Schrödinger's Q4 2024 Earnings: Unraveling Contradictions in Software Revenue, Drug Discovery, and Hosted Contracts

These are the key contradictions discussed in Schrödinger's latest 2024Q4 earnings call, specifically including: Software Revenue Distribution and Hosted vs On-Prem Contracts, Drug Discovery Revenue Expectations, Software Revenue Seasonality and Customer Transition, and Revenue Recognition and Hosted Contracts:



Software Revenue Growth:
- Schrödinger reported software revenue of $180 million for the year, representing a 13% growth, with $80 million in Q4, a 16% increase.
- The growth was driven by a shift towards hosted contracts, increasing adoption among large pharmaceutical customers, and enhancements to the platform's biologics discovery technologies.

Drug Discovery and Collaborations:
- Drug discovery revenue was $8.7 million in Q4, up from $5.5 million in the previous year, reflecting new milestones and amortization of upfront payments.
- The company expanded its drug discovery collaborations with Novartis and Lilly, contributing to a significant increase in drug discovery activities and revenue expectations.

Financial Guidance and Revenue Distribution:
- For 2025, software revenue guidance is in the range of 10% to 15% growth, with drug discovery revenue expected at $45 million to $50 million.
- The shift towards hosted contracts is anticipated to reduce Q4 revenue concentration and contribute to more balanced quarterly revenue distribution.

Clinical Program Advancements:
- Schrödinger plans to share Phase I clinical data for three lead programs by the end of the year, reflecting significant progress in-dose escalation and safety profiles.
- Advancements in the collaborative and proprietary pipeline are supported by successful dose escalation and initiation of Phase I trials in key programs.