Q2 2026 Schrodinger Inc Earnings Call Transcript
Key Points
- ACV growth of 27% in Q2 2026, driven by broad-based demand across large pharma, biotech, and materials science customers.
- Successful launch of Bunsen, an agentic AI co-scientist, with early access and a strategic deployment agreement with Bristol Myers Squibb, expanding platform usage.
- Predictive toxicology solution is gaining traction, with commercial evaluations going well and already contributing to 2026 ACV.
- Strong balance sheet with $419 million in cash and marketable securities, providing financial stability for strategic initiatives.
- Drug discovery revenue increased significantly to $23 million in Q2 2026, driven by a $10 million collaboration milestone from Ajax Therapeutics, and full-year guidance raised to $65-$75 million.
- Operating expenses decreased 6% year-over-year, reflecting disciplined expense management and improved efficiency.
- Therapeutics portfolio continues to generate value, with over $750 million realized since 2020, including recent milestones from the Lilly-Ajax acquisition.
- Hosted revenue percentage increased to 47% of software revenue, indicating successful transition to recurring revenue model.
- Improved biotech sector conditions, with increased IPO activity and reduced customer funding challenges compared to the prior year.
- New global collaboration with Simcere Pharmaceutical Group to advance discovery programs into clinical stages, with potential for milestones and royalties.
- Software gross margin declined to 71% in Q2 2026 from 76% in Q2 2025, due to the accelerated transition to hosted licensing.
- Contribution revenue decreased to $3.4 million in Q2 2026 from $4.8 million in Q2 2025, due to completion of initial Gates Foundation funding for predictive toxicology.
- Total revenue growth is negatively impacted by the planned transition to hosted licenses, which recognizes revenue ratably over contract life.
- The company expects a temporary negative impact on reported revenue from the hosted transition, with each 1% increase in hosted revenue reducing revenue by $2-$3 million.
- Full-year ACV guidance remains at 10%-15% growth, which is lower than the 27% growth seen in Q2, indicating potential slowdown in the second half.
- Predictive toxicology and other new products have long lead times for customer adoption, requiring extensive evaluation and validation, which may delay revenue contributions.
- The company's reliance on a few large customers, such as BMS, for significant platform deployments could concentrate risk.
- Operating expenses, while reduced, remain high at $74 million for the quarter, and the company expects them to be less than 2025 but still substantial.
- The drug discovery revenue increase is partly due to a one-time milestone payment, which may not be recurring.
- The company's net income was boosted by a one-time gain from the Lilly-Ajax acquisition, which may not be sustainable in future quarters.
Thank you for standing by. Welcome to Schrödinger's conference call to review second quarter 2026 financial results. My name is Rob and I will be your operator for today's call. (Operator Instructions) Please be advised that this call is being recorded at the company's request.
Now, I would like to introduce your host for today's conference, Ms. Jaren Madden, Chief Corporate Affairs Officer and Head of Investor Relations. Please go ahead.
Thank you. And good afternoon, everyone. Welcome to today's call, during which we will provide an update on the company and review our second quarter 2026 financial results. Earlier today, we issued the press release summarizing our financial results and progress across the company, which is available on our website at schrodinger.com.
During today's call, management will make statements that are forward-looking and made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995,
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