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Schrodinger, Inc. (SDGR)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 total revenue was $59.6M (+63% YoY), with software revenue $48.8M (+46% YoY) and drug discovery revenue $10.7M; SDGR maintained full-year 2025 guidance and issued Q2 software revenue guidance of $38–$42M .
  • Results beat Wall Street consensus: revenue ($54.6M*) and Primary EPS (-$0.73*) versus actual revenue $59.6M and non-GAAP EPS -$0.64; GAAP diluted EPS was -$0.82 .
  • Software gross margin fell to 72% (from 76% YoY) due to the Gates-funded predictive toxicology initiative; overall gross margin was ~52% (similar YoY), and OpEx declined YoY to $82.0M as R&D was lower .
  • Near-term catalysts: initial Phase 1 data for SGR-1505 (MALT1) at EHA and ICML in June; management reiterated strong pipeline momentum and platform adoption by large pharma, while noting minimal contribution from small/emerging biotech customers .

Values marked with * are retrieved from S&P Global.

What Went Well and What Went Wrong

What Went Well

  • Strong top-line beat and mix: total revenue $59.6M (+63% YoY) with software $48.8M (+46% YoY) and drug discovery $10.7M; CFO highlighted “robust” software growth and Novartis collaboration revenue recognition in Q1 .
  • Large-account momentum and hosted transition: on-prem software revenue rose to $25.4M (+44%) and hosted to $10.9M (+52%), with contribution revenue $3.8M from predictive tox; renewals/expansions at global accounts drove growth .
  • Cash collections and liquidity: net operating cash flow was $144.1M (vs. -$39.3M in Q1 2024) driven by receivable collections (including $150M Novartis upfront), boosting cash and marketable securities to $512M by quarter-end; “our financial position is very strong” (CFO) .

What Went Wrong

  • Margin headwind: software gross margin fell to 72% (76% a year ago) due to lower-margin contribution revenue (predictive tox) and royalties; management said margins would have been consistent with prior year absent this mix shift .
  • Bottom-line pressure: GAAP net loss widened to $59.8M (vs. $54.7M), driven by -$13.1M change in fair value of equity investments (Structured Therapeutics) and lower other income; GAAP diluted EPS -$0.82 .
  • SMB biotech demand limited: “growth contribution from new accounts and small and emerging biotech customers was minimal,” with large accounts driving most of the increase; professional services revenue declined 31% as prior contracts completed .

Financial Results

Revenue, EPS, Margins vs Prior Periods and Estimates

MetricQ1 2024Q4 2024Q1 2025Q1 2025 Consensus
Total Revenue ($USD Millions)$36.6 $88.3 $59.6 $54.6*
Software Revenue ($USD Millions)$33.4 $79.7 $48.8 —
Drug Discovery Revenue ($USD Millions)$3.2 $8.7 $10.7 —
GAAP Diluted EPS ($USD)-$0.76 -$0.55 -$0.82 —
Non-GAAP EPS ($USD)-$0.86 -$0.24 -$0.64 -$0.73*
Software Gross Margin (%)76% 83% 72% —

Values marked with * are retrieved from S&P Global.

Segment Breakdown

Software Components ($USD Millions)Q4 2024Q1 2025
On-Prem Software$55.4 $25.4
Hosted Software$11.0 $10.9
Maintenance$5.9 +15% YoY (amount not disclosed)
Contribution Revenue$4.9 $3.8
Professional ServicesDeclined 23% (amount not disclosed) Declined 31% (amount not disclosed)

KPIs (Annual 2024 Context)

KPI20242023
Total ACV ($USD Millions)$190.8 $154.2
ACV of Top 10 Customers ($USD Millions)$73.1 $51.0
Customers with ≥$5M ACV8 4
Customers with ≥$1M ACV31 27
Retention (≥$500k ACV)100% 98%

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Software Revenue GrowthFY 202510%–15% 10%–15% Maintained
Drug Discovery RevenueFY 2025$45M–$50M $45M–$50M Maintained
Software Gross MarginFY 202574%–75% 74%–75% Maintained
Operating Expense GrowthFY 2025<5% <5% Maintained
Cash Used in Operating ActivitiesFY 2025Significantly lower vs 2024 Significantly lower vs 2024 Maintained
Software RevenueQ1 2025$44M–$48M Actual $48.8M Beat vs guidance
Software RevenueQ2 2025N/A$38M–$42M New quarterly guidance

Management also noted remaining drug discovery revenue likely to be “approximately evenly distributed through the remaining quarters” of 2025 .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 2024, Q4 2024)Current Period (Q1 2025)Trend
AI/Technology Initiatives (physics + ML)Platform advances; hosted shift; predictive tox initiative funded by Gates Beta release of predictive tox to select customers later in 2025; expanded protein degrader modeling; TCR structure prediction; CSP method published Strengthening
Hosted vs On-Prem MixHosted rising (86% YoY in Q4 hosted revenue); reducing Q4 concentration On-prem +44% to $25.4M; hosted +52% to $10.9M; continued shift to hosted licenses Sustained transition
Tariffs/MacroLow China exposure; academic/government revenue minimal No direct impact expected from U.S. tariffs; watching policy risks; small biotech demand not a growth driver Monitor
Regulatory/Legal (FDA animal testing)Endorsement of computational methods; predictive tox initiative Strong support for FDA plan; predictive tox expected H2 2025 customer launch Positive catalyst
R&D Execution (Clinical pipeline)Expect initial Phase 1 data in 2025 for 3 programs SGR-1505 data at EHA/ICML in June; SGR-2921 and SGR-3515 initial data in H2 2025 Milestones approaching
Revenue PacingQ4 weighting to ease via hosted Majority of remaining software revenue in Q4; Q2 software guide $38–$42M Q4 still largest

Management Commentary

  • “We are confident about our revenue outlook for the year and are reiterating our full year financial guidance… We look forward to reporting initial data from the Phase 1 clinical study of SGR-1505 next month.” – Ramy Farid, CEO .
  • “Software revenue growth was robust… on-prem software increased by 44% to $25.4M, and hosted revenue grew by 52% to $10.9M… our software gross margin was 72% compared to 76% in Q1 2024, due to the change in revenue mix associated with the Gates grant.” – Geoffrey Porges, CFO .
  • “We expect software revenue in Q2 to be in the range of $38 million to $42 million… and the majority of the year’s remaining software revenue will be recognized in Q4.” – Geoffrey Porges, CFO .
  • “We are very pleased that we have both EHA and ICML abstracts… we plan to provide initial data describing the clinical profile of SGR-1505.” – Karen Akinsanya, President of R&D, Therapeutics .

Q&A Highlights

  • Predictive toxicology differentiation and pricing: SDGR integrates physics and ML to predict off-target binding at scale; pricing to be informed post beta customer feedback later this year .
  • Macro/tariffs and demand: limited China exposure; large pharma renewals/expansions continue; small/emerging biotech contribution minimal; focus remains on global accounts .
  • Quarterly revenue pacing: hosted contracts provide a base in early quarters; majority of remaining 2025 software revenue anticipated in Q4; drug discovery revenue spread more evenly through the year .
  • Cash burn and pipeline optionality: management doesn’t foresee materially higher cash burn next year, maintaining optionality across three lead clinical programs .
  • Large customer renewal timing and hosted mix: elements of a large renewal shifted into Q1; Novartis upfront recognition began as project work ramped .

Estimates Context

MetricQ1 2025 ConsensusQ1 2025 Actual
Revenue ($USD Millions)$54.6*$59.6
Primary EPS ($USD)-$0.73*-$0.64 (non-GAAP)

Values marked with * are retrieved from S&P Global.

Implication: SDGR delivered a clean beat on both revenue and non-GAAP EPS versus consensus. Given maintained FY guidance and near-term clinical catalysts, sell-side estimates on quarterly cadence may shift toward a stronger Q4 concentration consistent with management’s commentary .

Key Takeaways for Investors

  • SDGR beat on Q1 revenue and non-GAAP EPS versus consensus, driven by large-account renewals, hosted growth, and Novartis collaboration revenue recognition .
  • FY 2025 guidance was maintained across software growth, drug discovery, gross margin, OpEx, and cash usage, with new Q2 software revenue guide of $38–$42M suggesting back-half weighting remains intact .
  • Margin headwinds from predictive tox contribution and royalties likely persist near term; management expects reversion toward prior software GM range after the project winds down (mid-2026 risk if extended) .
  • Liquidity strengthened by collections and Novartis upfront, supporting clinical milestones without materially increasing cash burn next year, per CFO .
  • Near-term stock catalysts: SGR-1505 Phase 1 data (EHA/ICML) and subsequent webcast, with additional Phase 1 readouts (SGR-2921, SGR-3515) in H2 2025 .
  • Strategic narrative: physics+ML differentiation, growing hosted base, and large pharma scaling drive durable software growth; SMB biotech remains a weak contributor near term .
  • Estimate trajectory: Expect sell-side to adjust intra-year revenue phasing (strong Q4 concentration) and incorporate predictive tox margin impact, while watching clinical data for potential pipeline value inflections .