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 global adoption and milestone achievements in collaborations.

• Launched a predictive toxicology initiative funded by a $10 million Gates Foundation grant, leveraging NVIDIA AI to reduce development failure risk.

• Advanced proprietary pipeline with three clinical programs in progress, including SGR-3515 Phase 1 dosing and FDA Fast Track designation for SGR-2921 in relapsed/refractory AML; initial data expected in 2025.

• Anticipated $48 million realization from Morphic equity sale following planned $3.2 billion acquisition by Lilly.

• Maintained high customer retention and observed increasing scale of software adoption among established customers, with strong interest in new product initiatives.

Financial highlights

• Q2 2024 total revenue: $47.3 million (+35% YoY); software revenue: $35.4 million (+21% YoY); drug discovery: $11.9 million (+104% YoY).

• 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%.

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

• Net loss was $54 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 totaled $381.5 million as of June 30, 2024, expected to fund operations for at least 24 months.

Outlook and guidance

• Reiterated full-year software and drug discovery revenue guidance: software revenue growth expected at 6%–13%, Q3 software revenue of $32–$34 million, and full-year drug discovery revenue of $30–$35 million.

• Software gross margin expected slightly below 2023 due to Gates Foundation grant, with full-year margin in the 20–22% range.

• Full-year operating expense growth forecasted at 8%–10%, at the low end of the previous 8%–12% range.

• Cash use in 2024 expected to exceed 2023, but additional capital from asset sales and partnerships is anticipated.

• Initial clinical data from SGR-1505 expected in H1 2025; SGR-2921 and SGR-3515 data anticipated in H2 2025.