Schrödinger (SDGR) Q3 2024 earnings summary

Executive summary

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

• 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% year-over-year).

• Net loss for Q3 2024 was $38.1 million, improved from $62.0 million in Q3 2023, aided by gains from equity investments.

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

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

Financial highlights

• Software revenue grew 10% year-over-year in Q3 2024 to $31.9 million; hosted revenue rose to 28% of total software revenue.

• Drug discovery revenue was $3.4 million in Q3, down from $13.7 million a year ago, due to fewer collaborations and absence of milestones.

• Software gross margin was 73% in Q3 2024, down from 76% last year.

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

• Net loss narrowed to $38.1 million from $62.0 million in Q3 2023, with $30.2 million in other income.

Outlook and guidance

• Software revenue growth guidance for 2024 narrowed to 8%-13%; drug discovery revenue guidance set at $20-$30 million.

• Novartis collaboration expected to drive significant drug discovery revenue in 2025, with modest contribution in Q4 2024.

• Software gross margin expected slightly below 2023, in line with 2022; operating expense growth projected at 8–10% for 2024.

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

• Existing cash and securities expected to fund operations for at least 24 months.