SDGR Q4 2025 Earnings Call Summary

Total Revenue: $256 million for 2025, a 23% increase year-over-year.
Software Revenue: $199.5 million, with an annual contract value (ACV) of $198.5 million, reflecting an 11% increase.
Drug Discovery Revenue: $56.4 million, more than doubling from the previous year.
Gross Margin: Software gross margin decreased to 74% from 80% in 2024 due to higher costs associated with grant contributions.
Net Loss: $103 million, improved from a net loss of $187 million in 2024.
Cash Position: Strong balance sheet with $402 million in cash.
Operating Expenses: Total operating expenses were $310 million, down approximately 9% from 2024.

Schrodinger is advancing its computational platform for molecular discovery, integrating physics and AI.
The company aims to transition to a primarily hosted software model, with 23% of software revenue already from hosted contracts.
Significant progress in therapeutics, with molecules advancing in clinical pipelines and collaborations with various biotech firms.
The beta version of a predictive toxicology solution was released, generating positive feedback.
The company is focused on expanding its software business and increasing adoption across both established and new markets.

For 2026, Schrodinger expects software ACV to be between $218 million and $228 million, representing 10% to 15% growth.
Anticipated drug discovery revenue is projected to be between $55 million and $65 million.
The company aims to achieve positive adjusted EBITDA by 2028, supported by disciplined expense management and growth in both software and drug discovery segments.

Revenue Recognition Transition: The shift to hosted contracts may lead to reduced revenue recognition in the near term, impacting gross margins and adjusted EBITDA.
Net Dollar Retention: Fell to 100% from over 110% in previous years, indicating challenges in expanding relationships amid a tough funding environment for pharma and biotech.
Customer Acquisitions: The acquisition of two major customers by larger pharma companies reduced customer count, although their value and throughput were retained.
Market Environment: The overall biotech funding environment remains challenging, which could impact future growth.

Management emphasized that the transition to hosted contracts is a strategic move to provide a more predictable revenue profile, despite short-term revenue impacts.
There is optimism around the integration of AI in R&D, with management noting that it enhances demand for Schrodinger's software.
The predictive toxicology platform is expected to contribute to growth, with both existing and new customers likely to adopt it.
The company remains cautious about the timing of a biotech rebound and its potential impact on future revenue growth.
Management highlighted that while they are not guiding on specific revenue figures for 2026, they are focused on ACV as a key performance indicator during this transition period.

SDGR — Schrödinger, Inc.