Schrodinger, Inc. (SDGR) - Q1 2026 Filing Summary
Business Context and Reporting Period
This summary covers Schrodinger, Inc.'s Quarterly Report on Form 10-Q for the period ended March 31, 2026. The company operates a physics-based computational platform for drug discovery and materials science, generating revenue through software licensing and drug discovery collaborations. The company is classified as a large accelerated filer.
Key Financial Metrics
| Metric | Q1 2026 | Q1 2025 |
|---|---|---|
| Total Revenue | $58.6 million | $59.6 million |
| Net Loss | $(60.0) million | $(59.8) million |
| Loss Per Share (Basic & Diluted) | $(0.81) | $(0.82) |
| Gross Profit | $29.5 million | $31.1 million |
| Operating Loss | $(48.8) million | $(50.9) million |
| Cash & Cash Equivalents (End of Period) | $260.3 million | $230.5 million |
| Total Liquidity (Cash, Restricted Cash, Marketable Securities) | $406.4 million | $395.5 million |
| Operating Cash Flow | $(14.8) million | $144.1 million |
Material Changes vs. Prior Period
- Revenue Mix Shift: Total revenue decreased slightly by 2% year-over-year. This was driven by a 21% decline in Software Products and Services revenue (down $9.4 million), primarily due to a 44% drop in on-premise license fees as customers transition to hosted models. Conversely, Drug Discovery revenue surged 124% (up $12.6 million) to $22.9 million, driven by the Novartis collaboration and accelerated recognition from the Lilly collaboration.
- Contribution Revenue Decline: Contribution revenue plummeted 97% to $0.1 million from $4.3 million in the prior year, attributed to the depletion of allocated funds under agreements with the Bill & Melinda Gates Foundation.
- Operating Expenses: Total operating expenses decreased 4% to $78.3 million. Research and Development (R&D) expenses fell 4% to $43.8 million, largely due to the discontinuation of the SGR-2921 clinical program and reduced external costs for other programs. General and Administrative expenses dropped 11%.
- Equity Investment Volatility: The company recorded a $13.5 million unrealized loss on equity investments, primarily related to its stake in Structure Therapeutics, offsetting a $1.1 million gain on the sale of a portion of that stake.
- Cash Flow Volatility: Operating cash flow swung from a $144.1 million inflow in Q1 2025 to a $14.8 million outflow in Q1 2026. The prior year's strong cash flow was an anomaly driven by a significant decrease in accounts receivable ($215 million collection), whereas the current period saw a net loss offset by non-cash adjustments.
Guidance, Outlook, and Risks
- Strategic Restructuring: Management announced a restructuring in May 2025 expected to save approximately $70 million. The company plans to complete ongoing Phase 1 trials for SGR-1505 and SGR-3515 but will not independently advance other proprietary programs into clinical trials, instead seeking strategic partnerships.
- Revenue Recognition Transition: The company expects near-term revenue declines as it accelerates the transition from on-premise software (recognized upfront) to hosted software (recognized ratably).
- Collaboration Milestones: Significant potential upside exists from collaborations with Novartis (up to $2.27 billion in milestones) and Bristol-Myers Squibb (up to $482 million in milestones), though no milestone revenue was recognized from Novartis in Q1 2026.
- Liquidity Outlook: With $406.4 million in cash and marketable securities, management believes funds are sufficient to operate for at least the next 24 months.
- Risk Factors: Key risks include the company's history of significant operating losses, dependence on the success of collaborators for drug discovery revenue, the uncertainty of clinical trial outcomes for proprietary programs, and the impact of trade tariffs and geopolitical tensions on supply chains.
Investor Verification Checklist
- Software Transition Impact: Verify the rate of customer migration from on-premise to hosted models and its specific impact on future quarterly revenue recognition patterns.
- Drug Discovery Pipeline: Confirm the status of Phase 1 trials for SGR-1505 and SGR-3515 and the timeline for securing strategic partners for these assets.
- Collaboration Milestones: Monitor progress on the Novartis and BMS collaborations to assess the probability of future milestone payments.
- Equity Investment Valuation: Track the fair value of the Structure Therapeutics investment, which significantly impacts non-operating income/loss.
- Cost Reduction Execution: Validate the realization of the projected $70 million in savings from the May 2025 restructuring plan.