on integrating predictive methods into all stages of molecular discovery [7] - The company is exploring strategic opportunities for its proprietary drug SGR1505 to maximize its potential [18] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in maintaining full-year software revenue growth guidance despite macroeconomic challenges [7] - The company expects to report initial Phase I data from two clinical programs in Q4 2025 [23] - Discussions with customers about renewals and scale-ups are encouraging, particularly for the fourth quarter [14] Other Important Information - The company has a strong cash position with $462 million in cash and equivalents as of June 30 [14] - Operating expenses are expected to be lower in 2025 compared to 2024 due to a $30 million expense reduction initiative [15] Q&A Session Summary Question: How has the tone of customer conversations changed regarding investments in the platform? - Management noted that discussions are positive, with clear demand for advanced predictive technologies despite macroeconomic concerns [27] Question: Why decide to out-license the product at this stage of development? - The company believes that SGR1505 is best developed in partnership with a company that has expertise in hematology, which can accelerate the program [32] Question: What is the demand setup for the back half of the year? - Demand remains strong, with good conversations about renewals and potential scale-ups, particularly in the pharmaceutical sector [38] Question: Can you provide details on the adoption of the predictive toxicology feature? - There is significant excitement and demand for the predictive toxicology technology, with ongoing beta testing [44] Question: What is the timeline for feedback on the beta version of the predictive toxicology solution? - Feedback will be collected as beta testing progresses, but a specific timeline for rollout is not yet established [51] Question: What is the rationale behind the recent headcount reductions? - The reductions were part of a broader cost management strategy and did not impact strategic initiatives [61] Question: What data can be expected in Q4 for SGR2921 and SGR3515? - Initial data will include safety, PKPD, and preliminary clinical activity, with updates planned for the end of the year [71] Question: How might the expanded collaboration with Ajax impact future milestones? - The collaboration will contribute to discovery revenue, with potential for future milestones and royalties [74]

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]