Schrödinger (SDGR) Q3 2024 earnings summary

Executive summary

• Announced a multi-target research and expanded software licensing collaboration with Novartis, including $150 million upfront, up to $2.3 billion in milestones, and royalties.

• Q3 2024 total revenue was $35.3 million, with software revenue at $31.9 million (up 10% year-over-year) and drug discovery revenue at $3.4 million (down 75%).

• Net loss for Q3 was $38.1 million, improved from $62.0 million a year ago.

• Cash, cash equivalents, and marketable securities totaled $398.4 million at quarter-end, aided by $48 million from the Morphic equity sale.

• Proprietary clinical pipeline advancing, with initial data from three clinical-stage programs expected in 2025.

Financial highlights

• Total revenue decreased 17% year-over-year to $35.3 million, mainly due to lower drug discovery revenue.

• Software revenue grew 10% year-over-year to $31.9 million; hosted software revenue rose to 28% of total software revenue.

• Software gross margin was 73% in Q3, down from 76% a year ago; overall gross margin was 50%.

• Operating expenses increased 7.9% year-over-year to $86.2 million, mainly from higher R&D spending.

• Net loss for Q3 was $38.1 million ($0.52/share), improved from $62 million loss a year ago.

Outlook and guidance

• Software revenue growth guidance for 2024 narrowed and raised to 8%-13%.

• Drug discovery revenue guidance lowered to $20-$30 million for 2024, reflecting milestone timing.

• Software gross margin expected slightly below 2023, in line with 2022.

• Operating expense growth projected at 8–10% for 2024, with continued focus on expense management.

• Cash used in operations anticipated to exceed 2023, depending on collaboration payment timing.