Business Wire | Nov 12, 2020 07:00AM EST

Schrdinger, Inc. Reports Third Quarter 2020 Financial Results and Business Update

Nov. 12, 2020

NEW YORK--(BUSINESS WIRE)--Nov. 12, 2020--Schrdinger, Inc. (Nasdaq: SDGR), whose physics-based software platform is transforming the way therapeutics and materials are discovered, today announced financial results for the third quarter ended September 30, 2020.

"We are executing on our strategic plan across every area of our business," said Schrdinger CEO Ramy Farid, Ph.D. "We're excited about the strong growth we've seen in our software business and the rapid progress of our internal and collaborative programs to discover and develop therapeutics."

Third Quarter Financial Results

Revenue was $25.8 million for the third quarter of 2020, an increase of 29% compared to the third quarter of 2019.

Software revenue was $22.9 million for the third quarter of 2020, an increase of 42% over the third quarter in 2019. Drug discovery revenue was $2.9 million for the third quarter of 2020, a decline of 24% versus the third quarter of 2019.

Gross profit reached $15.3 million in the third quarter of 2020, an increase of 43% over the third quarter in 2019. Software gross margin was 81% in the third quarter, unchanged versus the third quarter of 2019.

Operating expenses for the third quarter of 2020 were $30.7 million, an increase of 40% over the third quarter of 2019.

Other income, which includes gains on equity investments and changes in fair value of such investments, was $18.7 million in the third quarter of 2020 versus a loss of $0.9 million in the third quarter of 2019. Other income for the third quarter of 2020 included an $18.0 million non-cash gain from our equity in Relay Therapeutics which completed its IPO in July 2020.

Net income, after adjusting for non-controlling interests, was $3.9 million for the third quarter of 2020, compared to a net loss of $11.5 million in the third quarter of 2019.

Schrdinger ended the third quarter of 2020 with cash, cash equivalents, restricted cash and marketable securities of $599.5 million, an increase of $315.0 million from the end of the second quarter of 2020, primarily as a result of net proceeds of $325.6 million from the equity financing in the third quarter.

"In the third quarter, we continued the excellent momentum across our business established in the first half of 2020," said Schrdinger CFO Joel Lebowitz. "With our strong balance sheet and growing revenue, we believe we are well-positioned to continue to invest in R&D and execute on all elements of our strategy."

Third Quarter Business Update

Driving growth in our Software business

* 42% revenue growth in the third quarter of 2020, driven by growth in both Life Sciences and Materials Science revenue

Increased Financial resources

* Raised $325.6 million of net proceeds from an equity follow-on offering * Ending cash, cash equivalents, restricted cash and marketable securities for the third quarter were $599.5 million

Advancing internal discovery programs and pipeline progress

* Expect to initiate IND enabling studies in 2021 on most advanced internal programs * Presenting data on our MALT 1 inhibitor program at the American Society of Hematology (ASH) Annual Meeting & Exposition; progressing research in single agent and combination studies targeting B-cell lymphomas

Advancing the underlying science of our platform and methods

* Several scientific publications describing and validating our differentiated computational platform Improved methods for accurately modeling the relative binding free energies of metalloenzyme inhibitors Improved approaches to optimize binding selectivity Validation and extension of our technologies to more comprehensively support macrocycle design and optimization

"We are very pleased with the significant progress we have made this year on our software business, our drug discovery collaborations and our internal pipeline," said Dr. Farid. "Our ongoing commitment to advance the science underlying our industry-leading physics-based computational platform to achieve new breakthroughs will drive our continued success."

Business Impact of COVID-19 Pandemic

While we did not see material impacts to our business from the COVID-19 pandemic during the first nine months of 2020, we have identified certain market risks that, if they materialize, could affect the growth of our software business and the timing of our drug discovery revenues for at least the remainder of 2020. Some of our software customers may experience increasing budgetary pressures, which may cause them to delay or reduce purchases. In addition, our sales force has limited in-person interactions, and their ability to attend industry conferences and events that promote and expand knowledge of our company and platform has been hampered. Relative to our drug discovery programs, certain programs, particularly ones that are in clinical studies or preparing to enter clinical studies, could be delayed which could result in delays in achieving milestones and related revenue. While there remains uncertainty about the extent of the effect of the COVID-19 pandemic, we do not envision a long-term impact from the COVID-19 pandemic on our ability to execute on our long-term strategy.

Webcast and Conference Call Information

Schrdinger will host a conference call to discuss its third quarter financial results on Thursday, November 12, 2020 at 8:30 AM Eastern Time. The conference call can be accessed live over the phone by dialing (833) 727-9520 (domestic) or +1 (830) 213-7697 (international) and refer to conference ID 8486343. The webcast can be accessed under "News & Events" in the investors section of Schrdinger's website, https://ir.schrodinger.com/newsand-events/event-calendar. The archived webcast will be available on Schrdinger's website following the event.

About Schrdinger

Schrdinger is transforming the way therapeutics and materials are discovered. Schrdinger has pioneered a physics-based software platform that enables discovery of high-quality, novel molecules for drug development and materials applications more rapidly and at lower cost compared to traditional methods. The software platform is used by biopharmaceutical and industrial companies, academic institutions, and government laboratories around the world. Schrdinger's multidisciplinary drug discovery team also leverages its software platform to advance collaborative programs and its own pipeline of novel therapeutics to address unmet medical needs.

Founded in 1990, Schrdinger has over 400 employees and is engaged with customers and collaborators in more than 70 countries. To learn more visit www.schrodinger.com and follow us on LinkedIn and Twitter.

Cautionary Note Regarding Forward-Looking Statements

This press release contains forward-looking statements within the meaning of The Private Securities Litigation Reform Act of 1995 including, but not limited to those regarding our expectations about the speed and capacity of our computational platform, our plans to continue to invest in research and our strategic plans to accelerate the growth of our software business and advance our collaborative and internal drug discovery programs, our ability to improve and advance the science underlying our platform, including through these use of new technologies, the timing of potential IND-enabling studies for our internal drug discovery programs, our expectations related to the use of our cash, cash equivalents, and marketable securities as well as our expectations related to the COVID-19 pandemic's impact on our business. Statements including words such as "anticipate," "believe," "contemplate," "continue," "could," "estimate," "expect," "intend," "may," "might," "plan," "potential," "predict," "project," "should," "target," "will," "would" and statements in the future tense are forward-looking statements. These forward-looking statements reflect our current views about our plans, intentions, expectations, strategies and prospects, which are based on the information currently available to us and on assumptions we have made. Actual results may differ materially from those described in these forward-looking statements and are subject to a variety of assumptions, uncertainties, risks and factors that are beyond our control, including the demand for our software solutions, our ability to further develop our computational platform, our reliance upon third-party providers of cloud-based infrastructure to host our software solutions, our reliance upon our third-party drug discovery collaborators, the ability to retain and hire key personnel and the direct and indirect impacts of the ongoing COVID-19 pandemic on our business and other risks detailed under the caption "Risk Factors" and elsewhere in our Securities and Exchange Commission filings and reports, including our Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2020 filed with the Securities and Exchange Commission on November 12, 2020, as well as future filings and reports by us. Any forward-looking statements contained in this press release speak only as of the date hereof. Except as required by law, we undertake no duty or obligation to update any forward-looking statements contained in this press release as a result of new information, future events, changes in expectations or otherwise.

Condensed Consolidated Statements of Operations (Unaudited)(in thousands, except for share and per share amounts) Three Months Ended Nine Months Ended September 30, September 30,

2020 2019 2020 2019

Revenues:Software $ 22,861 $ 16,118 $ 67,573 $ 49,205 products andservicesDrug discovery 2,936 3,842 7,490 10,506

Total revenues 25,797 19,960 75,063 59,711

Cost ofrevenues:Software 4,334 3,097 12,197 9,901 products andservicesDrug discovery 6,191 6,152 18,386 16,244

Total cost of 10,525 9,249 30,583 26,145 revenuesGross profit 15,272 10,711 44,480 33,566

Operatingexpenses:Research and 17,019 10,353 47,376 28,322 developmentSales and 3,969 5,185 13,120 15,621 marketingGeneral and 9,729 6,465 28,316 20,491 administrativeTotal operating 30,717 22,003 88,812 64,434 expensesLoss from (15,445 ) (11,292 ) (44,332 ) (30,868 )operationsOther income:Gain on equity - - 4,156 - investmentsChange in fair 18,233 (1,427 ) 23,513 10,607 valueInterest income 463 501 1,732 1,463

Total other 18,696 (926 ) 29,401 12,070 income (loss)Income (loss) 3,251 (12,218 ) (14,931 ) (18,798 )before incometaxesIncome tax (35 ) (257 ) 120 (262 )(benefit)expenseNet income 3,286 (11,961 ) (15,051 ) (18,536 )(loss)Net lossattributable to (566 ) (453 ) (1,727 ) (734 )noncontrollinginterestNet income(loss)attributable to $ 3,852 $ (11,508 ) $ (13,324 ) $ (17,802 )Schr?dingercommon andlimited commonstockholdersNet income(loss) pershareattributable to $ 0.06 $ (0.26 ) $ (0.23 ) $ (0.40 )Schr?dingercommon andlimited commonstockholders,basic:Weightedaverage sharesused to computenet income(loss)per share 66,339,570 44,879,188 56,802,567 44,623,383 attributable toSchr?dingercommon andlimited commonstockholders,basic: Net income(loss) pershareattributable to $ 0.05 $ (0.26 ) $ (0.23 ) $ (0.40 )Schr?dingercommon andlimited commonstockholders,diluted:Weightedaverage sharesused to computenet income(loss)per share 72,693,173 44,879,188 56,802,567 44,623,383 attributable toSchr?dingercommon andlimited commonstockholders,diluted:Condensed Consolidated Balance Sheets (Unaudited)(in thousands, except for share and per share amounts)AssetsSeptember 30, 2020December 31, 2019Current assets:Cash and cash equivalents$

210,490

$

25,986

Restricted cash500

500

Marketable securities388,494

59,844

Accounts receivable, net of allowance for doubtful accounts of $50 and $5012,290

18,676

Unbilled and other receivables4,891

7,062

Prepaid expenses4,449

6,468

Total current assets621,114

118,536

Property and equipment, net5,296

6,268

Equity investments40,914

15,366

Right of use assets10,583

12,762

Other assets2,209

2,338

Total assets$

680,116

$

155,270

Liabilities, Convertible Preferred Stock, and Stockholders' Equity (Deficit)Current liabilities:Accounts payable$

4,812

$

3,524

Accrued payroll, taxes, and benefits7,702

7,034

Deferred revenue19,067

25,054

Lease liabilities5,491

5,584

Other accrued liabilities2,204

3,824

Total current liabilities39,276

45,020

Deferred revenue, long-term2,592

2,205

Lease liabilities, long-term6,762

8,888

Other liabilities, long-term600

900

Total liabilities49,230

57,013

Commitments and contingenciesConvertible preferred stock:Series E convertible preferred stock, $0.01 par value. Authorized zero and 77,150,132shares; zero and 73,795,777 shares issued and outstanding at September 30, 2020 andDecember 31, 2019, respectively-

109,270

Series D convertible preferred stock, $0.01 par value. Authorized zero and 39,540,611shares; zero and 39,540,611 shares issued and outstanding at September 30, 2020 andDecember 31, 2019, respectively-

22,000

Series C convertible preferred stock, $0.01 par value. Authorized zero and 47,242,235shares; zero and 47,242,235 shares issued and outstanding at September 30, 2020 andDecember 31, 2019, respectively-

19,844

Series B convertible preferred stock, $0.01 par value. Authorized zero and 29,468,101shares; zero and 29,468,101 shares issued and outstanding at September 30, 2020 andDecember 31, 2019, respectively-

9,840

Series A convertible preferred stock, $0.01 par value. Authorized zero and 134,704,785shares; zero and 134,704,785 shares issued and outstanding at September 30, 2020 andDecember 31, 2019, respectively-

30,626

Total convertible preferred stock-

191,580

Stockholders' equity (deficit):Common stock, $0.01 par value. Authorized 500,000,000 and 425,000,000 shares; 56,298,216 and6,121,821 shares issued and outstanding at September 30, 2020 and December 31, 2019, respectively563

61

Limited common stock, $0.01 par value. Authorized 100,000,000 and 146,199,885 shares; 13,164,193and zero shares issued and outstanding at September 30, 2020 and December 31, 2019, respectively132

-

Additional paid-in capital748,123

11,655

Accumulated deficit(118,420

)

(105,096

)

Accumulated other comprehensive income480

16

Total stockholders' equity (deficit) of Schr?dinger stockholders630,878

(93,364

)

Noncontrolling interest8

41

Total stockholders' equity (deficit)630,886

(93,323

)

Total liabilities, convertible preferred stock, and stockholders' equity (deficit)$

680,116

$

155,270

Condensed Consolidated Balance Sheets (Unaudited)(in thousands, except for share and per share amounts) Assets September December 31, 30, 2020 2019Current assets:Cash and cash equivalents $ 210,490 $ 25,986

Restricted cash 500 500

Marketable securities 388,494 59,844

Accounts receivable, net of allowance for doubtful 12,290 18,676 accounts of $50 and $50Unbilled and other receivables 4,891 7,062

Prepaid expenses 4,449 6,468

Total current assets 621,114 118,536

Property and equipment, net 5,296 6,268

Equity investments 40,914 15,366

Right of use assets 10,583 12,762

Other assets 2,209 2,338

Total assets $ 680,116 $ 155,270

Liabilities, Convertible Preferred Stock, andStockholders' Equity (Deficit)Current liabilities:Accounts payable $ 4,812 $ 3,524

Accrued payroll, taxes, and benefits 7,702 7,034

Deferred revenue 19,067 25,054

Lease liabilities 5,491 5,584

Other accrued liabilities 2,204 3,824

Total current liabilities 39,276 45,020

Deferred revenue, long-term 2,592 2,205

Lease liabilities, long-term 6,762 8,888

Other liabilities, long-term 600 900

Total liabilities 49,230 57,013

Commitments and contingenciesConvertible preferred stock:Series E convertible preferred stock, $0.01 parvalue. Authorized zero and 77,150,132 - 109,270 shares; zero and 73,795,777 shares issued andoutstanding at September 30, 2020 andDecember 31, 2019, respectivelySeries D convertible preferred stock, $0.01 parvalue. Authorized zero and 39,540,611 - 22,000 shares; zero and 39,540,611 shares issued andoutstanding at September 30, 2020 andDecember 31, 2019, respectivelySeries C convertible preferred stock, $0.01 parvalue. Authorized zero and 47,242,235 - 19,844 shares; zero and 47,242,235 shares issued andoutstanding at September 30, 2020 andDecember 31, 2019, respectivelySeries B convertible preferred stock, $0.01 parvalue. Authorized zero and 29,468,101 - 9,840 shares; zero and 29,468,101 shares issued andoutstanding at September 30, 2020 andDecember 31, 2019, respectivelySeries A convertible preferred stock, $0.01 parvalue. Authorized zero and 134,704,785 - 30,626 shares; zero and 134,704,785 shares issued andoutstanding at September 30, 2020 andDecember 31, 2019, respectivelyTotal convertible preferred stock - 191,580

Stockholders' equity (deficit):Common stock, $0.01 par value. Authorized500,000,000 and 425,000,000 shares; 56,298,216 and 563 61 6,121,821 shares issued and outstanding atSeptember 30, 2020 and December 31, 2019,respectivelyLimited common stock, $0.01 par value. Authorized100,000,000 and 146,199,885 shares; 13,164,193 132 - and zero shares issued and outstanding at September30, 2020 and December 31, 2019, respectivelyAdditional paid-in capital 748,123 11,655

Accumulated deficit (118,420 ) (105,096 )

Accumulated other comprehensive income 480 16

Total stockholders' equity (deficit) of Schr?dinger 630,878 (93,364 )stockholdersNoncontrolling interest 8 41

Total stockholders' equity (deficit) 630,886 (93,323 )

Total liabilities, convertible preferred stock, and $ 680,116 $ 155,270 stockholders' equity (deficit)Condensed Consolidated Statements of Cash Flows (Unaudited)(in thousands)Nine Months Ended September 30,

2020

2019

Cash flows from operating activities:Net loss$

(15,051

)

$

(18,536

)

Adjustments to reconcile net loss to net cash used inoperating activities:Gain on equity investments(4,156

)

-

Noncash revenue from equity investments(342

)

(139

)

Fair value adjustments(23,513

)

(10,607

)

Depreciation2,648

2,732

Stock-based compensation7,542

1,612

Noncash research and development expenses1,694

680

Noncash investment accretion359

(277

)

Decrease (increase) in assets:Accounts receivable, net6,386

1,760

Unbilled and other receivables2,580

2,719

Reduction in the carrying amount of right of use assets3,957

3,045

Prepaid expenses and other assets290

658

Increase (decrease) in liabilities:Accounts payable1,254

3,324

Accrued payroll, taxes, and benefits668

896

Deferred revenue(5,258

)

(1,461

)

Lease liabilities(3,997

)

(2,961

)

Other accrued liabilities(1,922

)

1,761

Net cash used in operating activities(26,861

)

(14,794

)

Cash flows from investing activities:Purchases of property and equipment(1,652

)

(1,679

)

Purchases of equity investments(2,869

)

-

Distribution from equity investment4,582

-

Purchases of marketable securities(446,816

)

(96,278

)

Proceeds from sale and maturity of marketable securities118,272

37,725

Net cash used in investing activities(328,483

)

(60,232

)

Cash flows from financing activities:Issuances of common stock upon initial public offering, net211,491

-

Issuances of common stock upon follow-on public offering, net325,610

-

Issuances of Series E preferred stock, net-

29,893

Issuances of common stock upon stock option exercise2,747

425

Contribution by noncontrolling interest-

100

Payment of deferred offering costs-

(19

)

Net cash provided by financing activities539,848

30,399

Net increase (decrease) in cash and cash equivalents and restricted cash184,504

(44,627

)

Cash and cash equivalents and restricted cash, beginning of period26,486

77,716

Cash and cash equivalents and restricted cash, end of period$

210,990

$

33,089

Supplemental disclosure of cash flow and noncash informationCash paid for income taxes$

225

$

91

Supplemental disclosure of non-cash investing and financing activitiesAccrued deferred offering costs10

928

Purchases of property and equipment24

-

Acquisitions of right of use assets in exchange for lease obligations1,778

464

Right of use assets recognized on adoption-

16,475

Reclass of deferred financing costs to additional paid in capital1,858

-

View source version on businesswire.com: https://www.businesswire.com/news/home/20201112005038/en/

CONTACT: Media Contact: Stephanie Simon Ten Bridge Communications stephanie@tenbridgecommunications.com 617-581-9333

CONTACT: Investor Contact: Christina Tartaglia Stern IR, Inc. christina.tartaglia@sternir.com 212-362-1200