Schrödinger (SDGR) Q2 2024 earnings summary

Executive summary

• Q2 2024 revenue rose 35% year-over-year to $47.3 million, with software revenue up 21% to $35.4 million and drug discovery revenue up 104% to $11.9 million, driven by strong growth in both segments.

• Launched a major predictive toxicology initiative, funded by a $10 million Gates Foundation grant and leveraging NVIDIA AI.

• Advanced multiple proprietary and collaboration drug programs, including initiation of SGR-3515 Phase 1 dosing and FDA Fast Track Designation for SGR-2921.

• Anticipated $48 million realization from Morphic equity sale due to planned $3.2B acquisition by Lilly; company holds 834,968 shares and is eligible for royalties.

• Cash, cash equivalents, and marketable securities totaled $381.5 million as of June 30, 2024, expected to fund operations for at least 24 months.

Financial highlights

• Q2 2024 total revenue: $47.3 million, up 35% year-over-year; software revenue: $35.4 million (+21%), drug discovery: $11.9 million (+104%).

• Gross profit for Q2 2024 was $31.3 million (66% margin), up from $13.8 million in Q2 2023; software gross margin improved to 80% from 77% a year ago.

• Operating expenses rose 12% year-over-year to $84.1 million, mainly due to increased R&D spending.

• Net loss for Q2 2024 was $54.0 million, or $(0.74) per share, compared to net income of $4.3 million in Q2 2023, reflecting higher R&D and absence of prior year equity gains.

• Cash, equivalents, and marketable securities decreased by $87.3 million since year-end 2023.

Outlook and guidance

• 2024 software revenue growth expected between 6% and 13%; Q3 2024 software revenue expected between $32 million and $34 million.

• Drug discovery revenue guidance: $30 million–$35 million for 2024, with revenue weighted toward Q4.

• Software gross margin expected slightly below 2023 due to Gates Foundation grant, but to normalize after grant completion.

• Operating expense growth forecasted at 8%–10% for 2024, at the low end of prior guidance.

• Cash reserves are expected to fund operations and capital expenditures through at least the next 24 months.