Schrodinger 2025 Q1 Earnings Exceeds Revenue Expectations Amid Wider Net Income Loss

Schrodinger (SDGR) reported its fiscal 2025 Q1 earnings on May 07th, 2025. Schrodinger's earnings surpassed revenue expectations for the quarter, demonstrating robust growth in both software and drug discovery segments. Despite a wider net loss compared to the previous year, the company maintains its financial guidance for 2025. Software revenue is projected to grow 10% to 15%, while drug discovery revenue is anticipated to reach between $45 million and $50 million. The outlook remains positive as the company advances its predictive toxicology solution, expected to contribute significantly to long-term growth.

Revenue

Schrodinger's total revenue increased by 62.7% in Q1 2025, reaching $59.55 million, compared to $36.60 million in Q1 2024. Software revenue led the growth with $48.82 million, driven by larger customer renewals and multiyear contract expansions. Meanwhile, the drug discovery segment contributed significantly, generating $10.73 million, bolstered by milestones from collaborative programs and upfront revenue from the Novartis collaboration.

Earnings/Net Income

Schrodinger reported a loss of $0.82 per share in Q1 2025, widening from a loss of $0.76 per share in Q1 2024, marking a 7.9% increase. The company's net loss grew 9.3%, reaching $59.81 million, up from $54.72 million in the previous year. Overall, the EPS indicates a challenging period for the company.

Price Action

The stock price of Schrodinger edged up 0.30% during the latest trading day, declined 7.45% over the past week, but surged 31.56% month-to-date.

Post-Earnings Price Action Review

Over the past five years, the strategy of purchasing Schrodinger shares following a quarterly revenue drop and holding them for 30 days has delivered a return of 44.85%, underperforming the benchmark return of 84.08%. This strategy resulted in an excess return of -39.24% and achieved a compound annual growth rate (CAGR) of 7.72%. Despite this, the strategy maintained a Sharpe ratio of 0.46, indicating moderate risk-adjusted returns. The maximum drawdown stood at -18.99%, highlighting potential risks during downturns, while volatility reached 16.89%. Overall, while the strategy has shown some positive returns, it has underperformed the benchmark, reflecting challenges in sustaining high returns amidst fluctuating market conditions.

CEO Commentary

Ramy Farid, President & CEO, expressed satisfaction with the company's progress in Q1 2025, emphasizing strong growth in software and drug discovery revenue. He reiterated confidence in the revenue outlook for the year and plans for a beta release of the predictive toxicology solution. Farid remains optimistic about the company's long-term growth trajectory and its position in advancing its business throughout 2025.

Guidance

Schrodinger anticipates software revenue growth between 10% to 15% for 2025. Drug discovery revenue is expected to be between $45 million and $50 million. The company projects a software gross margin of 74% to 75% and operating expense growth below 5% for the year. Q2 software revenue is estimated to be between $38 million and $42 million.

Additional News

Schrodinger recently appointed Bridget van Kralingen to its Board of Directors, enhancing its leadership with her extensive experience in global technology solutions. Van Kralingen, currently a senior partner at Motive Partners, brings valuable insights from her previous executive roles at IBM. Additionally, Schrödinger scientists published research in Nature Communications on a novel computational crystal structure prediction method, improving drug formulation predictions. Furthermore, the company is advancing its predictive toxicology initiative, aligning with the FDA's reduced animal testing requirements, expected to be available to customers later in 2025.