Thank you for standing by. Welcome to Schrodinger's conference call to review first quarter and 2024 financial results. My name is Chloe and I'll be your operator for today's call. 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 2024 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 schrodinger.com. Here with me on our call today are Ramy Farid, Chief Executive Officer; Geoff Porges, Chief Financial Officer; and Karen Akinsanya, President of R&D, Therapeutics. Following our prepared remarks, we'll open the call for Q&A. During today's call, management will make statements that are forward looking and made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, including, without limitation, statements related to our outlook for the second quarter and full year 2024. Our plans to accelerate the growth of our software business and advance our collaborative and proprietary drug discovery programs, the timing of initiation of and readouts from our clinical trials, the clinical potential and properties of our compounds, the use of our cash resources and our future expenses. 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 due to a number of important factors, including the considerations described in the Risk Factors section and also in the filings we make with the SEC, including our Form 10-Q for the quarter ended March 31, 2024. These forward-looking statements represent our views only as of today, and we caution you that, except as required by law, we may not update them in the future, whether as a result of new information, future events or otherwise. Also included in today's call are certain non-GAAP financial measures. These non-GAAP financial measures are not prepared in accordance with generally accepted accounting principles and should be considered only in addition to and not a substitute for or superior to GAAP measures. Please refer to the tables at the end of our press release, which is available on our website for reconciliations of these non-GAAP measures to the most directly comparable GAAP measures. With that, I'd like to turn the call over to Ramy.

Thanks, Jaren, and thank you, everyone, for joining us today. We are pleased with the start of the year, delivering revenue growth in line with our expectations and continuing to advance our proprietary pipeline. As you will hear from Karen, our first 2 clinical programs are progressing in Phase I clinical studies. And today, we announced IND clearance for SGR-3515, our Wee1/Myt1 inhibitor. Total revenue for the first quarter was $36.6 million, with software revenue totaling $33.4 million, and we are reiterating our full year guidance. We are in active discussions with multiple global and emerging biopharma companies about increasing adoption of our platform. While it is too early to predict the magnitude of scale up from customers with renewals in the remainder of the year, we continue to see high interest in computationally driven drug discovery and believe we are well positioned to capitalize on the growing wave of research teams incorporating computation at scale into molecular discovery programs. Today, we reported that rights to the SOS1 inhibitor discovered and developed as part of the collaboration with BMS have reverted to us based on portfolio prioritization decisions. Collaborations are an important part of our business, and we are routinely assessing opportunities with existing and new collaborators and partners. Our venture activity has also been a very successful part of our overall strategy, validating our platform and strengthening our balance sheet with both cash distributions and equity from companies we have co-founded. We have been pioneering computational molecular discovery for over 30 years and continue to push new frontiers integrating physics and machine learning to extend our scientific and commercial leadership position in the industry. We have a bold vision of structurally enabling every protein of human genome with an initial focus on the most important off-targets known to cause serious side effects that derail clinical programs. There is an emerging requirement for such models to predict drug toxicity risk before animal or human studies. We are very actively developing computational solutions to meet these requirements. Our recent advances characterizing the structure of key proteins such as hERG and cytochrome P450 enzymes are examples of these efforts. We have also extended our informatics platform. And in March, we launched a new version of LiveDesign that supports Biologics. LiveDesign is an enterprise cloud-based solution that allows drug discovery teams to centralize access to computational modeling tools and data in a single interface. LiveDesign previously only supported small molecules, and we are pleased to expand our informatics capabilities to support Biologics. We are well positioned to advance all aspects of our business this year. We see clear opportunities to drive software adoption to extend our scientific leadership in the industry and to advance our clinical programs towards multiple data readouts. I would now hand the call over to Geoff.

Thank you, Ramy, and good afternoon, everyone. Showing out a solid Q1 with software revenue meeting our expectations a handful of software renewals were bumped into Q2 from Q1 and reduced some of the upside opportunities for the quarter, but we should see the benefit of these in Q2 and the balance of the year, underpinning our confidence in our full year revenue growth guidance. Our business in China has been below our expectations this year based on the challenging commercial environment there. But we have many opportunities to offset that impact with larger renewals in the U.S. and Europe. We continue to enhance the capabilities of our software and see multiple paths to secure multimillion dollar increases in contract size of global and emerging biopharmaceutical companies in 2024 and beyond. We are also very excited to have advanced our proprietary portfolio to now have a third program entering the clinic, and we are with insight of our first clinical data for our proprietary programs in patients later this year or in 2025. Finally, the return of our SOS1 program form BMS gives us further opportunity to evaluate for our proprietary portfolio and to consider for external partnership and combination development opportunities. In Q1, software revenue was $33.4 million, an increase of 4% compared to Q1 last year. Q1 last year benefited from a significant revenue contribution from multiyear renewals that did not recur in Q1 this year. Hosted software revenue was 22% of total revenue and grew more than 60% compared to Q1 2023. The faster growth in hosted software was in line with our expectations and consistent with our prior comments about an anticipated gradual transition to hosted software licenses across our customer base over a number of years. Maintenance and professional services were relatively constant as new…

Thank you, Geoff, and good afternoon, everyone. Our therapeutics team continues to advance our pipeline collaborative and proprietary programs. With the IND clearance of SGR-3515 our Wee1/Myt1 inhibitor, we now have 3 clinical stage proprietary programs. In addition to our proprietary pipeline, several collaborative programs are advancing in clinical trials at companies we have cofounded or partnered with providing continued validation of our platform. As Ramy reported, we have received full right to the SOS1 development candidate that we discovered as part of our collaboration with BMS. As you know, BMS acquired a clinical stage SOS1 inhibitor when it completed its acquisition of a clinical stage oncology company earlier this year. We received a milestone upon completing the SOS1 development candidate package and BMS have been conducting IND enabling studies. The transfer of information from BMS to Schrödinger is ongoing. We will determine the next steps and plans for further investment in this program based on our assessment of the updated data package from BMS as well as the opportunity within the context of our overall proprietary portfolio and the evolving therapeutic landscape. As we look ahead, we expect collaborations to continue to be an important component of our portfolio and we continue to evaluate new partnerships where the science, project, scope and value are consistent with our strategy. Turning to SGR-1505, our MALT-1 inhibitor. Our Phase I study in patients with relapsed refractory B-cell lymphomas is progressing well. We've expanded the study to 15 sites globally and dose escalation is ongoing. As a reminder, the primary objectives of the study are to evaluate the safety tolerability PK/PD and determine the recommended dose, measures of clinical activity are secondary endpoints. We are on track to have clinical data in late '24 or in 2025. Our CDC7 inhibitor SGR-2921 also advancing…

Thank you, Karen. As you heard, we are off to an excellent start this year and are continuing to make progress against our goals for the year. We appreciate the hard work and commitment of our employees are instrumental to our mission. We look forward to providing further updates throughout the year. At this time, we'll open the lines for questions.

[Operator Instructions] We'll take our first question from Michael Yee with Jefferies.

Thank you for the question, and thank you for the update. Question on software and question on the pipeline. On the core business, I think, Geoff, probably just made a comment about how some business was maybe pushed from Q1 to Q2. Can you talk a little bit about that? And how that relates to ongoing trends, appreciating that fourth quarter still is really your biggest quarter. So just comment on some of that dynamic. And then on the pipeline, maybe -- for Karen, can you talk about the MALT-1 study going on and what you would deem to be positive and very promising efficacy for a new small molecule for B-cell lymphomas?

Mike, just on the contracts that I mentioned, a couple of relatively small contracts, really the difference between the quarter, meeting our expectations and then being a little bit lighter. I don't think it reflects any underlying trends in the business. These were contracts that we knew will renew and for logistics reasons, they didn't renew at the very end of Q1 and then shift into Q2. We don't think that there's any -- there's no increase in the number of nonrenewals or anything like that. We continue to have very high conviction about the outlook for the full year and just don't see anything in the external environment that affected outlook. I did highlight the effects in China our business -- online business in China is relatively small. The smallest of our geography and given what's going on there, that's not a surprise that the renewals have dropped off somewhat, but it's not going to have a big impact and the big driver for us is as I highlighted, those large renewals that will tend to be concentrated in the fourth quarter.

And Mike, on the MALT1 mechanism, as you're aware, we're obviously in our Phase I dose escalation trial, I think your question was broader than that with respect to the mechanism. We see this as a clinically validated mechanism, given data that's been published over the last few years, showing monotherapy responses in the range of 28% ORR and combination activity -- in combination with BTK, giving you around 30% or -- we also know that they will complete responses in prior trials. So in terms of what we think would be exciting, obviously, monotherapy activities and also combination activity, either with BTK inhibitors or with BCL2 inhibitors, we showed a lot of that preclinically, but preclinically, you can get to progression. And so we hope to see similar data emerging from the MALT1 mechanism in the coming years.

And we'll take our next question from David Lebowitz with Citi.

Could you comment on -- I mean, Michael, to some extent got on this, but on the trends that we should expect, I know there was an effort to try to shift the nature of contracts to move revenues, I guess, to be a little bit more smoothed out would that result in even smoothing up somewhat more. How are those efforts progressing? And how should we see that take hold?

Thanks very much. That's for the question, David. Indeed, we are seeing some transition over to host for on-prem. You can see it in the breakup in the Q, the hosted in this most recent quarter grew by 16% year-over-year and with about 21% of total software revenue. Whereas in the first quarter of last year, it was only 14% of software revenue. It was much more of a percentage in the fourth quarter. So when we do have these large quarters with multiyear contract renewals the hosted proportion is going to go down. However, the long-term trend is that we think that the proportion of business that hosted will gradually increase, we did have a number of significant customers switch over from on-prem to hosted last year. Now as we've said, our business has been around selling software for nearly 30 years, perhaps longer than that, way before my history with the company. But we have complex contracts and every contract is different, to be honest [indiscernible] and so we can't go in and sort of immediately change all of those contracts over but we do think that over a number of years, that proportion from hosted will continue to increase. It won't be rapid, certain or a single year transition, but we do think that it will increase over time.

And we'll move next to Scott Schoenhaus with KeyBanc.

Could you give us an update on what you're seeing on the biotech end markets, we've had some peers in the space that have noted potentially some recovery or it's mixed commentary. So I wanted to hear from what you guys are seeing and then remind us what's baked into your guidance in terms of the biotech end markets.

Sure, for the last year, we did highlight that there's an increase in the number of a small companies that were nonrenewing and you could see that in the KPI data that we provided in the companies in the tier between $100,000 and $500,000 of ACV up build an increase in the nonrenewals in that tier. We don't provide quarterly ACV numbers or call it booking summers, but we've seen a stabilization of that trend. We're not seeing any sort of continued increase in the number of nonrenewals. That being said, we are seeing an offsetting increase in the new inquiries, but I will say we're seeing companies coming forward at a venture of that who are asking are there any creative ways they can get access to our software. And when engaging in those discussions, we do think over time they will result in software contracts. It matrix longer than we normally would have expected perhaps back in 2020 or 2021 to see that realized into our results, but we're hearing about those opportunities coming forward. So I would still characterize it as green shoots rather than anything that we can harvest but we're definitely seeing some of those opportunities.

And we move next to Vikram Purohit with Morgan Stanley.

So we have 2, 1 on the pipeline and then 1 on the full year software guidance. So on the pipeline, at what point do you think there might be some more visibility available on -- specifically when the late '24 or '25 data could come through from MALT1 and CDC7. And how are you currently thinking about what the initial size and scope of that dataset could be? And then on the software guidance for the year, with 1Q behind us now, how are you now thinking about which scenarios define the bookings of your guidance of 6% to 13% year-over-year growth?

So I can start. So I think it's too early to commit to specific data that we're going to be sharing. As you know, this is a dose escalation trial with respect to safety, PK and PD. Our goal is to determine a recommended Phase II dose and clinical activity as a secondary end point. However, we are gathering more PK, safety and PD data in the trials that we're running. And so that's ongoing and it's going well. And so over the course of period that we've shared '24 through '25, we will be in a position to share an update, but it's too early to give you any color on what that might look like at this time.

Let me chip in and give you an answer on your second question about the full year guide and the circumstances that would lead us to either of the bookings. First of all, so just to remind you, the guidance philosophy is to guide to the range of most likely outcomes. We have defined guide to either extreme, but very low probability outcome, either on the high side or the low side but we do want to share with you what we think it's most likely. And the range we provided is that range right now. We do think we'll get more information as we progress through the year. And of course, ultimately, we hope to narrow that range, but we don't know until we get that information, we will have to incorporate it. In terms of the circumstances that were drivers to either of those extremes, it does depend to a substantial degree on the nature of the renewals. For example, if we have customers who are on-prem customers who come to us and ask to renew a multiyear basis, that would drive revenue towards the high end of the guidance range. And if they come forward and say we want to renew as we already have on an annual contract basis, then it would be more sort of lower than the range. The other factor that we're considering in the guidance that we provide is some of the conditions that we discussed in terms of the biotech financing environment, if we see some of those conversations about providing our software to relatively early-stage companies, counter fruition and if those companies successfully financed and that might trigger a revenue purchase, that would also contribute to driving us towards the upper end of the range. So those are the 2 variables that we're mainly contemplating. I hope that's helpful.

And we'll take our next question from Evan Seigerman with BMO.

This is Conor MacKay on for Evan. And congrats on the IND approval for 3515. With the number of assets either in clinic or soon to be in clinic, can you just talk a bit about how you're thinking about P&L management as it relates to your broader business? And then also, how are you thinking about the potential for collaborations and partnerships with your internal assets, of course, balancing data maturity and preserving economics?

Maybe collaborations for -- that's how...

Yes. So I can just start by saying each of the mechanisms that we've disclosed -- we believe either serves a population that has existing drugs where additive mechanisms that's going to lead to deeper responses. As you are well aware, we don't have those mechanisms, for example, BCL2, BTK inhibitors. And we view collaborations as an important way to basically combine our assets with other companies, products or development assets to recognize the opportunity for these programs in various different indications. So we're very open to collaboration. We continue to be in those discussions. But obviously, we're gathering important [indiscernible] on all of these programs at the moment.

And Conor, let me just add to that on collaborations. It is a very dynamic deal environment for companies in the computational drug discovery space generally. And that dynamic environment, I think, is to our advantage, and we do see a lot of opportunities for a wide variety of different types of deals as we contemplate the business [indiscernible]. Now I said previously, we aren't guiding to that. We have these forecast timing, value, probability and those discussions, but that dynamic environment is [indiscernible]. In terms of your first question about P&L management, assuming that you're asking us about the trajectory of expenses while we haven't guided to expenses for next year, I hope that we've been communicating statistically that we are seeing a slowing in growth rate of a number of those different expense drivers, we think that we have opportunities to see slight improvements in our gross margin. For example, that you're seeing some operating leverage now on our G&A line, you're seeing some operating leverage on sales and marketing as well. And we think that our R&D, while has been increasing, and it's likely to continue to increase is going to increase significantly more slowly than it has in the past because there will be additional capital required for the advancing clinical programs, but relative to totality about R&D, which is still substantially for the platform, it's a relatively small contribution. So we don't think it's starting to drive a large increase in our R&D response going forward. I hope that's clear.

We'll move next to Steven Mah with TD Cowen.

I've got 1 on LiveDesign for Biologics. Could you give us some color on the adoption and any traction to customers you've gotten since launch in March? And then specifically, what types of companies are making inquiries, are they big pharma or emerging biotechs?

Yes. So we just launched it . But as with many of our launches, including LiveDesign itself, -- we worked very closely with a number of companies to understand the requirements and what they would want in the product. So the feedback so far in all of the presentations that we've given before the launch actually and since the launch has been incredibly positive. There is clearly sort of pent-up demand for something like this, there is not a good solution right now, so significant interest. But this is a very new release so we can't comment on what is anything about the number of customers or the revenue from it, but we're really excited about the launch, and it's going well so far.

Okay. Great. That's fair enough. And then I've got 1 last question on the SOS1 inhibitor that reverted back to you guys from BMS. I appreciate the color on why they didn't take the option that they acquired a company with a similar asset. But do you know how similar that asset that BMS acquired is to the inhibitor that you guys developed? Is it similar? Is it the same mechanism?

Yes. I mean I think from a mechanism point of view, this is a PPI inhibitor I think that mechanistically, they're both very similar. I will say that, obviously, we were in a position to benchmark our compound during the discovery phase of the program that we ran with BMS, and we're very happy to say that the profile is the compound and BMS brought that program in on the basis of the work that we have done. So we remain excited about the molecule. I think obviously, that molecule that they acquired through their acquisition is more advanced than ours. And so we have obviously work ahead of us to as an industry actually to see how all of these compounds compare. So yes, I think it's too early, obviously, to saying how they stack up against each other in the clinic.

Okay. Got it. And how long do you think the evaluation will take in the internal evaluation and what to proceed with it?

It's a little hard to determine. We obviously are very early in the process of getting data back from BMS from the IND-enabling studies they have been conducting. So I can't say exactly, but I think, obviously, we're in a hurry to understand the opportunity here. And again, we're excited about the profile and what we've seen so far. So hopefully, it won't take too long.

We'll move next to Michael Ryskin with Bank of America.

Great. First, I want to just follow up on exactly that last point, the BMS discontinuation. In the past, I think when you've had some programs sent back, there might be a milestone fee or some sort of financials associated with it. I'm just curious, is there anything like that recognized in the first quarter? Or do you expect it in the second quarter? Just any other details around the process of reverting those rights?

Mike, the short answer is no, because this program has transitioned to their portfolio, and we had a milestone from previously with -- associated with that transition. There isn't any additional milestone or fee payable on -- being returned to us nor do we have any prior revenue that we accelerate. So it wasn't a contributing fact during Q1.

Okay. Easy answer. And then for my follow-up, it's been, I think, a couple of quarters since you guys really talked about the material science part of the portfolio. So I thought I'd ask on that. Just any updates there? Anything interesting to give us -- to apprise us of -- I know it's always sort of in the background and doesn't get a ton of light, but just would see if there's anything new going on there.

Sure. Yes. So -- the thing that we're most excited about on the materials science side is as we talked about before, is we have this collaboration with Gates -- that was the initial project -- it was a 3-year project, went so well that it was actually renewed. And that was on the basis of really progress on the science. This is a really, really hard problem. And as with all really hard problems, we think success in the problem will have significant rewards, so we're really pleased with the progress on the basic science. But that's really the stage that we're at [indiscernible] and that's what we're really excited about. We think if we're successful in the project, as I said, it has the potential to have a really big impact. As far as the core business and the revenue for the business, as we said before, we don't really break that down. We're pleased with the progress. It continues to -- we continue to add new customers. There continues to be scale up of other customers, but we're not really disclosing -- we're not bringing down the revenue into the different components. I hope that answers the question.

We'll take our next question from Matt Hewitt with Craig-Hallum Capital.

Maybe first up, and this kind of goes back to Geoffrey, some of your comments about the R&D expense kind of leveling off a little bit. As we look out over this year and maybe into next year, you've got a couple of Phase I trials that will be wrapping up, and then you've got Wee1, obviously kind of kicking off. Is that part of the flattening of the R&D expense over the next, call it, a year, 1.5 years? Or is it more a function of kind of looking at those programs and trying to figure out where do we go next? And which one do you want to kind of move on to Phase II? Just help us out there.

Okay. Yes, I understand the question about the R&D trajectory. And in fact, the flattening is due to a different phenomenon, which is that we think that we are at scale with respect to our R&D investment in our platform. As I previously indicated, it's a substantial portion of our R&D investment and we think that this is such an exciting space and a dynamic industry environment. We've still a lot of opportunity in terms of new discoveries, new research that we can then translate into capabilities in the platform. So we're not driving that back but we don't think that needs to get a lot larger. The second component of our R&D is drug discovery organization, not so much the development portion, but the investment that we're making to come up with the next wave of molecules and the next wave after that, same general comment there. We can't sort of manage 10 new programs a year or 15 new programs a year. And if we keep scaling up, that's where we would have -- so again, we think that we're at scale in terms of the ability to discover the next wave of programs and a wave after that. So both of those pieces, we don't see a lot of need to increase. Now you correctly identified that there has been an increase in the investment on the clinical programs but that total clinical spend is a relatively small portion of our overall R&D. We do expect that piece to go up, but the rest of the R&D pace is likely to be pretty stable from here. And so that's where you get that. We just don't see a large [indiscernible] up from here. Is that clear?

Yes. No, that's super helpful. And then I guess, separately, on the software side, -- so the last fall, obviously, in particular, very challenging from a funding perspective, you commented on how that likely weighed on some of your smaller customers kind of hearing back or not renewing. As that funding environment is improving and as more recently, as China has announced a new stimulus package there -- are you starting -- like how quickly will that turn around where you start to get those customers that maybe didn't renew previously, they started coming back saying, "Okay, now we're ready to reengage." Is it pretty quickly or does it take quarters? Or how should we be thinking about the timing on as the environment improves, you'll start to see that as well.

Yes. So to be clear, I think what we expect to happen is new companies will come to us asking to use our technology as a foundation for the drug discovery efforts. And we are seeing those inquiries. Now those companies that are asking that we're going after this particular target or this drug class, and we like to build our company based on your technology, there's all sorts of availability of funding in those companies. Some of them are well capitalized, some that have to be capitalized, some of them may be capitalized in the future. And we're working with all of them, and we are seeing an uptick of interest there, but it's too early to bake that into our revenue outlook. Now the companies that previously discontinued, my expectation is that they will not come back, whether they are based in China or based in the U.S. Those companies have shifted their strategy. In some cases, they merge with other companies. In other cases, they've been acquire themselves. Or in other cases, they shut down drug discovery altogether and they're just focusing on the contribution of their clinical progress. So we're not assuming that they come back and become drug discovery software customers again.

we'll move next to Joe Catanzaro with Piper Sandler.

Maybe a quick one on 3515. I think we've seen in the space that patient selection strategy could be really important. And Karen, as you mentioned, selecting patients with elevated replication stress. So I would be curious to hear your thoughts and if you could elaborate a bit on sort of how are you thinking about going about detecting and defining elevated replication stress.

Yes. Great question. I mean first of all, let's just say that we know that Wee1 inhibitors have been -- shown to have great efficacy in particular chemotypes already for uterine serous carcinoma, ovarian cancer, really strong responses there. We do though believe that there are opportunities in solid tumors beyond those gynecological tumors. We mentioned breast cancer and other solid genotypes, as you know, we have a collaboration with MD Anderson for several years that thought to really help us understand sensitive tumor sites, and we're going to be leveraging that information as we go forward with our clinical trials. As you know, we're in dose escalation set up this year. But as we go to look for efficacy signals, we have the opportunity to leverage that information from the collaboration as well as to think about how to select patients that we think are going to be the most sensitive. So we'll be providing updates on that in the future.

[Operator Instructions] We'll move next to Chris Shibutani with Goldman Sachs.

A question about the business as well as the question about the pipeline. On the business, on an annual basis, you tend to provide some insight into the annual contract value and the number of customers that you're having there. Can you talk about how the year is progressing and your confidence in terms of that ACV trend moving 1 direction or another, presumably favorably given the 6% to 13% range that you provided? And then within that, what tends to influence whether the gross margins are closer to sort of the mid-70s versus the 80% level. So if I had to explain to someone the mix of the customers and the gross market impact and what you're seeing, how could you help me there? And then secondly, at the R&D Day, Karen, at the end of last year, I think there was a little bit of buzz that emerged when you guys identified a couple of potential targets that -- the Street tends to [indiscernible] about. In particular, I'll mention NLRP3 this year has become somewhat trendy. PRMT5 also has the presence. So with those, you talk about advancing on into an IND in 2025, what's the horse race like? And is that purely on the domain of something that you guys would plan to take forward or is that something you would contemplate possibly shifting over towards a partnership there as a way to cross leverage cost but still be able to get some of the carry, so to speak?

Thanks, Chris. I'll answer the last couple of questions, I'll let Karen to answer the other 5 or 6. So beginning with the ACV. We highlighted that last year revenue growth exceeded ACV growth by a significant margin, and we disclosed the ACV growth. And we don't break out ACV trends quarterly, but we've definitely communicated that ACV growth will be significantly higher than revenue growth this year and that was driven by the large contribution from the multiyear deals in the fourth quarter of last year, which effectively are recognizing revenue from future years, that is '24, '25 and '26, for a 3-year deal. So ACV growth this year is likely to be significantly higher than revenue growth. And that was true in the first quarter, we don't sort of have an ultimate ACV growth number, but qualitatively, it was significantly above the revenue growth, and it is consistent with what we're expecting for the full year. Now in terms of the number of customer trends, we do [indiscernible] in our KPIs. I think we have confidence that the KPI is going to trend positively this year. We don't guide to that. I don't have specific numbers to share, but you could look at the numbers that we highlighted last year, and we remain pretty positive about the trajectory of those numbers this year and about their ability to contribute to us achieving the revenue guidance and by implication, the ACV growth outlook that we're expecting. And then -- sorry, I mixed the other question. [indiscernible] to get the gross margin. So gross margin is somewhat influenced by the contribution of multiyear deals. If we have a large software renewal that includes revenue that where we're providing the actual access to software, 2 or 3 years out, that revenue being recognized as a very high gross margin, and that tends to lift the gross margin overall, whereas quarter, for example, like the one we most recently had, where we didn't have a lot of multiyear deals, and we had a significant step-up in hosted revenue that tends to bring the gross margin down. Now we are very confident that the gross margin is going to trend only over time. There was a little bit of an increase in technology spend that I flagged up in the first quarter. But I think that overall, we're very convinced that our gross margin trend -- the guidance will be similar to last year, and we think that it will trend positively over time. I wouldn't be dialing in, so -- substantial increase in our gross margin, but we do think there's reason to think that it will continue to actually tick up by small amounts this year. So, Karen?

Sure. Yes. So you're right, the NLRP3 and PRMT5-MTA has been pretty interesting over the last year with a lot of disclosures from other companies. We are excited about both programs. I think what they first have in common is that there are a number of potential indications for NLRP3 potential, obviously, in Parkinson's disease as well as a number of peripheral inflammatory diseases. For PRMT5, there's opportunity in brain tumors, but also a number of solid tumors. So we're excited to have both these programs in our portfolio. They're both in the optimization stage. We're working hard on the optimization of multiple theories. I think we described that at Pipeline Day and one of the important features is the opportunity to leverage our platform to optimize brain penetration, which is clearly a key feature for both of these programs. And that work is underway. I think it's too early to talk about -- sort of picking in [indiscernible] the rate. I think we're pleased with the progress that we're seeing. And then your other question, I think, was whether we would develop these [ loan or income ] collaboration with others. I think those opportunities are open to us, and we remain sort of open to collaboration discussions, but we also are working right now to think about indications in which we would conduct early clinical trials. So again, we'll keep you posted as we make progress with that.

I am showing no further questions at this time. That concludes today's call. You may now disconnect.