Q2 2020 Schrodinger Inc Earnings Call
[music] the morning, and welcome to the show their second quarter 2020 earnings Conference call.
At this time, all participant lines on a listen only mode a.
Unknown Executive: At this time, all participant lines are in a listen-only mode. A question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to turn the call over to Schrodinger's team. Please go ahead.
A question and answer session will follow the formal presentation.
As a reminder, this conference is being recorded.
It is now my pleasure to turn the call Oh, what a Schrodinger thing. Please go ahead.
[music].
Thank you operator, and thank you all for listening in on our second quarter financial results call. Today, you hear from Rami, Fareed, President and Chief Executive Officer, Karen I can Sonia she's by medical scientists and head of discovery R&D and Joel in other words Richie Fund.
Unknown Executive: Thank you, Operator, and thank you all for listening in on our second quarter financial results call. Today, you will hear from Ramy Farid, President and Chief Executive Officer, Karen Akinsanya, Chief Biomedical Scientist and Head of Discovery R&D, and Joel Lebowitz, our Chief Financial Officer. Before we begin, I'd like to remind you that 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 the potential advantages of our platform, our strategic plans to accelerate the growth of our software business, and advance our collaborative and internal drug discovery programs, risks related to the COVID-19 pandemic, our expectations related to the use of our cash, cash equivalents, and marketable securities, as well as our future operating expenses.
The Angele officer before we begin I'd like to remind you that management will make statements related to our business that are forward looking at are made pursuant to the safe Harbor provisions of the private Securities Litigation Reform Act of 1995, including without limitation statements related to the potential advantages of our platform our strategic plans to accelerate the growth of our software business.
And advance our collaborative and internal drug discovery programs.
Just related to the cobot 19 pandemic.
Expectations related to the use of our cash cash equivalents and marketable securities as well as our future operating expenses.
Unknown Executive: 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 the forward-looking statements and are subject to a variety of assumptions, uncertainties, risks, and factors that are beyond our control, including those risks detailed under the caption, Risk Factors, and elsewhere in our most recent Securities and Exchange Commission filings. Except as required by law, we undertake no duty or obligation to update any forward-looking statements discussed on this call as a result of new information, future events, changes in expectations 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.
These forward looking statements reflect our current views about her plans intentions expectations strategies and prospects, which are based on information currently 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 factors that are beyond our control.
Including those risks detailed under the caption risk factors and elsewhere in her most recent securities and Exchange Commission filings and reports.
Except as required by law, we undertake no duty or obligation to update any forward looking statements discuss on this call as a result, a new information future events changes and expectations or otherwise. These forward looking statements should not be relied upon as representing our views as of any date subsequent used today with that I'd like to turn the call over to Rami.
Ramy Farid: Thank you everyone for joining the Schrodinger Call to review our most recent financial results. We had a very strong second quarter, building on the momentum of our first quarter.
Thank you everyone for joining the Schrodinger call to review our most recent financial results. We had a very strong second quarter building on the momentum of our first quarter.
Ramy Farid: As you'll hear from Karen, we are making excellent progress on our five internal wholly owned drug discovery programs and have achieved important milestones with several of our biotech and pharma collaborators. Also, as Joel will describe later in the call, we saw very strong revenue growth in our software business, and we continue to make significant progress on the science that underlies our differentiated computational platform. As further validation of our technology and business model, we saw two important developments since our last call. PetroPharma was acquired, a testament to the strength of the assets discovered by leveraging our computational platform, and Relay Therapeutics had a very successful IPO in July. These milestones build on the success we've seen at Nimbus Therapeutics and Morphic Therapeutics and demonstrate our continued ability to derive value from our portfolio of biotech equity stakes. In a moment, Joel will expand on the financials in greater detail, but on the top line, we achieved total revenue of $23.1 million in the second quarter, which represents 21% growth over the second quarter of 2019, underpinning this top-line growth with software revenue of $20.9 million, an increase of 44% compared to the second quarter last year.
As you'll hear from Karen, we're making excellent progress on our five internal wholly owned drug discovery programs and have achieved important milestones with several of our biotech and pharma collaborators.
Also as Joel will describe later on the call. We saw very strong revenue growth in our software business and we continue to make significant progress on the science that underlies our differentiated computational platform. That's further validation of our technology and business model. We sold two important developments since our last call petrified.
Mmm was acquired a testament to the strength of the assets discovered by leveraging our competition a platform.
And really therapeutics had a very successful IPO in July.
Milestones build on the success, we've seen nimbus therapeutics, and Morphic therapeutic and demonstrate our continued ability to derive value from our portfolio of biotech equity Stakes in a moment, Joe will expand on the financials in greater detail, but topline we achieved total revenue of 23.1 million in the second quarter.
Which represents 21% growth over the second quarter 2019.
Underpinning this topline growth with software revenue of 20.9 million, an increase of 44% compared to second quarter last year.
Ramy Farid: This growth is a clear sign that our customers are engaging more deeply with our platform. Importantly, we're also adding new materials science customers, an area we think will become increasingly meaningful in the coming years as the industry continues to recognize the potential of computational methods. As part of our ongoing efforts to deepen our software solutions for material science applications, we entered into a three-year agreement in June with Gates Ventures to develop and apply novel, accurate, atomistic simulation methods to improve battery performance. We remain strongly committed to advancing the science that underlies our computational platform. To that end, in the second quarter, we published several noteworthy scientific papers describing our work in such areas as integration of molecule-generative machine learning with mixed physics-based and machine learning scoring for ultra-large-scale multi-parameter optimization, improved methods for determination of cryo-UEM structures of protein-ligand complexes, improvements to the accuracy of binding affinity predictions from FEP+ through enhanced modeling of water molecules, and improved methods for calculation of protein thermal In addition to these publications, we released to our software customers a method for calculating absolute binding affinities using free energy perturbation.
This growth is a clear side, our customers are engaging more deeply with our platform.
Importantly, we're also adding new material signs customers an area, we think will become increasingly meaningful in the coming years as the industry continues to recognize the potential of computational methods.
As part of our ongoing efforts to deepen our software solutions for material science applications. We entered into a three year agreement in June with gates ventures to develop and apply novel accurate I domestic simulation methods to improve battery performance, we remain strongly committed to advancing the science that underlies our computational play.
For two that ended the second quarter, we publish several noteworthy scientific papers, describing our work in such areas as integration of molecule generative machine learning with mix physics, based and machine learning, scoring for ultra large scale multi parameter optimization.
Improved methods for determination of Cry, you, we structures a protein ligand complexes improvements to the accuracy of binding affinity predictions from AFP plus through enhanced modeling of water molecules and improved methods for calculation of protein thermal stability using AFP plus.
In addition to these publications, we released to our software customers method for calculating absolute binding affinity is using free energy perturbation. We have shown that this technology can improve hit rates in virtual screening, we look forward to continuing to make important scientific advances and drug discovery and materials design.
Ramy Farid: We have shown that this technology can improve hit rates in virtual screening, and we look forward to continuing to make important scientific advances in drug discovery and materials design. We are also excited that we've expanded the reach of our platform by forming partnerships with leading structural biology companies, such as Viva Biotech, a leader in X-ray crystallography, and Thermo Fisher, a leader in cryogenic electron microscopy, Cryo-EM.
We are also excited that we've expanded the reach of our platform by forming partnerships with leading structural biology companies FIFA biotech a leader in X Ray crystallography, and Thermo Fisher the leader in cryogenic electron microscopy cryo EM.
Ramy Farid: I'd like to give you an update on the progress we are making on our COVID-19 multi-company philanthropic alliance, which was created to discover and develop small molecule antiviral therapeutics to address COVID-19 and possible future SARS-CoV-2 outbreaks. In June, we announced that Google Cloud had joined the alliance with a significant donation of high-powered parallel computing resources to help accelerate our discovery work. We are also excited because the Alliance is using LiveDesign, our enterprise solution that enables full project management and interactive collaboration among discovery teams at numerous sites and across many traditionally siloed areas of research.
These joint efforts will allow us to explore targets that were previously not structurally enabled for physics based method, thereby broadening the domain of applicability of our platform.
I'd like to give you an update on the progress we are making on Ur Cobot 19, multi company philanthropic alliance, which was created to discover and develop small molecule antiviral therapeutics to address cobot 19, and possible future Sars Cove to outbreaks in.
In June we announced that Google cloud had join the aligns with a significant donation of high powered parallel computing resources to help accelerate our discovery work.
We're also excited because the alliances using lie design, our enterprise solution that enables full project management and interactive collaboration among discovery teams at numerous sites and across many traditionally silos areas of research if ever there was a more critical time to apply live design. It is now and the alliance is finding an instrumental.
Ramy Farid: If ever there was a more critical time to apply live design, it is now, and the Alliance is finding it instrumental for sharing computational and experimental data across all the organizations at multiple sites. And finally, I'm very happy to report that despite the obvious challenges we're all facing with COVID-19, our teams have been collaborating to successfully engage both existing customers and potential new customers while advancing our drug discovery programs and those of our collaborators. We're also executing on the hiring plan we established at the beginning of the year, and we're pleased to be adding more talent to our already impressive ranks. Summing up, we're excited by the many advances we've made as we continue to transform the way therapeutics and materials are discovered. Our leading physics-based computational platform is enabling us, our customers, and our collaborators to accelerate the discovery of higher quality, novel molecules compared to traditional methods. I'll now turn the call over to Karen for an update on our drug discovery programs.
For sharing computational and experimental data across all the organizations at multiple sites.
And finally, I'm very happy to report that despite the obvious challenges were all facing with covert 19, our teams have been collaborating to successfully engage both existing customers and potential new customers, while advancing our drug discovery programs and those of our collaborators. We're also executing on the hiring plan we established.
Beginning of the year and we're pleased to be adding more talent to our already impressive ranks.
Summing up we're excited by the many advances we've made as we continue to transform the way therapeutics and materials are discovered our leading physics base computational platform is enabling us our customers and our collaborators to accelerate the discovery of higher quality novel molecules compared to traditional methods.
I'll now turn the call over to Karen for an update on our drug discovery programs.
Thank you Rob me good morning, everyone.
I'm pleased to share an update on the continued to progress across our portfolio of drug discovery collaboration and our pipeline of internal wholly owned program.
The hard work and dedication design teams and global partners has enabled us continuing to navigate the challenges because its 19 pandemic with minimal disruption.
Karen Akinsanya: Thank you, Ramy. Good morning, everyone.
Karen Akinsanya: I am pleased to share an update on the continued progress across our portfolio of drug discovery collaborations and our pipeline of internal, wholly-owned programs. The hard work and dedication of our teams and global partners has enabled us to continue to navigate the challenges of the COVID-19 pandemic with minimal disruption. We continue to see the profound impact of our physics-based methods, including FEP+, deep learning, and ultra-large-scale compound enumeration, on the efficiency and speed of our programs, as well as our ability to address difficult design challenges. We have leveraged these methods extensively in the development of our internal pipeline, which has rapidly advanced since we launched our first program in mid-2018. In our first quarter call, we reported that our third wholly-earned program advanced into late discovery in just under 18 months. Since then, three additional programs have moved into lead optimization across our collaborative portfolio. This brings the total number of partnered and internal programs at this later stage of discovery to 12, the largest group we've seen at this stage to date. We are often asked how large our library of compounds is. And that's an important point.
We continue to see the profound impact of physics base methods, including SPP, plus deep learning and ultra large scale compound in human ration on the efficiency and speed about programs as well as our ability to address difficult design challenges.
We have leveraged these methods extensively in the development of our internal pipeline, which is rapidly advance since we launched of first program in mid Twentys 18.
First quarter Cool, we reported that telephoned wholly owned program advanced into late discovery in just under 18 month.
Since then three additional programs has moved in to be to optimization across our collaborative portfolio.
This brings the total number of partners and internal programs at this latest stages discovery to 12, the largest we've seen at this stage to date.
We're often asked how large on libraries compounded.
That's an important point, we don't really rely on physical library, which are necessarily limited to compounds that have been previously synthesized and are therefore, much smaller than computation of the enumerated that true libraries.
We were able to explore vast amounts of chemical space that truly once we have it validates is computational assay.
During the first half of Twentytwenty alone, we have explored 237 billion compound virtually across our collaborative and internal program.
Karen Akinsanya: We don't really rely on physical libraries, which are necessarily limited to compounds that have been previously synthesized and are therefore much smaller than computationally enumerated virtual libraries. We are able to explore vast amounts of chemical space virtually once we have a validated computational assay. During the first half of 2020 alone, we have explored 237 billion compounds virtually across our collaborative and internal programs. Furthermore, by combining physics-based methods with deep learning approaches, we've been able to rapidly move several programs into lead optimization in just months instead of potentially years. It is quite clear that fully exploring chemical space within and between chemical series during all stages of the program allows us to prioritize design and synthesis strategies almost in real time and achieve multi-parameter optimized compounds. Details of this approach have just been published in the Journal of Chemical Information and Modelling.
Furthermore, by combining physics base messes with deep learning approaches we've been able to rapidly move several programs into the optimization in just love instead of potentially he is.
It is quite clear that fully exploring chemical space within and between chemicals series during all stages as the program allows us to prioritize design and synthesis strategies almost in real time and achieve multi parameter optimized compound.
Details of this approach will just published in the journal of chemical information and modeling.
Focusing on our wholly owned pipeline, we have five active programs targeting solid tumors and Haematological malignancies.
Based on the mechanistic validation and characteristics of our molecules. We believe these assets could have monotherapy activity in specific population as well as utility in combination with other therapies.
Karen Akinsanya: Focusing on our wholly owned pipeline, we have five active programs targeting solid tumors and haematological malignancies. Based on the mechanistic validation and characteristics of our molecules, we believe these assets could have monotherapy activity in specific populations, as well as utility in combination with other therapies. We made considerable progress across our programs during Q2, most notably in our MORT1 program.
We made considerable progress across our programs during Q2, most notably in our more one program.
We are developing novel Alastair more one inhibitors to treat relapsed or resistant lymphomas, which represent an area of high unmet medical need.
Karen Akinsanya: We are developing novel allosteric MOLT1 inhibitors to treat relapsed or resistant lymphomas, which represent an area of high unmet medical need. Molecules from our first MORT1 chemical series demonstrate similar tumor growth inhibition in vivo when compared to data from Activated B-Cell Diffuse Large B-Cell Lymphomas or ABCDL-BCL xenograft models, just reported by We have continued to advance our MORT1 program, inhibitor optimization, and now our most advanced molecule has been shown to be an order of magnitude more potent than other known competitor molecules. Additionally, published MOLT1 tool molecule data has shown that these inhibitors have activity against both naive and ibrutinib-resistant CLL and mantle cell lymphoma. We are now testing our most potent leads to assess their potential both as monotherapies and in combination regimens in resistant and relapsed patient samples. We are delighted with the rapid pace with which our MOLK1 molecules are progressing. Just over a year into the program and a quarter ahead of schedule, our leads are on track to begin non-GLP-TELPS studies in the coming months, followed by GLP-TELPS studies early in 2021.
Molecules from our first one chemicals series demonstrate similar tumor growth inhibition in vivo when compared to data from activated b cell diffuse large b cell lymphomas or ABCD LTC authentic RAF model just reported by Janssen at Ace yet for that.
Cool compound.
We have continued to advance animal one program inhibitor optimization and now our most advanced molecule has been shown to be an order of magnitude more potent than other node competitor molecule.
Additionally, published moat one to molecule data has shown that these inhibitors have activity against both naive and ibrutinib resistance CLL and mantle cell lymphoma.
We are now testing and most potent leads to assess that potential both as monotherapy and combination regimens and resistant and relapsed patients pool.
We are delighted with the rapid pace with which our moat one molecules are progressing.
Just over a year into the program and a quarter ahead of schedule. Our leads are on track to begin non GLP tilts in the coming month, followed by GLP Tox studies early in Twentytwenty one.
Karen Akinsanya: Our two programs focused on DNA damage repair mechanisms, CDC7 and WE1, are also in the in vivo testing phase. Across both programs, we have achieved differentiated kinase selectivity profiles while maintaining potency and desirable drug-like properties. Our plan for 2021 initiation of GLP-TALC studies in support of regulatory interactions, including pre-IND meetings with the FDA and IND filings, is on track. Our picomolar CDC7 inhibitors show excellent potency in our biochemical assays and deeper growth inhibition responses in preclinical acute myeloid leukemia models when compared to other known CDC7 inhibitors. Additionally, our inhibitors show synergistic effects on AML cell death when combined with venetoclax, which received accelerated approval in 2018 for the treatment of newly diagnosed AML in adults. We have now gone on to show that CDC-7 inhibition is effective in AML models with a wide range of sensitivity to venetoclax. To date, CDC-7 inhibitors have only been studied clinically in solid tumors, so we believe our data provides compelling rationales to investigate them in hematological malignancies such as AML. Moving on to our WE1 program.
Our two programs focused on DNA damage repair mechanisms CDC seven and we won also in the in vivo testing phase.
Across both programs, we have achieved differentiated kinase selectivity profile, while maintaining potency and desirable drug like properties. Our plan for 2021 initiation of GLP Tox studies in support of regulatory interactions, including pre I'd meetings with the FDA.
And on T. filings are on track.
Our peak them all the CDC seven inhibitors show excellent potency biochemical assays and deeper growth inhibition responses in preclinical acute myeloid leukemia leukemia models when compared to other known CDC seven inhibitors.
Additionally, our inhibitors show synergistic effect from AML cell death, when combined with the net decline, which received accelerated approval in 2018 for the treatment of newly diagnosed AML in adults.
We have now going on to show the CDC seven inhibition is effective in animal models with a REIT range of sensitivity to the Mastercard.
To date CBC seven inhibitors have only been studied clinically in solid tumors. So we believe our data provides compelling rationale to investigate them in hematological malignancies, such as a Mel.
Moving onto our we won program.
Karen Akinsanya: The potential for this class of drug was confirmed by recently reported deep prolonged responses to AstraZeneca's AZD1775 in uterine serous carcinoma, especially in the setting of FBXW7 loss. From a precision oncology perspective, identifying the hallmarks of super-responders is a key component of our molecular stratification plans to achieve improved therapeutic windows in patients. Our next generation WE1 inhibitors are highly selective and we believe have the potential to be used in optimized dosing regimens. I'll round out the discussion of our internal programs with two more updates.
Potential for this class of drug was confirmed by recently reported the prolonged responses to Astrazenecas HCT 17, 75 in uterine cirrus carcinoma, especially in assessing its SPX w. seven loss.
From a precision oncology perspective, identifying the hallmarks of Super respond is is a key component of our molecular stratification plans to achieve improved therapeutic windows in patients.
Our next generation, we want inhibitors, a highly selective and we believe has the potential to be used in optimize dosing regimen.
Oh round out the discussion of our internal programs with two more uptake.
Karen Akinsanya: First, next-generation inhibitors that address resistance mucins have seen significant clinical success and approvals over the last few years. We believe that our next-generation HIF-2 program for use in renal cell carcinoma patients that have become resistant to first-generation agents is an important opportunity to capture more patients with VHL disease-associated renal cell carcinoma. Finally, our early stage SOS-1 inhibitor program for use in combination with KRAS inhibitors also continues to advance. Using drug combinations to target proteins that indirectly interact with KRAS is an emerging and promising strategy. We believe that multi-targeted approaches will likely be necessary to achieve a durable therapeutic response in most cancers harboring mutant KRAS. From a capabilities and execution standpoint, we continue to strategically expand our ranks as we prepare to enter the next stages of discovery and development in liquid and solid tumors.
First next generation inhibitors that address resistance me since has seen significant clinical success and approvals over the last few years.
We believe the tower next generation has to offer program for use in renal cell carcinoma patients who has become resistant to first generation agents is an important opportunity to capture more patients with DHL disease associated renal cell carcinoma.
Finally.
Early stage. So it's one inhibitor program for use in combination with K rest inhibitors also continues to advance.
You think drug combinations to target proteins that indirectly interact with K Ras isn't emerging and promising strategy.
We believe that multi targeted approaches will likely be necessary to achieve a durable therapeutic response in most cancers harboring mutant hey, Rob.
From a capabilities and execution standpoint, we continue to strategically expand ranks as we prepare to enter the next stages of discovery and development in liquid and solid achievements.
Karen Akinsanya: We are adding industry veterans with decades of experience in order to expedite the development of potential new therapies for patients in need. We continually evaluate our drug discovery programs in order to focus on those with the best chance for success. We are accelerating promising new targets with validation or genetic support in human cohorts and emerging pharmacology data that we believe are valuable candidates for our future development. However, some of these emerging and potentially high-value drug targets do not have protein structures, which limits our ability to apply our physics-based technology. We recently entered into strategic collaborations with Thermo Fisher and Viva Biotech that will provide our teams with greater access to cryo-EM and x-ray structures to broaden the reach of our technology. We are quite pleased with the substantial progress in our diversified portfolio of collaborative and wholly owned programs and the continued positive impact of existing and new technology. We are genuinely excited by the opportunities for our future preclinical and clinical pipeline. Now, I'll turn it over to Joel.
We are adding industry veterans with decades of experience in order to expedite the development of potential new therapies for patients in need.
We continually evaluate at drug discovery programs in order to focus on those with the best chance for success, we're accelerating promising new targets, we validation of genetic support in human cohorts and emerging pharmacology data, but we believe a valuable candidates for future development.
Some of these emerging and potentially high value drug targets do not have protein structures, which limits our ability to apply our physics based technology.
We recently entered into strategic collaborations with Thermo Fisher and visa biotech that will provide our teams with greater access to cry, OEM and X ray structures to broaden the breach of our technology.
We're quite pleased with the substantial progress in our diversified portfolio of collaborative and wholly owned programs.
And the continued positive impact of existing and new technology.
We are genuinely excited by the opportunities for our future preclinical and clinical pipeline.
Now I'll turn it over to Joe. Thank you Karen Hello, everyone. Thank you for joining us today to review our second quarter results.
David Neil Lebowitz: Thank you, Karen. Hello, everyone.
David Neil Lebowitz: Thank you for joining us today to review our second quarter results. As you heard from Ramy and Karen, we are executing on our strategy across our business. In the second quarter, we continued to see strong momentum, recording $23.1 million in total revenue, an increase of 21% compared to the second quarter of 2019. Our software business powered the results, delivering $20.9 million in revenue, which represents 44% growth versus the second quarter of 2019. The underlying trends of new customer additions and increased adoption of our solutions continue to drive the business, and we experienced growth in all regions and in both life sciences and material science. We also continue to see increasing adoption of LiveDesign, our project management enterprise solution for drug discovery. LiveDesign plays an essential role in our integrated platform offerings, and this solution can be especially powerful in fully remote work environments that many of our customers are still experiencing.
As you heard from Rami and Karen we are executing on our strategy across our business.
The second quarter, we continue to see strong momentum recording 23.1 million in total revenue an increase of 21% compared to the second quarter of 2019.
Our software business powered the results delivering 20.9 million in revenue, which represents 44% growth versus the second quarter 2019.
The underlying trends of new customer additions and increased adoption of our solutions continue to drive the business and we experienced growth in all regions and in both life Sciences and materials science.
We also continued to see increasing adoption of lives design, our project management enterprise solution for drug discovery.
Life design plays an essential role in our integrated platform offerings and this solution can be especially powerful and fully remote work environments that many of our customers are still experiencing.
With regard to the coded 19 crisis, while we did not experience any material impact to our software business in the first half certain risks have been identified that if materialize could affect the growth of our software business in the second half of the year customers, particularly those in Hartford industries could come under budgetary pressures.
David Neil Lebowitz: With regard to the COVID-19 crisis, while we did not experience any material impact on our software business in the first half, certain risks have been identified that, if materialized, could affect the growth of our software business in the second half of the year. Customers, particularly those in hard-hit industries, could come under budgetary pressures, which could impact our software sales. Software sales could also be affected by the limited ability to engage with customers in person as the crisis continues. That being said, through the first half of 2020, we have been pleased with the execution of our strategy to grow our customer base and increase adoption of our solutions, which resulted in 35% software revenue growth versus the first half of 2019.
Which could impact our software sales group.
Software sales could also be affected by the limited ability to engage with customers in person as the crisis continues.
That being said through the first half of 2020, we've been pleased with the execution of our strategy to grow our customer base and increase adoption of our solutions, which resulted in 35% software revenue growth versus the first half 2019.
On the discovery side of our business, we achieved revenues of 2.2 million in the second quarter compared to 4.5 million in the same quarter last year.
As we've discussed previously these revenues depend upon the timing of program milestones and are expected to vary significantly from period to period. This quarter. We continue to see broad advancement of our collaborative programs many of which we expect will lead to milestones and associated revenues in future periods.
Some cases, we are experiencing variability in certain collaboration program timelines impacted by Cobot 19 that could result in delays in reaching certain milestones and impact the timing of revenue in the second half of 2020.
David Neil Lebowitz: On the discovery side of our business, we achieved revenues of $2.2 million in the second quarter compared to $4.5 million in the same quarter last year. As we've discussed previously, these revenues depend upon the timing of program milestones and are expected to vary significantly from period to period. This quarter, we continue to see broad advancement of our collaborative programs, many of which we expect will lead to milestones and associated revenues in future periods. However, in some cases, we are experiencing variability in certain collaboration program timelines impacted by COVID-19 that could result in delays in reaching certain milestones and impact the timing of revenue in the second half of 2020. Turning to our internal programs, we are moving rapidly through late-stage discovery, as you heard from Karen, and we are on track to begin our first IND-enabling studies early next year.
Turning to our internal programs, we are moving rapidly through late stage discovery as you heard from Karen and we're on track to begin our first I Andy enabling studies early next year. Accordingly, we are continuing to add to our capabilities as we prepare for the advancement of our programs toward the clinic in the quarter. We also saw significant returns from.
Our collaborations that are reflected in other income in the piano.
One of our collaborators Petra Pharmacore was acquired in June which resulted in a 4.2 million dollar gain in the quarter.
As part of the acquisition, we received 4.6 million in cash from our share of an upfront payment related to our equity stake in Petra. We're also eligible to receive potential earn outs tied to the achievement of specified development regulatory and commercial milestones. In addition to being eligible to continue to earn revenue under the terms of our original collapse.
Operation agreement also our equity holdings in Morphic Therapeutics resulted in a 10.3 million dollar gain in the quarter, reflecting more fixed stock price appreciation.
David Neil Lebowitz: Accordingly, we are continuing to add to our capabilities as we prepare for the advancement of our programs toward the clinic. In the quarter, we also saw significant returns from our collaborations that are reflected in other income in the P&L. One of our collaborators, Petra Pharmacorp, was acquired in June, which resulted in a $4.2 million gain in the quarter. As part of the acquisition, we received $4.6 million in cash from our share of an upfront payment related to our equity stake in Petra. We are also eligible to receive potential earnouts tied to the achievement of specified development, regulatory, and commercial milestones, in addition to being eligible to continue to earn revenue under the terms of our original collaboration agreement. Additionally, our equity holdings in Morphic Therapeutics resulted in a $10.3 million gain in the quarter, reflecting Morphic's stock price appreciation. In a subsequent event to the second quarter, Relay Therapeutics successfully completed an IPO in July.
Subsequent event the second quarter relay Therapeutics successfully completed an IPO in July we anticipate that we will record a gain in the third quarter commensurate with the approximately 422000 shares owned by Schrodinger and these will be mark to market each quarter. So we continue to derive value from our biotech.
Equity Stakes.
Before shifting to the rest of the piano I'd like to point out that our deferred revenue balance at the ended the quarter was 25.1 million an increase of 12% compared to the end of the second quarter 2019, reflecting underlying growth in our business moving on gross profit reached 13.6 million in the quarter.
38% compared to the second quarter of 2019, the growth was driven by the significant increase in software revenue and slower growth in cost of revenues software gross margin was 82% compared to 75% in the second quarter of last year.
Operating expenses were 30.7 million for the quarter up 29% versus the same period of 2019, primarily reflecting the continued investment in research and development for the advancement of our technology platform and support of our internal drug discovery programs several of which are now in late stage discovery the growth relative.
David Neil Lebowitz: We anticipate that we will record a gain in the third quarter commensurate with the approximately 422,000 shares owned by Schrodinger, and these will be marked to market each quarter. Thus, we continue to derive value from our biotech equity stake. Before shifting to the rest of the P&L, I'd like to point out that our deferred revenue balance at the end of the quarter was $25.1 million, an increase of 12% compared to the end of the second quarter of 2019, reflecting underlying growth in our business. Moving on, gross profit reached $13.6 million in the quarter, up 38% compared to the second quarter of 2019. The growth was driven by a significant increase in software revenue and slower growth in costs. Software gross margin was 82% compared to 75% in the second quarter of last year.
I have to 29 team also reflects the increased costs associated with operating as a public company looking at sequential total expense growth in 2020, including both cost of revenues and operating expenses taken together, we experienced a 6% increase versus the first quarter of this year as I pointed out last quarter, we expect total.
<unk> expenses to continue to rise steadily quarter to quarter on a sequential basis as we progressed through the rest of this year and continue to invest in key capabilities and our drug discovery programs loss from operations was 17.1 million in the quarter versus 14 million in the second quarter 2019, driven primarily by the increased investor.
But in research and development.
As I mentioned earlier our results this quarter reflect the positive contributions from our equity Stakes in two collaborators Morphic and Petra, resulting in 13.1 million in other income net loss in the second quarter. After adjusting for non controlling interest was 3.4 million versus half a million in the second quarter of 2019 are.
David Neil Lebowitz: Operating expenses were $30.7 million for the quarter, up 29% versus the same period of 2019, primarily reflecting the continued investment in research and development for the advancement of our technology platform and support of our internal drug discovery programs, several of which are now in late-stage discovery. The growth relative to 2019 also reflects the increased costs associated with operating as a public company. Looking at sequential total expense growth in 2020, including both cost of revenues and operating expenses taken together, we experienced a 6% increase versus the first quarter of this year. As I pointed out last quarter, we expect total expenses to continue to rise steadily quarter to quarter on a sequential basis as we progress through the rest of this year and continue to invest in key capabilities and our drug discovery program.
Total cash and marketable securities balances were 284.5 million at the end of June a decline of 4.2 million from the end of the first quarter. This year as our increased operating expenses were partially offset by strong software revenue performance and the cash distribution from our equity stake in Petra. We're excited about the continue.
Good execution of our strategy to further develop our platform science drive growth in our software business and rapidly advance our discovery programs. During the second quarter, we made significant progress in these areas. Despite an uncertain global environment. We believe that we are well position to deliver on our long term strategy and that the current crisis only underscores the.
Critical need for transforming drug discovery and materials design.
With that we would like to open the call to your questions operator.
Thank you.
David Neil Lebowitz: Loss from operations was $17.1 million in the quarter versus $14 million in the second quarter of 2019, driven primarily by the increased investment in research and development. As I mentioned earlier, our results this quarter reflect the positive contributions from our equity stakes in two collaborators, Morphic and Petra, resulting in $13.1 million in other income. The net loss in the second quarter after adjusting for non-controlling interest was $3.4 million versus half a million in the second quarter of 2019. Our total cash and marketable securities balances were $284.5 million at the end of June, a decline of $4.2 million from the end of the first quarter this year as our increased operating expenses were partially offset by strong software revenue performance and the cash distribution from our equity stake in Petra.
Asked the question you need the press Star then one on your telephone.
To withdraw your question please press the pound King.
Our first question comes from the line of David level. It with Morgan Stanley. Your line is now open.
Thank you very much for taking my question.
When you talk tier customers.
Do you hear any.
Commentary from them on how they might be evolving their their approach to spending on discovery.
And.
Clinical stage development. These days given what has happened independently.
Hi, David This is rami, yes. Thanks, thanks for the question.
Not really actually.
We certainly are hearing.
On the discovery side.
That.
Because of reduced rig chemistry resources, what chemistry resources.
They are relying more heavily on computation I'm pleased to see that the platform is resulting into your comp being synthesized.
David Neil Lebowitz: We are excited about the continued execution of our strategy to further develop our platform science, drive growth in our software business, and rapidly advance our discovery programs. During the second quarter, we made significant progress in these areas, despite an uncertain global environment. We believe that we are well positioned to deliver on our long-term strategy and that the current crisis only underscores the critical need for transforming drug discovery and materials design. With that, we would like to open the call to your questions. Operator?
But that's the extent of it on we're not hearing anything about changes in plans.
Inside but maybe Karen.
Those of.
Has a different though.
Hum.
Nothing direct but I think on everyone's aware that Sarah Sutton trials have been delayed that it's been.
Spoke publicly in the media, but we don't have any specific information.
The impact on customers particular trial.
Actually I might add that.
You know the momentum in the quarter really was largely underpinned by continued increasing adoption of our solutions by some of our largest customer so to the extent that that's an indicator that they're still investing in methods to drive early discovery.
Unknown Executive: Thank you. To ask a question, you will need to press star then 1 on your telephone. To withdraw your question, please press the pound key. Our first question comes from David Lebowitz on behalf of Morgan Stanley. Your line is now open. Thank you very much for taking my question. When you talk to your customers, do you hear any... commentary from them on how they might be evolving their approach to spending on discovery and clinical stage development these days, given what has happened in the pandemic?
That might be the case and to make it more efficient.
Right exactly.
Thank you for that.
And also given that you said you had three compounds entering I guess GLP talks in preparation for entering the clinic in 2021.
From that point, how long does it actually take you expect until an I.M.D. would be filed and we do enter humans.
Ramy Farid: Hi David, this is Ramy. Yeah, thanks. Thanks for the question.
Okay. So yes the.
Ramy Farid: Not really, actually. We certainly are hearing on the discovery side that because of reduced chemistry resources, wet chemistry resources, that they are relying more heavily on computation and are pleased to see that the platform is resulting in fewer compounds being synthesized. But that's the extent of it. We're not hearing anything about changes in plans on the development side. But maybe Karen or Joseph has a different song.
One can think about a span of nine to 12 month.
We've been in regular contact with the vendors, who will be working with us on those studies, we're not hearing anything about delay or extended timeline for GLP Tox studies.
So again, you can think about nine to 12 months.
Between the start of those R&D, enabling studies.
And the opening design D.
Studies the dosing.
Thank you for taking my questions.
Thanks.
Thank you.
Karen Akinsanya: Nothing direct, but I think everyone's aware that certain trials have been delayed, and it's been talked about publicly in the media, but we don't have any specific information about the impact on customers' particular trials.
Question comes from the line of Michael Wong with Jefferies. Your line is now open.
Hi, This is our goal darn permanently thanks for taking my question.
So it feels like two questions or it feels like the consensus for Q4 is modeling and potential deal would be able to commentary comment on that seems like there's been a spike in Q4.
Ramy Farid: Actually, I might add that, you know, the momentum in the quarter really was largely underpinned by continued increasing adoption of our solutions by some of our largest customers. So, to the extent that that's an indicator that they're still investing in methods to drive early discovery, that might be the case.
And second question is is there any progress trying to development on a potential partnership for for any of the two to three key assets that are wholly owned thanks.
Sure Karen do you want to.
Yes, so as we've discussed in the past we.
Pursuing discussions.
Ramy Farid: and to make it more efficient.
Both around internal programs, but also just in terms of how long can apply the platform to early stage drug discovery. So we continue to have actually very good conversations with potential partners.
Ramy Farid: Right, exactly.
Karen Akinsanya: Thank you for that. And also, given that you said you had three compounds entering, I guess, GLPTOX in preparation for entering the clinic in 2021. From that point, how long does it actually take? Do you expect until an IND is filed, and you enter humans?
Space for us so I.
I think one on this.
Looking forward to the opportunity to to partner these I think.
Karen Akinsanya: So, yes, one can think about a span of 9 to 12 months. We've been in regular contact with the vendors who will be working with us on those studies. We're not hearing anything about delays or extended timelines for GLP-TOP studies. So again, you can think about 9 to 12 months between the start of those IND-enabling studies and the opening of our IND program. No studies or dosing.
We remain optimistic that in some cases, it may make actually sense for us to pursue some of these assets are built into the clinic as the landscape program than these mechanisms continues to evolve.
We think it might make sense actually for us too.
To see some of these bubba into development before.
And other side I would say that servicing a lot of excitement around particular target.
Unknown Executive: Thank you for taking my questions. Thank you. Our next question comes from the line of Michael Yee with Jeffreys. Your line is now open. Hi, this is Ari Goldon for Michael Yee.
Oh, the disease areas with tottering around discovery.
Unknown Executive: Thanks for taking my question. So there are two questions. It feels like the consensus for Q4 is modeling a potential deal. Would you be able to comment on that? It seems like there's a bit of a spike in Q4.
And development of asset who's actually.
A key theme as our conversation so I think there's a lot of optionality there in terms of dealmaking for.
Thanks and congrats.
[music].
Thank you. Our next question comes on the line of there can be a mold capital markets.
Let's now open.
Thanks, Good morning, and thanks for taking my questions say, congrats on a great quarter.
Karen Akinsanya: Is there any progress or any development on a potential partnership for any of the 2 to 3 key assets that are wholly owned? Thanks.
Just a follow up question for Karen on that prior question when you're thinking about how the elite internal programs was reading drug fit into the cancer treatment landscape.
Karen Akinsanya: Sure. Karen, do you want to? Yes.
Karen Akinsanya: Yes, so as we've discussed in the past, we are pursuing discussions, both around internal programs but also just in terms of how one can apply the platform to early stage drug discovery. So we continue to have very good conversations with potential partners. It's a very active space for us.
Are they more valuable as a combination therapy. So a farmer partner that would have a synergistic program already in place or a partner just looking to get competitive.
And cancer.
So if I understood your question correctly.
Karen Akinsanya: So I think one is Looking forward to the opportunity to partner with them, but we remain optimistic that in some cases it may actually make sense for us to pursue some of these assets ourselves into the clinic as the landscape for these programs and these mechanisms continues to evolve. We think it might actually make sense for us to pursue some of these assets further into development before partnering them. And on the other hand, I would say that we're seeing a lot of excitement around particular targets or disease areas. Partnering around discovery and development of assets is actually a key theme of our conversation. So I think there's a lot of optionality in terms of deal making for us.
Couple of different opportunities one is is too.
These with with companies that already have existing assets and the pathway.
The other is.
Potentially to too.
Take these schools, so I think that's what you're asking.
So on the.
During the assets both to already have these mechanisms and I would say that.
Takes for example, the thoughts one program obviously.
We talked long.
Ship to possibly is generating quite a lot of it.
Unknown Executive: Thanks, and OK. Thanks. Thank you. Our next question comes from the line of Duke Chem with BMO Capital Markets.
These days and there are many players in this space, but most of the big pharma some of them out biotech and as such I think what was saying is.
Unknown Executive: Your line is now open. Thanks. Good morning. And thanks for taking my questions. Congratulations on a great quarter. Just a follow-up question for Karen on that prior question. When you're thinking about how the LEAD internal program, those three drugs, fit into the cancer treatment landscape, are they more valuable as a combination therapy, so a pharma partner that would have a synergistic program already in place, or a partner just looking to get competitive in cancer?
Well, it's about the opportunity to combine those thoughts one with payrock. Thus on that Mexico was shipped to our and other mechanisms in that space with each other so yes, I would say, though is the opportunity to.
Assets.
Companies that already have.
Existing mechanism I.
I'd also point to one similarly.
Probably are aware.
Good luck.
That's it.
Combination therapies are expected to be.
Karen Akinsanya: So, if I understood your question correctly, there are a couple of different opportunities. One is to partner these with companies that already have existing assets in the pathway. The other is potentially to take these forward ourselves. I think that's what you were asking.
Become more and more in terms of managing late stage patients.
These patients who are not responding to existing therapies. So I think to many of the is going to be the opportunity to partner.
Karen Akinsanya: So on the partnership of these assets with folks who already have these mechanisms in place, I would say that if one takes, for example, the SOS ONE program, obviously the SOS ONE, ERC, MEC, SHIP2 pathway is generating quite a lot of excitement out there these days, and there are many players in this space. Some of them are big pharmaceutical companies. Some of them are biotech companies. And as such, I think what we're seeing is excitement about the opportunity to combine SOS ONE with KRAS, SOS ONE with MEC, SOS ONE with SHIP2 and other mechanisms in that space with each other. So, yes, I would say there is the opportunity to partner these assets with companies that already have existing mechanisms. I'd also point to MALT ONE.
Either early on later on with companies who have existing assets.
In terms of monotherapy for each of these mechanism.
The plan would be to study these as monotherapy and I think that opens up.
But she and achieved full.
The.
Initial.
Talk in the clinic for us or.
If you take this on internally.
Right. So I hope I'm answering a question if not consistent.
No that was very helpful. Thank you Karen.
And a question on the on the software business.
When you look at the proportion of on premise versus hostess software.
Where do you where do you see that distribution going and is that a potential driver of revenues.
Hi, Joe do you want to take that sure I can take that thanks, though so so actually in the quarter, we saw healthy growth from both on premise and hosted software.
Karen Akinsanya: Similarly, as you probably are aware, in the relapsed and resistant setting, combination therapies are expected to become more and more important in terms of managing these late-stage patients, these patients who are not responding to existing therapies. So I think for many of our assets, there is going to be the opportunity to partner either early or later on with companies who have existing assets. In terms of monotherapy for each of these mechanisms, the plan would be to study these as monotherapies, and I think that opens up opportunities for either initial work in the clinic for us or partners who take this on internally after partnering. So I hope I'm answering your question. If not, please feel free to follow up.
29% and 21% respectively and.
On premise still represents a majority of our revenue base. So 53% this quarter hosted was 11%.
And.
I'd just remind everybody that we under our hosted solutions really provide we host only access to our license we don't actually host the computation all the heavy computational work that has done actually by our customers own computers or their own instances on the cloud and so.
Karen Akinsanya: No, that was very helpful. Thank you, Karen. And a question about the software business. When you look at the proportion of on-premise versus hosted software,
Economically over the life of the contracts were fairly indifferent between whether our customers choose to enter into contracts through.
An on premise arrangement or a hosted arrangement.
Unknown Executive: Where do you see that distribution?
Unknown Executive: Is that a potential driver of revenue?
And I think we're really just focused on the fact that although there are some differences in revenue recognition timing between the two were really just focus on the fact.
Unknown Executive: Alright. Oh, Gil, did you want to take that? Sure, I can take it.
Unknown Executive: So, actually, in the quarter, we saw healthy growth from both on-premise and hosted software, 29% and 21% respectively, and on-premise still represents a majority of our revenue base, so 53% this quarter, and hosted was 11%. And I just remind everybody that under our hosted solutions, we really provide only access to our license. We don't actually host the heavy computational work that is actually done by our customers' own computers or their own instances in the cloud. And so, economically, over the life of the contracts, we're fairly indifferent between whether our customers choose to enter into contracts through an on-premise arrangement or a hosted arrangement. And I think we're really just focused on the fact that, although there are some differences in revenue recognition timing between the two, we're really just focused on the fact that the strategy to drive increased uptake, which we saw strong evidence of in the second quarter.
On the strategy to drive increased uptake, which we saw strong evidence out in the second quarter.
Great. Thank you and last question on the relay equity is there is there an ongoing relationship with that company are you involved in our platform.
For drug discovery and are there any economics not pipeline.
There are economics Dallas is rami.
And.
But with regard to the ongoing relationship that's actually not something that we can comment on.
Given confidentiality between you know it between the company.
Okay understood.
Congrats again my question.
Thanks, so much though.
Thank you. Our next question comes on the line of Mike risk with Bank of America. Your line is open.
Hi, guys. Thanks for taking the question congrats on a quarter.
I want to ask through a bigger picture question first on the software utilization in some of your conversations with customers you know you flat.
Potentially some budget already.
Constraints for a couple quarters now as a result program, but I'm wondering.
Ramy Farid: Great, thank you. And last question on the relay equity. Is there an ongoing relationship with that company? Are you involved in their platform for drug discovery? And are there any economics in that pipeline?
Longer term do you think you've seen any indication of a longer term change and how your customers think about software versus how they think about what chemistry.
And then internal design and I mean beyond the next couple quarters wants a sort of shakes out of people come back to the lab.
Ramy Farid: There are economics, though, this is Ramy. But with regard to the ongoing relationship, that's actually not something that we can comment on, given the confidentiality between, you know, the companies.
The conversations indicating that you could you know this entire outbreak could lead to potentially wider adoption or just sort of different workflows in terms of people how go around garanti on early stage drug discovery.
Unknown Executive: Okay, understood. Congratulations again. Thanks for taking my question. Thanks.
Yeah, So I think the.
Unknown Executive: Thanks so much, Joe.
Ramy Farid: Thank you. Our next question comes from the line of Mike Ryskin with Bank of America. Your line is not open. Hey guys, thanks for taking the question. Congratulations on the quarter. I want to ask sort of a bigger picture question first on the software utilization and some of your conversations with customers. You know, you've flagged potentially some budgetary constraints for a couple quarters now as a result of COVID, but I'm wondering, you know, longer term, do you think you've seen any indication of a longer-term change in how your customers think about software versus how they think about web chemistry and internal design? And I mean, beyond the next couple quarters, once it sort of shakes out and people come back to the lab, are there conversations indicating that this entire outbreak could lead to potentially wider adoption or just sort of different workflows in terms of people how to go around, go around doing early stage drug discovery?
Trends that we're seeing now.
Broader and broader adoption and this idea that.
You really can by deploying the technology and a large scale bewley reduce the number of compounds that are made which significantly of course reduces the cost associated with getting to a development candidate.
Of course reduces the time and really does result in higher quality compounds, we see that trend I'm continuing.
And I seriously doubt that when.
This current crisis is over that somehow there'll be.
A shift in that it doesn't make any sense right. This is.
You know what I think happened is cobot 19 crisis sort of catalyze the faster adoption right.
Subsidy.
And then of course once you recognize the positive impact it has its hard to imagine it going back.
So hopefully I'm answering your question.
Yes, yes, and then on one of.
I would fall on the material science side of the business Nice update there with the agreement with Gates ventures I'm. Just wondering I was there any upfront revenue or milestone with that and also on on the back end do you have.
Ramy Farid: Yeah, so I think the trends that we're seeing now of broader and broader adoption and this idea that you really can, by deploying the technology on a large scale, really reduce the number of compounds that are made, which significantly, of course, reduces the cost associated with getting to a development candidate, of course, reduces the time, and really does result in higher quality compounds. We see that trend continuing. And I seriously doubt that when this current crisis is over, that somehow there'll be a shift in that. It doesn't make any sense, right? This is, you know, what I think happened is the COVID-19 crisis sort of catalyzed faster adoption, right, because of necessity. And then, of course, once you recognize the positive impact it has, it's hard to imagine it going back. So, hopefully, I'm answering your question.
So flexibility to monetize whatever comes out of the idea of potential collaboration partners lined up and just in general if he could have some comments on material science sort of how that's progressing over the last.
The last couple of months that'd be great sure, yes, so that.
Collaboration that we announced a three year collaboration with gates ventures to improve battery to develop software to improve battery performance. It is really meant to fund the basic research effort as probably most people know batteries are incredibly complex.
The interface between the electrolyte and the Catherine Anodes are very complex. The capital that adds themselves are highly complex and there is a real need to develop software to more accurately stimulate these complex interfaces.
Ramy Farid: Yeah, yep. And then I want to have a follow-up on the material science side of the business. Nice update there with the agreement with Gates Ventures. I'm just wondering, was there any upfront revenue or milestone with that? And also, on the back end, you know, do you have sort of the flexibility to monetize whatever comes out of that? Do you have potential collaboration partners lined up? And just in general, if you could add some comments on material science, sort of how that's progressed over the last couple months, that would be great.
That's what the collaboration is about is to is to fund basic research and I think we have a pretty good track record of working on really hard problems and solving them and so and then to answer your other question.
Yes, we I'm the agreement allows for us to.
Take that take you know.
Ramy Farid: Yes, so that collaboration that we announced, the three-year collaboration with Gates Ventures to improve batteries, you know, to develop software to improve battery performance, is really meant to fund basic research efforts. As probably most people know, batteries are incredibly complex. The interface between the electrolyte and the cathode and anodes is very complex. The cathodes and anodes themselves are highly complex.
Technology that we hopefully follow up again its basic research so.
There is uncertainty in it but that's how we solve hard problems right working on basic research problems and take that technology that and product tied that admonish put it into software and actually.
You know.
Sell it.
With regard to her.
Work on with this.
There are.
Ramy Farid: And there is a real need to develop software to more accurately simulate these complex interfaces. So that's what the collaboration is about, funding basic research. And I think we have a pretty good track record of working on really hard problems and solving them. And so, and then to answer your other question... Yes, the agreement allows for us to take that technology that we hopefully develop. Again, it's basic research, so there is uncertainty in it, but that's how we solve hard problems, working on basic research problems, and take that technology then and productize it, and put it into software, and actually sell it. We work on this. There are We haven't announced anything along those lines, but that's certainly something we'll be looking at.
No we haven't announced anything along those lines, but you know that's certainly something we'll we'll be looking out.
Sorry, and just wanted just to add I think Mike you asked if there was an upfront. So we we did receive a million dollars.
From gates ventures in the second quarter, and it's part of a three year deal 3 million dollar deal. So we expect to receive that annually.
And.
The million dollars and it's under contribution revenue in our software business segment.
Great. Thanks, so much.
Thank you ladies and gentlemen. This concludes today's question and answer session and earnings call. Thank you for your participation. You may now disconnect everyone have a great day.
Unknown Executive: Sorry, and just to add, I think Mike asked if there was an upfront payment, so we did receive a million dollars from Gates Ventures in the second quarter. It's part of a three-year deal, $3 million deal, so we expect to receive that annually, and the million dollars, and it's under contribution revenue in our software business segment.
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Unknown Executive: Great. Thanks so much. Thank you. Ladies and gentlemen, this concludes today's question and answer session and earnings call. Thank you for your participation. You may now disconnect. Everyone, have a great day.
Unknown Executive: [inaudible]