Welcome to Schrödinger's Conference Call to review First Quarter 2022 Financial Results. My name is Charlie, and I'll be your operator for today's call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star one on your telephone. If you require any further assistance, please press star zero. 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, Senior Vice President of Investor Relations and Corporate Affairs. 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 first quarter 2022 financial results. Earlier today, we issued a press release summarizing our financial results and progress across the company, which is available on our website at www.schrödinger.com. Here with me on our call today are Ramy Farid, Chief Executive Officer, Jenny Herman, Senior Vice President of Finance and Corporate Controller, and Karen Akinsanya, President of R&D Therapeutics. Following our prepared remarks, we'll open the call for Q&A. I'd like to remind you that during today's call, management will make statements related to our business that are forward-looking and are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995, including without limitation, statements related to our future financial performance, including our outlook for the full year 2022 and for the quarter ending June 30th, 2022, our strategic plans to accelerate the growth of our software business and advance our collaborative and wholly-owned drug discovery programs, the timing of potential IND submissions and initiation of clinical trials for our wholly-owned drug discovery programs, risks related to the COVID-19 pandemic, our expectations related to the use of our cash equivalents, and marketable securities, as well as our future operating expenses. These forward-looking statements reflect our views about our plans, intentions, expectations, strategies, and prospects, which are based on the information available to us and on assumptions we have made. Actual results may differ materially from those described in the forward-looking statements and are subject to a variety of assumptions, uncertainties, risks, and important factors that are beyond our control, including the demand for our software solutions, our ability to develop our computational platform, our reliance upon our drug discovery collaborators and other risks detailed under the caption Risk Factors and elsewhere in our most recent Securities and Exchange Commission filings and reports. Except as required by law, we undertake no duty or obligation to provide any update on our forward-looking statements discussed on this call as a result of new information, future events, changes in expectations, or otherwise. These forward-looking statements should not be relied upon as representing our views as of any date subsequent to today. With that, I'd like to turn the call over to Ramy. Thanks, Jaren, and thank you everyone for joining us today. At Schrödinger, we have developed a computational platform that is transforming the way therapeutics and materials are discovered. We license our platform to biopharma and materials companies, as well as government and academic institutions around the world. We are continuing to see a shift in how our software customers are incorporating digital chemistry into their research, and we're excited about our leadership role in advancing a new discovery paradigm. We are very pleased with the strong start we've had to the year. We reported first quarter software revenue of $33.1 million, a 26% increase over the prior year. We are also seeing nice progress across our collaborative programs. We recognized multiple milestones during the first quarter, which helped drive drug discovery revenue of $15.6 million. The strong revenues across both aspects of our business led to total revenue of $48.7 million for the first quarter. We believe this momentum positions us for continued success this year. We've built a highly differentiated company that we believe enables us to continue to innovate while providing a solid foundation of growing revenue. We ended the quarter with approximately $529 million in cash, and we believe we have sufficient runway to fund our operations for the foreseeable future, including advancing our wholly owned programs into clinical studies. As you'll hear from Karen, we are also continuing to make progress across our wholly owned pipeline. Our MALT1 inhibitor, SGR-1505, is expected to enter the clinic later this year. We are also pleased to see continued progress across our collaborative programs, including the initiation of a phase II-A study for one of Morphic Therapeutic's programs, which further demonstrates the impact of our platform. Today, we are announcing that we recently entered into a three-year collaboration with Eonix to accelerate the discovery and design of materials for safer and energy-dense lithium-ion batteries. As part of the agreement, we received an equity stake in Eonix. This is our first equity-based collaboration within our materials science business, and we're excited to work with the Eonix team. We see several parallels between this collaboration and our collaboration with Nimbus, which is a clinical stage company founded in 2009. Nimbus has since progressed a deep pipeline and played a key role in validating our drug discovery platform. Before we review our first quarter financial results, I would like to introduce Jenny Herman, our Senior Vice President of Finance and Corporate Controller. Jenny joined Schrödinger in 2002, the same year I joined the company. She has played a key role in executing our financings, including our 2020 IPO and in building our global finance team. I will now turn the call over to Jenny. Thank you, Ramy, and hello, everyone. I am pleased to discuss our financial results for the first quarter of this year. Total revenue was $48.7 million, up 51% compared to the first quarter of 2021. Software revenue was $33.1 million, representing 26% growth compared to the first quarter of 2021. As in prior quarters, the growth in software revenue was primarily driven by increased adoption of our software solution by existing customers, as well as the addition of new customers during the quarter. Drug discovery revenue was $15.6 million, compared to $5.8 million in the first quarter of 2021. Drug discovery revenue for the quarter included $4 million in revenue recognized from our ongoing collaboration with Bristol Myers Squibb, as well as $9 million of revenue from preclinical milestones related to two of our collaborative programs, which were recognized earlier in the year than expected. Gross profit was $28 million in the first quarter of 2022, up 73% over the first quarter of 2021. Software gross margin was 77% in the first quarter of 2022, compared to 78% for the same period in the prior year. We continue to make investments to support the rollout of large-scale deployments of our platform. Operating expense was $56.6 million, compared to $40.1 million for the same quarter last year. This reflects our continued investment in R&D to advance the science underlying the platform and to progress our internal drug discovery programs, as well as infrastructure costs and the addition of staff and G&A functions to support our business. We recorded a net loss of approximately $34.5 million for the first quarter of 2022, compared to a loss of approximately half a million for the same period in the prior year. As we mark-to-market the equity stakes we hold in our collaborators each quarter, we can experience significant fluctuations in the value of our holdings. We recorded a $6.2 million loss on our equity holdings in the first quarter of 2022, compared to a $24.8 million gain in the first quarter of 2021. We ended the quarter with cash equivalents, marketable securities, and restricted cash balances of approximately $529 million, compared to approximately $579 million on December 31st, 2021. Cash expenses included the purchase of XTAL, the structural biology company we acquired in January, and several annual expenses that we paid in the first quarter. In February, we provided our financial outlook for the full year, and today we are reaffirming that guidance. We expect total annual revenue to be in the range of $161 million-$181 million, corresponding to 17%-31% growth over 2021. We continue to expect software revenue to range from $126 million-$136 million, representing 11%-20% growth over 2021. Consistent with prior years, we expect that our first and fourth quarters will be our largest revenue quarters with the greatest proportion of the annual revenue coming in the fourth quarter, as was the case in each of the last two years. For the second quarter specifically, we expect software revenue to range from $28 million-$30 million. This reflects approximately 21% growth over the second quarter of 2021 at the midpoint. We continue to expect drug discovery revenue to range from $35 million-$45 million, reflecting 42%-82% growth over last year. Drug discovery revenue fluctuates from quarter- to- quarter, largely based on the timing of achieving certain milestones within our collaborative programs. Finally, we continue to anticipate that operating expense growth will be slightly lower than the 42% annual growth rate we saw in 2021 as we invest in advancing our internal programs into the clinic. We expect our software gross margin percentage to be in the mid-70s%. We are very pleased with the progress we have made so far this year, which we believe positions us for continued momentum as we look ahead. I'll now turn the call over to Karen for an update on our drug discovery programs. Thank you, Jenny, and good afternoon, everyone. We are continuing to make important advances on many fronts across our portfolio of collaborative programs and our internal drug discovery pipeline. We are pleased to see a growing number of programs advance through discovery, preclinical, and clinical development. As highlighted earlier, multiple collaboration programs advanced through discovery ahead of schedule, which underscores the impact of our platform. A total of seven collaborative programs are in the clinic. In March, Morphic Therapeutic announced initiation of their phase II-A clinical trial of MORF-057 and oral alpha-4 beta-7 integrin inhibitor. Today, I will highlight the progress made on our three most advanced wholly-owned programs, starting with SGR-1505, our MALT1 inhibitor. MALT1 has emerged as a potential therapeutic strategy to treat certain B-cell lymphomas, including relapsed or resistant B-cell lymphomas and mantle cell lymphoma. Pre-IND interactions with the FDA are complete, and we remain on track to submit our IND in the first half of this year. Subject to regulatory clearance, we expect to initiate our first phase 1 clinical study of SGR-1505 in the second half of 2022. We are planning a multicenter dose escalation study in patients with relapsed or refractory B-cell malignancies in which we will evaluate the safety, pharmacokinetics, and pharmacodynamics and early signals of antitumor activity of SGR-1505. We plan to pursue expansion cohorts once we have determined the recommended dose. This will be the first clinical study within our internal pipeline, and we look forward to reaching this important milestone. Moving to our WEE1 program. Last month, we presented very encouraging preclinical data at the American Association for Cancer Research. We have identified differentiated WEE1 inhibitors that demonstrate antitumor activity with desirable pharmacokinetic and pharmacodynamic properties in multiple preclinical models, including models of lung, ovarian, and breast cancer. The representative molecule from our lead series showed that antitumor effects were maintained during dosing holidays, a feature that we think may be clinically beneficial given the known on-target hematological effects of inhibiting WEE1. Our compounds also showed no detectable CYP3A4 time-dependent inhibition while maintaining potency, selectivity, and antitumor activity. We believe this is an important feature for enabling WEE1 inhibitors to be used as part of combination regimens. We are excited to see WEE1 continue to progress as a clinically validated target based on data from other groups working on this mechanism. We believe we have a highly selective and differentiated molecule, and the totality of our preclinical data underscore the opportunity for us to advance a potential best-in-class WEE1 inhibitor into the clinic. We expect to submit an IND to the FDA next year. Now I'll turn to our CDC7 program. Our CDC7 development candidate has demonstrated strong antitumor activity in preclinical models of AML in combination with Venetoclax and other marketed agents. IND-enabling studies are progressing, and as we have previously stated, we expect to be able to submit an IND to the FDA for this program in early 2023, enabling a phase I study next year. As our wholly-owned programs progress, we are continuing to add new programs to our discovery pipeline. Last year, we added two new programs, one in oncology and the other in immunology. In addition to these five wholly owned programs, we are initiating additional precision oncology and immunology programs this year. Our growing portfolio reflects our strategy to select targets with substantial human validation and solve key design challenges with our platform, positioning us to selectively advance first-in-class and differentiated programs. We maintain a high bar for what we will progress beyond the lead optimization stage. Our focus is on projects with a strong line of sight to value-inflecting data in discovery or in phase one to support potential partnering or that merit continued internal development. In summary, our diverse portfolio of programs is advancing, and activities to support expansion of our pipeline are well underway. We are excited about the progress that we and our collaborators are making and look forward to providing updates on our R&D activities throughout the year. I will now turn the call back over to Ramy. Thanks, Karen. We are excited about the strong start to 2022 and expect continued momentum this year. Our exceptional team is committed to transforming the way therapeutics and materials are discovered, and we look forward to providing updates on our progress throughout the year. At this time, we'd be happy to take your questions. Operator? As a reminder, if you have a question at this time, please press star one on your telephone keypad. If your question has been answered or you wish to remove yourself from the queue, press the pound key. Once again, that's star one to ask a question. Your first question comes from the line of Vikram Purohit with Morgan Stanley. Please go ahead. Great. Thanks for taking my question. The first one for me was on the Eonix collaboration. Could you speak a bit about the rationale for this transaction and what sorts of internal capabilities you think this is going to help you build out? Sure. Yeah. This is Ramy. Thanks for the question, Vikram. As we said in our remarks, this is our first equity-based collaboration with the goal of developing better batteries, to put it very simply. When we look back at impact that doing that on the life science side had on the business, we're pretty excited about the opportunity here. With Nimbus, we obviously learned a lot about the technology and what needed to be. That played a big role in helping to guide scientific development of the platform. But of course, it also provided a really excellent way of validating the platform, and we expect to see the same thing here. We have developed technology that we think today can have a really huge impact on developing better batteries, but we also expect to learn from the collaboration and help them, and we certainly expect that to help to advance the science and apply that to continuing, you know, to improve battery technology. Got it. As a follow-up on a separate item. For drug discovery revenues, how should we think about the cadence of quarterly revenues, 2Q through 4Q, for the rest of this year? Sure. I can take that. This is Jenny. For 2022, we have guided to drug discovery revenue of $35 million-$45 million for the year. We are not guiding to quarterly revenue for our drug discovery because the timing of the milestones can vary quarter- to- quarter. We did see two large milestones come in earlier this year. We were able to recognize them earlier than expected. We recognized $15.8 million in revenue this quarter, which was a little earlier than anticipated. Our revenue guidance of $35 million-$45 million still stands for the year. Okay. Understood. If I could ask a final follow-up on that topic. As you move through your collaborations, do you feel like you're getting an increasing level of visibility into, you know, decision triggers that may lead to greater milestones and as you look towards 2023, and I know you've got it to a floor of drug discovery revenues there, but do you feel like that visibility is increasing from your standpoint? Or, are most of those decisions and most of those triggers still kind of in the hands of partners? Karen, do you wanna? Yeah, I can answer that. Hi there. The way our collaborations are set up, we obviously have existing collaborations where the programs have essentially run the course of discovery and the assets are now in the hands of the collaborator, and they are the ones progressing them through the clinic. Obviously, when a program is in discovery, we actually have a lot of visibility into what's going on. Once they move over into discovery, especially in our publicly traded companies as part of our portfolio, Nimbus and Morphic, other companies who are pursuing programs in the clinic, we have less visibility. Now, the more recent programs that have kicked off are obviously still in discovery, and we are responsible for those as they move through to development candidate. That means that, for programs that are part of deals that were signed more recently, whether it's milestones are actually more substantial and read into the guidance we gave for next year, we have a lot of visibility into those, and we keep a very close track, obviously, of all the upcoming milestone events and, as Jenny alluded to, the revenue opportunities. Does that answer your question? It does. That's helpful. Thank you. Thank you. Your next question comes from the line of David Lebowitz with Citi. Please go ahead. Thank you very much for taking my question. Actually, similar question, different line item. Given the software number for the quarter, but guidance remained unchanged for the year, was that number incorporated into the original guidance or is that more of a commentary on how revenues can be lumpy from quarter- to- quarter? Yeah. You know, I can say that we're really pleased that, you know, we had guided to software revenue of $28 million-$30 million. We were pleased to have an even stronger quarter than we anticipated. We reported Q1 revenue of $33.1 million. We did see some larger than expected renewals as customers scale up the use of the platform, which is very encouraging. We believe this positions us for the continued momentum as we deliver on the expectations that we have laid out for the year. Thank you very much for that. On the partnership, it really seems to be the most public, I guess, move forward in the materials science space that we have seen. Mm-hmm. Toward that end, what do we expect to see as far as evolution in that direction going forward? For example, in the software side, is there a point in time where we start to see what the breakdown is between life sciences and materials sciences? On the drug discovery, well, on the other side of things, should we expect to see more partnerships that focus on this? We don't have any immediate plans to report material science software revenue separate from life science revenue. You know, obviously that's something we're thinking about, but no plans to do that. The more important part of your question, I think, is sort of what, you know, does this signal something and where do we see this going forward? I think I would just point back to what happened following the success, the incredible success really of Nimbus and how that led to the formation or, you know, us getting involved in the formation of Morphic and a number of other companies. The way it accelerated our learning of what's possible and helping to guide the direction that the science goes in is really something that can't be overstated. Certainly we'll continue to explore other collaborations, and you know, we expect that success in this particular collaboration with Eonix will, in the same way that Nimbus did, catalyze more interest from the large number of companies that are obviously in this space. This is certainly not our last collaboration material science. Thank you for answering my questions. Absolutely, David. Thank you. Your next question comes from the line of Do Kim with Piper. Please go ahead. Hey, good afternoon, everyone. This is BK on for Do. Congrats on the excellent quarter. Thank you. I have a question. My pleasure. On the XTAL collaboration. Mm-hmm. What are some of the kind of early learnings that you're getting there and how you'll be able to incorporate it into your platform? If you can just, you know, provide some early commentary on that'd be great. Of course. Yeah. That's the acquisition of XTAL, although I like that you're calling it a collaboration as well because, you know, in some sense, you know, everything is inside the company. We're really excited about how smoothly that transition has gone, and we now have fully integrated that team into Schrödinger. We had already been doing this actually even before the acquisition had been working with them to solve structures of important proteins, and obviously having that capability internally is having a really very nice impact on our internal efforts. The other thing that we've talked a lot about this, as we've said many times, crystal structures in and of themselves aren't that valuable. There is a significant amount of refinement that has to be done and then, of course, it's what you do with that structure. Obviously using it as input to our physics-based methods is where the value really comes. Now having in one company the experimentalists working closely with the computational chemists who are working on the technology to essentially convert, you know, a, let's call it a raw experimental structure into input to physics-based methods is obviously helping to also advance the science. We're excited about both aspects. We actually see a future that I think is sooner than one might sort of think, you know, or imagine where a very significant fraction of targets that the industry's working on are structurally enabled. We think that's extremely important, and we're very happy to be leading that field and that concept of structurally enabling targets. Again, combining the experimental capabilities with the computational capabilities is the key to realizing that vision. Okay. I appreciate the fulsome answer there. One more question. This might be for Karen. You just mentioned how you guys will be looking to start getting busy on some oncology targets beyond the five programs that you mentioned, you know, a few years ago. Would you be able to provide us some type of guidance into what those targets might be? Or are they still going to align with the at least pre-clinically or clinically validated targets, or will it be a little bit more white space? That's a great question. Thank you for it. We actually are pursuing targets, as you stated, where we believe they are significantly biologically de-risked, and that means also, either clinical or genetic information that gives one, some great confidence that these are going to translate, in the clinic or they indeed have clinical data, but there's an opportunity to come up with a next gen inhibitor, or a differentiated inhibitor. I do also want to acknowledge and connect with the comments that Ramy was just making, that there are some high value targets for which there have been no crystal structures or cryo-EM structures and indeed no chemical matter, but we believe we have an opportunity to be the faster drug, that's a much smaller fraction of what we're working on, but we think those are going to be exciting programs in the future. Excellent. Sounds very exciting. I appreciate that, Karen. Congrats again on the quarter, and thanks for taking my questions. Thanks a lot. Thank you. Thank you. Your next question comes from the line of Michael Yee with Jefferies. Please go ahead. Okay. Hi, everyone. It's Andrew Tsai on for Mike. First question is, kind of wanted to ask your visibility, your confidence on the software business in Q2. Seems like it might be, you know, tracking well compared to your expectations. You're guiding the revenues a little bit above consensus. You know, I believe you said before renewals tend to be, you know, skewed a little bit towards the end of each quarter. If that's the case, if you're, you know, guiding to Q2 with these numbers, with this range, you know, is that due to a function of renewals happening a little bit earlier or more frequently, or are you seeing larger customer adoption or an uptick in usage? A little bit more color would be nice. Thanks. Sure. We believe we have good visibility into the anticipated software revenue for the second quarter, based on ongoing engagement our account managers have with our customers. We've guided to $28 million-$30 million in Q2. We believe we are set up to deliver on that. As a reminder, our Q1 and Q4 software revenue are the largest quarters, and we expect that to be the case this year with the largest proportion of our annual revenue will come in Q4 again this year, as it has the prior two years. Noted. Thanks. You know, I guess corollary to that, I guess it speaks to your full year software guidance. I mean, traditionally, you've maintained it each quarter, and you've done so this time as well. I guess I'll ask this another way. Is there a scenario where you would consider raising your full year software guidance revenue? If so, you know, what would that entail? We've just completed a Q1 that we are very pleased with. I think as we get through the year and, you know, as we see what revenue looks like at this time, we are reaffirming our guidance, but at a point where we feel that we are confident we could deliver on guidance that's updated, then we would definitely do that. Noted. Okay, very last one, thank you, is for Karen. You know, the MALT1 on track for IND submission. I think you mentioned a little bit about the phase I trial design. I guess my question would be, you know, what do you think good data would look like in terms of perhaps CR or, you know, response rates? You know, could we actually expect, you know, the low dose of SGR-1505 to show efficacy, later in 2023, perhaps? Thanks. Thank you, Andrew. I would say, timing wise, we are too early to start to speculate, I think about CRs and PRs. What I will say is that we are looking forward to learning more about the PK, the target engagement, the biomarkers, for MALT1, as an inhibitor in these lymphomas. We will keep you updated as that data comes in, and we're ready to share it. We remain very excited about the mechanism based on the preclinical data. I think you saw at ASH, we were seeing pretty complete responses, at least preclinically, in combination with BTK, and we hope and look forward to seeing that kind of data in the clinic. That will be something we'll be updating you on over the course of next year, I would say. Great. Very good. Thank you, guys. Thanks. Thank you. Thank you. Your next question comes from the line of Michael Ryskin with Bank of America. Please go ahead. Hi, this is Wolf Chanoff on for Mike. Thanks for taking the questions. I appreciate the commentary around seeing your kind of typical 4Q heavy software revenues. I'm just wondering, are there any other shifts around seasonality or pacing of expenses that we should be considering as we update our models? No. I think the seasonality for our software revenue looks to be following the trends that we have laid out for you. For OpEx, we saw the Q1 increase in expenses of just over 41%, which is right in line with what we guided to and is what we expect for the remainder of the year. Great. Thank you very much. Maybe just a bit more big picture. Can you provide any update on the CFO search? Maybe any rough idea for when we should be on the lookout for announcement? Yeah. We're not prepared to make any announcements now. We are pleased with the candidates we're seeing. Nothing to announce today. All right. Thank you very much. Thank you. Your next question comes from the line of Gary Nachman with BMO Capital Markets. Please go ahead. Hi, good evening. This is Dennis on for Gary. Congrats on the quarter. Thanks for taking our questions. Just a couple. You've got some solid cash on the balance sheet. Could you highlight one or two initiatives on how you plan to use that cash? Is it gonna be more investment in the sales force, platform-oriented or internal pipeline or even maybe more acquisitions? Then, now that all the contracts have been done, can you just talk about the retention rate you saw this year? Was it still sitting high above 95%? Yeah. It's with regard to retention, that's something that we report on an annual basis. So as you pointed out, it was, you know, 99% two years ago, 98% last year. We're seeing absolutely no indications of that changing. We'll report it at the end of the year. Obviously looking very good so far. With regard to use of our cash, we obviously, and we talked about this, are continuing to invest in our platform. We've made incredible breakthroughs in the underlying science, but there's a lot more to do, and we continue to invest in that. We think that's going to have a really big impact on our ability to continue to accelerate, drug discovery, produce better molecules, but also helping our customers do that, and obviously that leads to continued growth in the software business. We're obviously excited about our internal pipeline, our wholly owned pipeline, I should say. As you can see, we're planning to take these compounds into the clinic to value inflection points. That's obviously, you know, something that we're investing in. With regard to acquisitions, that's not something that is a particular strategy. We'll be opportunistic about it. We are always, you know, there are many companies reaching out to us and, you know, looking for potential partnerships along that way. We assess the fit and the strategic fit and the technology, and you can see what we did. You know, I think, the XTAL acquisition is a really fantastic example of how well that works. If things like that come up, certainly we're open to that, but it's not a major strategy. Great. Thanks so much, and congrats on the quarter again. Thanks. Thank you. Your next question comes from the line of Matt Hewitt with Craig-Hallum Capital Group. Please go ahead. Mm-hmm. This is Lucas on for Matt Hewitt. First off, could you give us an update on how many sales reps you have on staff and whether you're planning to hire any more over the remainder of the year? We are continuing to grow our sales team and the scientists that help support our sales team. We feel that that's obviously, you know, something that happens as the business grows, in particular in new territory. For example, we recently expanded and have an office in South Korea, so we're growing the team there. There are new opportunities in other regions, and we're continuing to expand the team there. I can't tell you exactly the number of account managers, but that's something that we can get back to you on. Continue to invest in that team for sure. Yeah, not a problem. Secondly, you know, in the past, many of your wins have been related to small molecule opportunities. Mm-hmm. Have you now started to gain more traction, with large molecule customers? Yeah, that's a great question. We have been advancing our platform in both areas and actually other modalities, but certainly in small molecules and peptides and antibodies and antibody design and large molecules. We do have a number of customers that are using our technology to advance their biologics programs. There's more science to be done there. There's more basic research, and it's an area that we're focusing more and more on as we learn more from collaborations we've had. We've actually announced our collaboration with AstraZeneca around biologics. We're learning from that, learning what works, what doesn't work, and that helps guide the science and that will certainly lead to more advances and more usage of the software around biologics designs. Thank you very much. That's all I had. Mm-hmm. Great. Once again, if you would like to ask a question, please press star one on your telephone keypad and wait for your name to be announced. Again, that's star one to ask a question. Your next question comes from the line of Gaurav Goparaju with Berenberg Capital. Please go ahead. Pardon me. Your next question comes from the line of Gaurav Goparaju. Your line's now open. Oh, sorry. I was muted, sorry about that. Thanks for taking my question. Good afternoon, guys. Just a quick one on the software side of the business. Mm-hmm. You know, regarding your push for existing customers to adopt more software, right? How are your growth prospects in getting your larger top pharma customers to consume more versus increasing existing consumption from those with, you know, smaller ACVs, maybe close to the $100,000 benchmark? Mm-hmm. Just really trying to get a sense of, you know, what group of existing customers has, you know, maybe more or less attractive potential to fuel the segment's growth or do you feel bullish on both, you know, on a even playing field? Any color on that would be great. Thanks. Yeah. We're seeing growth across the board with large customers, and that's happening through relationships that are now extending to heads of research in those companies. I think that's a really important part of it. Obviously, as the amounts that they're spending are increasing and as the platform becomes a larger sort of strategic component of their drug discovery processes, you know, we continue to have those. Those are relationships that are important and we're seeing growth there. We're also seeing growth across the full spectrum of size of companies from large biotech companies, medium sized biotech companies, small biotech companies. We are actually focused on all of those different kinds of companies, and we have account managers, salespeople and the scientific support that have expertise in all of these different areas. Okay. Got it. Just one quick follow-up on that. Right now regarding, you know, getting new customers on board. Mm-hmm. Are you seeing, you know, I guess how sticky are the top customers, right? Are you still getting new big spenders, let's say, on the software business? Or is that ceiling, you know, relatively, I don't wanna say capped out, but relative to, you know, bringing on more smaller biotechs, medium sized biotechs, I guess just the growth potential on or just the growth split between, again, the demographics but on the ACV cohorts, but on the yeah. Yeah. On the life science side, of course, all the large companies are already customers, but as we've said, they are still utilizing our software on a scale that is significantly lower than the scale that we're using it in our collaborations and our wholly owned programs. That's where the source of growth there, and we are far from fully realizing the potential from that sector. Again, on the life science side, we do see with smaller biotech companies that we do see growth coming from new biotech companies becoming customers. On the materials science side, we do see both existing customers scaling up. That's a great sign, of course. It same thing, right? Retention, and obviously it means that the software's working, it's having an impact to keep scaling up. Of course, since that's an earlier business on the materials science side, we're seeing a larger proportion of the growth coming from new customers. That's a much more area that's benefiting significantly from more awareness and a heavier sort of marketing or dependence on marketing campaigns. We put a lot more effort on the materials science side with regard to that and awareness. Obviously, that's not required on the life science side since everybody already knows about Schrödinger. As I said, you know, the large majority of companies that are doing research are already using our software, and the growth again comes from just scaling up their usage. Great. That's it for me. Thanks, Ramy. All right. Congrats guys on the quarter. Thanks a lot. I'm showing no further question at this time. That concludes today's call. You may now disconnect.