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Schrodinger Inc (SDGR) Q1 2024 Earnings Call Transcript Highlights: A Mixed Start with ...

GuruFocus Research
·4-min read

  • Total Revenue: $36.6 million in Q1 2024, down from $64.8 million in Q1 2023.

  • Software Revenue: $33.4 million in Q1 2024, a 4% increase year-over-year.

  • Drug Discovery Revenue: $3.2 million in Q1 2024, significantly lower compared to $32.6 million in Q1 2023.

  • Hosted Software Revenue: Grew over 60% year-over-year, representing 22% of total revenue.

  • Software Gross Margin: 76% in Q1 2024, slightly down from 78% in Q1 2023.

  • Drug Discovery Margin: Negative in Q1 2024, compared to a profit in Q1 2023.

  • Total Gross Margin: 52% in Q1 2024, a decrease from 71% in Q1 2023.

  • Operating Expenses: $86 million in Q1 2024, up from $76 million in Q1 2023.

  • Net Loss Per Diluted Share: $0.76 in Q1 2024, compared to a profit of $1.75 in Q1 2023.

  • Cash and Marketable Securities: $436 million at the end of Q1 2024, down from $469 million at the end of Q4 2023.

Release Date: May 01, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

  • Schrodinger Inc (NASDAQ:SDGR) reported a solid start to the year with revenue growth meeting expectations.

  • The company announced IND clearance for STR. 35 15, expanding their clinical program portfolio.

  • Schrodinger Inc (NASDAQ:SDGR) has seen a significant increase in hosted software revenue, growing more than 60% compared to Q1 last year.

  • The company continues to advance its proprietary pipeline with multiple clinical programs progressing.

  • Schrodinger Inc (NASDAQ:SDGR) is actively developing computational solutions to predict drug toxicity risks, enhancing their scientific leadership in the industry.

Negative Points

  • Schrodinger Inc (NASDAQ:SDGR) experienced a decrease in total revenue in Q1 2024 compared to Q1 2023, primarily due to lower drug discovery revenue.

  • The company's business in China has been below expectations this year, impacted by a challenging commercial environment.

  • Schrodinger Inc (NASDAQ:SDGR) reported a net loss per diluted share of $0.76 in Q1 2024, compared to a profit in Q1 2023.

  • Operating loss increased significantly in Q1 2024 to $67 million, compared to $31 million in the same period a year ago.

  • The company's gross margin declined to 52% in Q1 2024 from 71% in Q1 2023, driven by lower drug discovery revenue.

Q & A Highlights

Q: Can you discuss the software business trends, particularly the shift from Q1 to Q2 and the impact on the full year? A: Geoffrey Porges, CFO, explained that a few small contracts expected in Q1 were delayed to Q2 due to logistical reasons, not reflecting underlying business trends. He emphasized strong confidence in the full-year outlook, despite some challenges in China, highlighting that major renewals typically occur in Q4.

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Q: What are the expectations for the MALT1 inhibitor study in B-cell lymphomas? A: Karen Akinsanya, President of R&D Therapeutics, noted the clinical validation of the MALT1 mechanism, showing promising monotherapy responses. She highlighted the potential for significant efficacy, particularly in combination with other treatments like BTK and BCL2 inhibitors.

Q: How is the transition to hosted software solutions progressing? A: Geoffrey Porges mentioned a gradual increase in hosted software revenue, which aligns with the company's strategy to transition customers from on-premises to hosted solutions. This shift is expected to continue over several years, contributing to a more stable revenue stream.

Q: Can you provide an update on the biotech end markets and how it influences your guidance? A: Geoffrey Porges acknowledged a stabilization in the biotech market, with no increase in non-renewals and some early-stage companies showing interest in accessing Schrodinger's software, potentially boosting future contracts.

Q: What are the plans for the newly IND-cleared SGN-3515, and how do you approach patient selection? A: Karen Akinsanya discussed the strategy for SGN-3515, targeting patients with elevated replication stress. She mentioned leveraging a collaboration with MD Anderson to identify sensitive tumor types, aiming for effective patient selection in upcoming clinical trials.

Q: What is the financial outlook for 2024 following the Q1 results? A: Geoffrey Porges reiterated confidence in the full-year guidance, attributing the solid Q1 performance to consistent software revenue and controlled expenses. He highlighted the potential for significant contract renewals and advancements in proprietary drug programs as key drivers for the year's outlook.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.