Executive Summary

Q3 2025 total revenue was $54.3M (+54% YoY), with software revenue $40.9M (+28% YoY) and drug discovery revenue $13.5M; GAAP EPS was $(0.45) and non-GAAP EPS was $(0.57) .
The company lowered FY25 software revenue growth guidance to 8–13% (from 10–15%), raised drug discovery revenue guidance to $49–52M (from $45–50M), and trimmed software gross margin guidance to 73–75% (from 74–75%), citing timing uncertainty around pharma scale-ups .
Management shifted therapeutics to a discovery-focused model (no independent advancement into clinic beyond ongoing Phase 1 for SGR-1505 and SGR-3515), expecting ~$70M savings alongside earlier $30M reductions to improve long-term profitability .
Operational highlights included steady 73% software gross margin, reduced OpEx (-14% YoY), and cash/marketable securities of $401M; Q3 software revenue beat Q2’s quarterly guidance range ($36–$40M) with $40.9M .

What Went Well and What Went Wrong

What Went Well

Strong top-line: Total revenue +54% YoY ($54.3M) driven by software growth (+28% YoY to $40.9M) and drug discovery ($13.5M vs. $3.4M) .
Expense discipline: OpEx fell to $74.0M (from $86.2M), with R&D down to $42.8M and S&M/G&A lower, supporting a narrower GAAP net loss ($32.8M vs. $38.1M) .
Clear strategic focus: “Beyond our planned clinical investments… we do not intend to advance discovery programs into the clinic independently… actions… expected to result in savings of approximately $70 million” — CEO Ramy Farid .

What Went Wrong

Guidance reduction: FY25 software growth guide cut to 8–13% amid delayed pharma scale-ups and biotech sector headwinds; management noted conversations have greater visibility on size but less on timing to close .
Equity mark-to-market: Other income fell to $13.3M (vs. $30.2M YoY) driven by changes in fair value of equity investments (Q3 change in fair value $9.7M vs. $25.5M YoY), dampening below-the-line contribution .
Program discontinuation: SGR-2921 (CDC7 inhibitor) discontinued after two treatment-related deaths in AML despite early monotherapy activity, removing a near-term clinical data catalyst in hematology .

Financial Results

Metric	Q1 2025	Q2 2025	Q3 2025
Total Revenue ($M)	$59.6	$54.8	$54.3
Software Revenue ($M)	$48.8	$40.5	$40.9
Drug Discovery Revenue ($M)	$10.7	$14.2	$13.5
Software Gross Margin (%)	72%	68%	73%
Operating Expenses ($M)	$82.0	$79.1	$74.0
Other Income ($M)	$(8.9)	$10.0	$13.3
GAAP Net Loss ($M)	$(59.8)	$(43.2)	$(32.8)
GAAP Diluted EPS ($)	$(0.82)	$(0.59)	$(0.45)
Non-GAAP Diluted EPS ($)	$(0.64)	$(0.65)	$(0.57)
Cash, Cash Equivalents & Marketable Securities ($M)	$511.1 (325.997 + 174.301 + 11.764 restricted)	$462.3 (219.901 + 230.284 + 12.079 restricted)	$401.0

Segment Revenue Breakdown

Segment	Q1 2025 ($M)	Q2 2025 ($M)	Q3 2025 ($M)
Software Products & Services	$48.8	$40.5	$40.9
Drug Discovery	$10.7	$14.2	$13.5
Total	$59.6	$54.8	$54.3

KPIs and Operating Detail

KPI	Q1 2025	Q2 2025	Q3 2025
R&D Expense ($M)	$45.8	$43.1	$42.8
Sales & Marketing ($M)	$10.4	$10.7	$9.5
G&A ($M)	$25.8	$25.2	$21.7
Weighted Avg Shares (M)	73.06	73.43	73.61
Software Gross Margin (%)	72%	68%	73%

Estimate Comparison (S&P Global consensus)

Metric	Q3 2025 Consensus	Q3 2025 Actual	# of Estimates
Revenue ($)	$49,616,390*	$54,324,000*	8*
Primary EPS ($)	$(0.7168)*	$(0.57)*	10*
EBITDA ($)	$(52,687,670)*	$(44,482,000)*	—

Note: Values retrieved from S&P Global*

Context: Q3 revenue and EPS beat consensus; software revenue also exceeded Q2 guidance range ($36–$40M) at $40.9M .

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Software Revenue Growth (%)	FY 2025	10%–15% (Aug 6, 2025)	8%–13% (Nov 5, 2025)	Lowered
Drug Discovery Revenue ($M)	FY 2025	$45–$50M (Aug 6, 2025)	$49–$52M (Nov 5, 2025)	Raised
Software Gross Margin (%)	FY 2025	74%–75% (Aug 6, 2025)	73%–75% (Nov 5, 2025)	Lowered (range widened downward)
Operating Expenses	FY 2025	Lower than 2024 (Aug 6, 2025)	Lower than 2024 (Nov 5, 2025)	Maintained (post-May $30M cuts)
Cash Used in Operating Activities	FY 2025	Significantly lower than 2024 (Aug 6, 2025)	Significantly lower than 2024 (Nov 5, 2025)	Maintained
Software Revenue ($M)	Q3 2025	$36–$40M (Q2 guide)	Actual: $40.9M	Beat upper end

Earnings Call Themes & Trends

Topic	Q1 2025 (Q-2)	Q2 2025 (Q-1)	Q3 2025 (Current)	Trend
AI/technology initiatives	Emphasis on computational in R&D; predictive tox expected H2’25 rollout	Beta virtual kinase panel; HERG/PXR/CYP off-target prediction; broader adoption across org	Physics+AI paradigm; 2025-4 release, degraders; predictive tox beta ongoing, expanding anti-targets	Building capabilities, expanding scope
Macro/tariffs/regulatory	Broad push to computational solutions; regulatory openness to new methods	CFO flagged regulatory/tariff uncertainties, drug pricing pressures; resilient pharma demand	Cautious tone: delayed scale-ups; biotech headwinds; early signs of recovery	Near-term cautious, longer-term optimistic
Software growth drivers	Early renewals, hosted contracts, contribution revenue	Hosted revenue growth; renewals skew to Q4; limited new logos	Hosted + on-prem renewals; contribution revenue; expansion within existing accounts	Growth from existing accounts; new logos challenging
Therapeutics strategy	Advancing 3 clinical-stage programs; SGR-1505 data upcoming	SGR-1505 initial Phase 1 encouraging; aim to partner mid/late-stage	Shift to discovery-focused model; SGR-1505 ODD in WM; SGR-3515 data now 1H26; SGR-6016 selected	Partner-first beyond Phase 1; portfolio evolution
Regulatory/legal	FDA Fast Track for SGR-1505 planned engagement	Informal FDA discussions on predictive tox; pilot interest acknowledged	FDA Orphan Drug Designation for SGR-1505 in WM	Regulatory milestones supporting pipeline
R&D execution and OpEx	OpEx growth <5% (initial guide)	$30M expense reduction; FY25 OpEx below 2024	~$70M savings incl. phasing out independent clinical dev; profitability focus	Cost discipline intensifies

Management Commentary

“We are updating our software revenue growth guidance for 2025 to 8%–13% from 10%–15% to reflect our current expectations regarding the timing of certain pharma scale-up opportunities.” — Ramy Farid, CEO .
“We have already realized more than half of the $30 million savings, and the remainder will be realized in 2026… plus the phasing out of independent clinical development activities… savings of approximately $70 million.” — Richie Jain, CFO .
“We now expect to share initial clinical data [for SGR-3515] in the first half of 2026… [and] present new translational data and a clinical update on SGR-1505 at ASH.” — Karen Akinsanya, President & Head of Therapeutics R&D .
“We are pleased to see wide recognition that simulated data is required to realize the full potential of AI in drug discovery… physics-based simulation data are essential for training robust AI models.” — Ramy Farid, CEO .

Q&A Highlights

Profitability and OpEx trajectory: Management reiterated actions toward long-term profitability, with $30M reductions achieved >50% and incremental ~$40M from clinical strategy shift; formal profitability is a meaningful milestone .
Software demand and guidance trim: Delays in pharma scale-up closes and persistent biotech challenges drove a 2ppt reduction to growth guidance; renewals remain on track .
Predictive toxicology: Beta running; strong interest; separately priced add-on targeting tox groups and discovery teams; gross margin impact tied to Gates grant timeline (~2 years from Q3’24) .
Partnership-first clinical approach: Preference to partner mid/late-stage development for SGR-1505 and other programs to accelerate and de-risk; economics have improved as track record grows .
Novartis collaboration: “Excellent progress… a portion of [drug discovery] revenue is related to Novartis progress” .

Estimates Context

Results exceeded Wall Street consensus (S&P Global): revenue $54.3M vs. $49.6M*, EPS $(0.57) vs. $(0.7168), EBITDA $(44.5)M vs. $(52.7)M.
Expect near-term estimate adjustments reflecting stronger Q3 revenue/software margin and higher FY25 drug discovery guide, offset by trimmed FY25 software growth and later SGR-3515 data timing .