Schrodinger, Inc. ((SDGR)) has held its Q4 earnings call. Read on for the main highlights of the call.
The recent earnings call for Schrödinger, Inc. painted a mixed picture of the company’s financial health and operational progress. While there was notable growth in software revenue and promising strategic collaborations, the company also faced challenges such as increased operating losses and a decline in drug discovery revenue. Despite these hurdles, the company’s advancements in clinical programs and high customer retention rates provide a positive outlook.
Record-Breaking Software Revenue Growth
Schrödinger reported a remarkable increase in software revenue, reaching $180 million in 2024, which marks a 13% year-over-year growth. The fourth quarter alone saw a 16% increase, bringing in $80 million. This growth underscores the company’s strong position in the software market and its ability to capitalize on technological advancements.
Successful Collaborations and Partnerships
The company has made significant strides in forming strategic alliances, establishing a new drug discovery collaboration, and expanding a software agreement with Novartis. Additionally, Schrödinger has strengthened its existing partnerships with Otsuka and Lilly, which are expected to drive future growth and innovation.
Clinical Program Advancements
Schrödinger is making progress in its clinical programs, with the initiation of a Phase 1 study for SGR-3515. The company anticipates releasing clinical data for SGR-1505, SGR-2921, and SGR-3515 in 2025, which could potentially enhance its drug discovery pipeline and market position.
High Customer Retention
The company boasts a 100% customer retention rate for clients with an annual contract value of at least $500,000. Furthermore, there has been significant growth in customers with annual contract values exceeding $5 million, highlighting Schrödinger’s ability to maintain and expand its customer base.
Increased Operating Loss
Despite operational successes, Schrödinger faced an increased operating loss of $209 million in 2024, up from $177 million in 2023. The net loss for the year was $187 million, indicating financial strains that the company needs to address moving forward.
Decline in Drug Discovery Revenue
The company experienced a substantial drop in drug discovery revenue, falling from $58 million in 2023 to $27 million in 2024. This decline is attributed to the impact of non-recurring milestones, which presents a challenge for Schrödinger’s revenue diversification.
Increased Cost of Revenue
Schrödinger’s overall cost of revenue increased by 46% in Q4 2024 compared to the previous year, leading to a decline in gross margin from 77.6% to 72.6%. This rise in costs could impact the company’s profitability if not managed effectively.
Cash Position and Usage
The company reported net cash used in operating activities of $157 million in 2024, an increase from $137 million in 2023. However, Schrödinger maintains a robust cash balance of $367 million at year-end, providing a cushion for future investments and operational needs.
Forward-Looking Guidance
Looking ahead to 2025, Schrödinger plans to accelerate growth in its software business and advance its drug discovery programs. The company anticipates software revenue growth between 10% and 15% and drug discovery revenue in the range of $45 million to $50 million. Despite a projected decrease in software gross margin due to the predictive toxicology initiative, operating expenses are expected to grow by less than 5%. Schrödinger’s strong customer retention and annual contract values support its optimistic outlook for the coming year.
In conclusion, Schrödinger’s earnings call reflects a company in transition, balancing significant achievements in software revenue and strategic partnerships with challenges in financial performance. The company’s forward-looking guidance suggests a focus on growth and innovation, with an emphasis on maintaining strong customer relationships and expanding its market presence.