Schrödinger, Inc. (NASDAQ:SDGR) Q1 2023 Earnings Call Transcript

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Michael Ryskin: That was the first part. So the second part is unrelated to that. But second question is sort of if you look at your drug discovery revenue this year and you look at sort of the cash inflows you’ve recognized year-to-date in some of the comments you made about 2Q, really positive contributors to the balance sheet. And as we think about drug discovery going forward, it should continue to be a meaningful and potentially growing part of the business. So you roll that together and you’re rolling — you add in the gross profit dollars you generated from software. You’re approaching the area where your free cash flow breakeven, sometimes positive ones a little bit negative, but starting this year and potentially going out, does that change your perspective in any way in terms of your rate of spend on internal programs, if you think about it from a — we are now essentially self-cash sufficient?

Ramy Farid: Yes. That’s a really, really good question. And certainly a question that we all think about quite a lot. At conclusion, I think, from those discussions is that we have a unique technology, a unique time point and probably a unique opportunity to invest in our technology and invest in the programs that are emerging from the technology. And so — you’re right. If you kind of look ahead at some trajectories, you can kind of see the picture that you described. But I think that we — if we fail to capitalize on all of those uniques that I described, then we will fail to achieve the value that we think that we can achieve and that we can deliver for investors. So I think that we want to really take advantage of all of these opportunities.

Operator: Thank you. The next question comes from Gaurav Goparaju from Berenberg .

Unidentified Analyst: This is Annabel on for Gaurav. I have 2 questions. One, regarding Nimbus and Takeda, given the $147 million tax received, which was 4% of the $4 billion upfront payment by Takeda, should we assume a similar percentage to Shortage on the potential $2 billion in sales-based milestones, which would imply around $74 million in cash if achieved. And then also the starting year, are you seeing more software revenue contribution from existing customers increasing the consumption or from new customers licensing software for the first time.

Ramy Farid: Okay. Let me add I’ll tackle the first question. Yes is the answer. We are assuming that we get the additional distribution for those last 2 revenue milestones. As you know, there are significant revenue tranches that would trigger those milestones. But yes, if those miles turns occur, we would assume that the distribution is as you calculated. Go ahead.

Unidentified Analyst: Yes. No, no, no.

Ramy Farid: Sorry, you go ahead.

Unidentified Analyst: Go ahead.

Ramy Farid: So they’re really, really simple, and it’s what we’ve been saying in the answer to the question about where the growth is coming from absolutely coming more and more from existing customers increasing their usage of the software and more and more from larger customers, which again is why we’re seeing this shift in Q4.

Operator: Thank you. Ramy, I am showing no further questions at this time. That concludes today’s call. You may now disconnect.

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