Cogstate Limited

Thanks for joining us today for this Half Year Financial Results from the 2025 Financial Year. We're going to go ahead and just jump right over and we'll have Brad get started with the numbers.

We'll also be hearing from Darren Watson, our Chief Financial Officer here at Cogstate, as well as Rachel Colite, who is our Executive Vice President of Clinical Trials. But first, over to Brad.

Thank you Ruth. Welcome everybody.

I'm really pleased to present the half year financial results for Cogstate for the 6 months ended 31 December 2024. Before we get started, today's presentation includes some forward-looking statements and therefore I note our disclaimer stating that this information in the presentation is general in nature.

We obviously encourage all investors to consider your own investment objectives and also to review in detail our half year financial statements that were lodged with the ASX early this morning. Following our presentation, we'll take questions.

If you do have a question, there are two ways in which you can ask it. First, you can type your question into a control panel and that will be read by Ruth, our moderator, or alternatively, you can raise your hand to have your line unmuted to ask your question.

I note that this presentation has been lodged with the ASX and the slides here are available in the handouts tab of this webinar. Finally, I note that the recording of this presentation will be lodged -- sorry, uploaded to the Investor Center section of the Cogstate website following the conclusion of today's presentation.

So let's get into it. On the back of the financial growth recorded in the June 2024 half year, the first half of the 2025 financial year produced a record revenue result.

For some time now we've maintained that this business should produce gross margins in the range of 58% to 60% and the EBIT margins of 20% with upside if scale can be achieved. Over the last two half year periods, we have produced such results.

Sales contracts executed in the first half of the '25 financial year totaled just over $20 million. And while that is still less than revenue recognized during the period, there was an improvement on the sales booking result recorded for the previous three half year periods.

However, due to a changing mix in both product solutions as well as changed mix of indications into which we're selling, the revenue yield in financial year '25 from those contracts signed is higher than historical averages. The $20.3 million of sales contracts executed in the first half have added $12.4 million to forecast FY '25 revenue.

So in other words, sales contracts have produced a higher level of short-term revenue than historically been the case. Our technology investment over recent years continues to create efficiency gains.

We've been able to create margin improvements through automation in data analytics, data management and workflow management. Our number of employees at 31 December 2024 was down to 154 people, which was down from 166 people at the same time last year.

Pre-COVID, Cogstate staff numbers were over 200 full time employees. So we've seen a fairly significant reduction in workforce.

However, our focus has not been just limited to cost reduction and margin improvement over the last couple of years. We continue to invest for the future with ongoing investment in advanced analytics and automated data analysis because we believe that this technical capability will allow us to generate automated error detection in clinical study data, thereby enabling us to gain market share in the future.

As a result of that investment, we did see an increase of $0.8 million in operating expenses from the June half into the December half. As we look forward, further profitable growth will be subject to growth in sales contracts executed.

In this sense, Cogstate is pleased with the progress of our channel partnership strategy, specifically the partnership with Medidata that we announced in October of 2024, and Rachel is going to speak to that opportunity later in this presentation. Darren will dig into the financial results in more detail in just a second, but just to run over some of the highlights.

$20.3 million of sales contract executed during the half year was up 86% on the first half '24 result. However, because revenue recognized is higher than the sales contracts executed, we did see an 8% reduction in the value of contracted future clinical trials revenue.

Contracted future health care revenue also reduced as a result of the amendment of the Eisai agreement when we announced that amendment in April of 2024. So in total, contracted future revenue at 31 December 2024 is just a touch over US$99 million, which is down 20% on 31 December 2023.

Total revenue of $23.9 million was a record half year result and was up 19% on the previous corresponding period. Clinical trials revenue was up 27% compared to the previous corresponding period.

The total revenue growth was lower due to a reduction in health care revenue. And that again resulting from the amendment of the Eisai agreement that I referred to a moment ago.

Profit before tax of $5.2 million was up 150% on the previous corresponding period, driven by strong growth in clinical trials revenue as well as excellent cost control. Positive operating cash flow of $5 million resulted in closing cash balance of US$34.2 million at the end of December.

And that's notwithstanding approximately US$1 million that was spent on the share buyback during 2025 -- the first half of the 2025 financial year. I'm now going to hand over to Darren to run through the financial results in more detail.

Thanks, Brad. As Brad mentioned, Group revenue for the first half of '25 was $23.9 million, which is up 3% on the most recent half and up 19% from the previous corresponding half.

The growth in revenue results from growth in the clinical trial segment, as Brad noted, but is offset by a reduction in the health care revenue. We'll run through the segment results in a moment.

We saw strong improvement in gross profit margin, up 2.5 points and up 7 points compared to the previous corresponding period. During the first half of '25, our margin -- our high margin license -- software license fee revenue returned to roughly 19% of revenue, which is consistent with the longer term trend that we've seen.

Cost control and efficiency gains from technology improvement, as noted by Brad, also contributed to the strong margin improvement. From a profit perspective, EBITDA and EBIT margins were consistent half to half.

The EBIT margin was up 11 points from the previous corresponding period. Gross margin and EBIT margins are consistent with our target model.

Profit before tax of 5.2 was up slightly on the most recent half and up 3.1 on the previous corresponding period. Turning to the segments.

Clinical trials revenue has grown 5% half on half and is up 25% on the previous corresponding period. The clinical trials gross margin for the first half increased to 61% for a gross contribution of $13.7 million, up a million on the previous half, and up $4.7 million, or 54% improvement from the prior corresponding period.

In health care, as Brad noted, in April 2024, we renegotiated our health care license agreement with Eisai, enabling Cogstate to regain control of our IP in that market, but reducing the future receipts from Eisai by roughly $15 million. As a result, the amortization of that contracted revenue has decreased, with health care revenue down $0.6 million half to half, and $1 million compared to the previous corresponding period.

However, through cost reductions, we've been able to maintain the health care contribution of 0.9 for the half. That's down 0.3 million half to half and down 0.8 million compared to the previous corresponding period.

From a cash flow perspective, operating cash flow was $5 million for the first half of 2025. Receipts from customers increased $1.5 million half to half and $6.6 million compared to the previous corresponding period.

Our payments to employees and suppliers was up by $2 million half to half and up by $2 million compared to the previous corresponding period. Approximately $1 million was used to buy back Cogstate shares, up from $0.5 million in the most recent half, but down from $3 million in the previous corresponding half.

Our net cash inflow for the first half of 2025 was $4.1 million, taking cash on hand to $34.2 million on 31 December 2024. As noted, clinical trials sales contracts executed during the first half of 2025 totaled $20.3 million, an improvement from the previous three halves, but still less than the historical trend.

Alzheimer's disease trials represented 70% of contract sales executed during that period from the most recent half year periods. The $6 million of sales contracts executed in other indications -- in indications other than Alzheimer's disease reflects the continued expansion of Cogstate's offerings in these indications.

Contracted revenue at 31 December 2024, Cogstate had $41.3 million of contracted revenue for FY '25. At the same time, last year we had $36.7 million of revenue contracted for FY '24, which was 84% of the $43.4 million revenue recognized in FY '24.

That is, through the execution of sales contracted during the second half of '24, last year Cogstate added $6.7 million of revenue to the amount that was contracted at the beginning of that half, being 1 January '24. At that, I'll hand over to Rachel.

Sorry.

Thank you, Darren. So as we know, the CNS clinical trials market has historically been a challenging road for innovators, but it's showing encouraging progress as we advance our understanding of these conditions, identify new drug targets and see late stage novel candidates progressing through development and onto market.

The IQVIA [ph] white paper referenced here on CNS innovation forecasted the global CNS market size will reach 230 billion by 2032, with areas like Alzheimer's disease expected to be the fastest growing with a projected 12% annual growth rate. The CNS opportunity is second only to oncology, so it's an incredible unmet medical need to drive investment in clinical trials.

In terms of product-focused transactions in 2024, we saw large and mid-sized pharma entering or further committing to the space with Lundbeck's acquisition of Longboard for epilepsy. AbbVie's deal with Aliada and Takeda's with AC Immune both in Alzheimer's disease.

And then within Cogstate, we're also seeing this renewed CNS interest reflected in interest from channel partners. So we now have a number of collaborators and candidate collaborators at various stages, which we'll talk a little bit about here.

So we wanted to highlight one of our most exciting channel partnerships. So we have mutually invested in uniquely deep integrations, not only technical integrations, but also operational and commercial.

And that's with Medidata, the leading provider of electronic data capture solutions in clinical trials. In the short time since our partnership was announced in October of last year, we've achieved our first joint award, which was a Phase 2 influenza trial.

And we've established strong initial pipeline of opportunities from 28 different pharma sponsors and a broad range of indications, which is taking Cogstate into areas we may not typically address, things like oncology, dermatitis and restless leg syndrome. So we are incredibly excited to see where this partnership takes us with such a widely adopted clinical trials technology company, to see how this can provide substantial scale to a Cogstate business that's now well-positioned for efficient delivery.

So here we'll highlight just some of the ways we've prepared the business for scale and efficiency. The first is through significant investment in workflow automations that are focused on our clinician network.

This network allows us to provide data quality services for clinical trial assessments using a highly flexible resourcing model of consultants. We have developed purpose-built applications that support all aspects of their delivery.

And this has enabled us to quickly move into new indication areas as well as new geographies in line with customer needs. Another way we have prepared for scale is through the commercialization of data insights and analytic solutions using our modern data lake [ph] infrastructure.

This was something we've spoken about previously. It's been a point of major investment for the company, modernizing that underlying data lake infrastructure.

We've delivered a number of data management and monitoring automations off of that technology that improve the cost and quality of customer deliverables, including customer facing data dashboards with algorithmic quality indicators that help sponsors make decisions about their trials. And finally, we're establishing data pipelines and other data integrations with our channel partners to underpin our ability to deliver seamlessly as one cohesive team.

Our customers want fewer vendors and fewer systems to manage, so this is a central part of our partnership growth strategy. So here I'll hand it back to Brad, I believe.

And Brad, you may need to unmute. Hey, Brad, we may need you to unmute your line.

There you go. We can see you and we cannot hear you.

Let's see.

Sorry.

There you go.

Sorry about that everyone. My mouse wouldn't recognize my clicks.

Anyway, we're back. Just in time for guidance.

So we wanted to provide a bit of update in respect of our expectations for the second half of the '25 financial year. Largely speaking we're expecting at this stage the second half to be very consistent with the first half of the financial year and certainly from a revenue perspective.

We base that statement on the fact the contracted revenue position at the 1st of January is stronger than it was at this time last year. So we have $16.3 million of revenue expected to be recognized in the second half of the '25 financial year.

That compares to $14.5 million at the same time last year. It's important to note that if sales contracts executed in the second half of '25 outperform what we did to that $20.3 million in the first half, then there could be revenue upside and that's obviously subject to timing of execution of those sales contracts.

From a margins perspective, there's no significant changes to the cost base planned and therefore gross margins and EBIT margins for the second half of '25 should be consistent with that of the first half of '25. From an operating cash flow point of view, we do know that there's additional tax payments of approximately $1.5 million that's expected to be made during the second half of 2025.

That's just the timing of when tax amounts are due, but excluding the timing of those tax payments, cash flow from operations for the second half should be very consistent with the first half of '25. So all in all, I'm expecting at this stage similar results, second half versus first half, which will give us good growth from '24 into '25 financial year.

With that, I want to open up to questions. So, again, as a reminder, there's two ways you can ask a question.

You can type the question into the control panel, and it will be read by Ruth, or alternatively you can raise your hand and your line will be unmuted and you can ask your question. So, with that, I'd like to go ahead and open the line to questions.

Fantastic. Thank you so much, Brad, Darren, and Rachel.

Really appreciate the presentation today. Let's go ahead and jump into questions.

We have several. The first is, we covered some of the exciting things happening with Medidata, and the question is more about can you quantify the improvements to the pipeline that are driven by Medidata?

I'm not sure if you guys want to add any additional color to other things we've shared about Medidata already.

So I'll start on that and then Rachel, I'll hand over to you. So I think the first general comment is one around scale.

So Medidata is an extremely large organization, more than 4,000 employees, a commercial team of near on 1,000 people. So that's the size and scale that draws [ph] Cogstate.

And obviously their reach then into the clinical trials market is much broader than Cogstate's. So I think it's really about the opportunity of adding scale to a Cogstate business that's really operating very efficiently at the moment and is ripe to add scale to that.

I think the other comment I'd make is that the types of -- because of that reach and the scale, the types of opportunities that we are seeing are broader than what we have traditionally focused on. And Rachel, maybe I'll hand over there to you and you can talk to sort of that breadth of opportunities that we are seeing.

Sure. Yes, without getting specifics in terms of pipeline value, we are seeing an increase in opportunities.

We had a record level of new opportunities and proposals in the month of January, again, which is building on that announcement of the partnership and prior to our retraining of the Medidata sales team, which we were really encouraged to see. So we are seeing the momentum.

We are absolutely seeing it make an impact on the number of sales opportunities and also the breadth. I think the introduction of new customers to Cogstate is one of the major advantages of the partnership and getting into the new indications that I pointed to earlier that are sort of outside the areas that we can address with our smaller team.

So I think it does present considerable upside from that perspective. And I think also because of their strong installment base, particularly in their EDC, electronic data capture business, which industry standards reports as the most widely adopted EDC in the clinical trials industry.

And so I think with that in play as well, it really supports strong potential for pipeline growth.

Thanks so much, Brad and Rachel. Certainly exciting.

Switching gears here, next question is about lead times between sales contract execution and revenue recognition seem to be shrinking. Do you see this trend continuing in the future?

And if so, what's driving it?

It's not so much the lead time for revenue recognition is shrinking. So there's a couple of things at play here.

So if -- and I'll give a couple of examples just to try and illustrate it. But if we are signing a large Phase 3 Alzheimer's trial that might run for 5 or 6 years, the contract value there is large, but obviously the timeline under which the revenue is recognized spreads across that 5 or 6 years.

Whereas if we are signing a larger number of smaller opportunities that might run over say 18 [ph] months, then that revenue just gets recognized over a shorter period of time because the trials run over a shorter period of time. So as we are seeing that change in mix of indications and as we continue to do that, as we continue to support more opportunities that are brought to us through channel partners like Medidata, we expect that'll be a trend that continues.

And it really just reflects the growth in that -- the customer base and the number of trials that we are running as part of that book of revenue.

Yes, I would agree, Brad, and I would just add that the indication mix is important, how fast these trials recruit. If you're a really, harder to recruit population, those trials will start more slowly and often have a longer duration, but also the phase.

And so what we are seeing, if there's more Phase 2 opportunities or even Phase 1 and 1b opportunities, we'll see those burn more quickly than Phase 3s.

Thank you guys for that clarification. Again, kind of taking a different spin here.

The question is regarding some changes in our competitors that we've seen over recent time, such as cognitive clarity now used in clinical trials to assess cognitive functioning, as well as amyloid presence, and then Cambridge Cognition adding radar training. Curious, our commentary on those changes from our competitive standpoint.

Yes, so we don't -- we haven't seen a lot of changes from a competitive standpoint. Cambridge Cognition Office gets brought up on these calls.

We rarely see them in competitive bids in clinical trials. So I think they just operate at certainly a different scale to what we do.

So our competitors continue to be the likes of Signet Health and WCG Clinical, who are the largest competitors in our space. In terms of, I think the reference was made there to biomarkers and Alzheimer's disease, I think it's important to note there that we don't consider that a competitor to what we do.

So measurement of pathology in the brain is different to measurement of the cognitive or functional outcome. We see those things as complementary.

So the advancement and the adoption of biomarkers, and particularly blood-based biomarkers in Alzheimer's disease, we see as a really important sort of tailwind to ease of recruiting into clinical trials and ease of identification of disease in patient populations. So we see that as, as I say, as a tailwind to our business model as a competitor.

Definitely appreciate that -- those clarifications and that addition on the biomarkers. It's certainly a fascinating time to be part of CNS.

Another hot topic we're encountering right now is AI. And so we've got a question about how can we use AI tools to our advantage as a company, and do we view it as an opportunity or a threat?

No, it's certainly an opportunity, and I'll get Rachel to talk to this in a second as well, but Rachel mentioned in her presentation some of the work we've been doing around advanced analytics and our advanced data monitoring and the automations there, and I've just brought that slide back up on the screen. But certainly a lot of the efficiency we've created, I wouldn't necessarily call it AI.

We could stuff a nomenclature there, whether it's advanced analytics or AI. It's using the data infrastructure that we've invested in over the last couple of years to ensure that we are in the most efficient way possible, identifying error that occurs in the conduct of a clinical trial.

And at the end of the day, that's our job. What pharma companies basically pay us to do is to reduce the error.

By reducing error, we increase signal strength. And that's ultimately what we're trying to do in clinical trials.

Rachel, do you want to add in to that?

Yes, I think that's exactly right, Brad. So a lot of our product innovations and investments have been focused around the concept of more scalable means of data monitoring and data quality assurance.

And that certainly includes algorithmic monitoring in AI. We see opportunities for this and have performed some pilots and in-study implementations for these more scalable approaches where we are looking at the audio recordings from assessments to understand quality indicators and then also the scores resulting from the rating assessments where we can look at things like incongruent change scores, outer range scores, unexpected change scores to help us flag quality indicators that can then more strategically target the human reviews to the expert reviews that we also support.

So we see it as working hand in hand with the expert review, but certainly a really great opportunity for us to get more strategic about the use of those resources and to allow sponsors to achieve even greater data quality oversight. Currently, sponsors make trade off decisions about how much of their data they can do those quality checks on.

And our vision is for a 100% data quality oversight. And so that's how we see AI lending to what we do in trial.

Great. Thank you, guys.

We'll take just about one or two more questions here, folks, so feel free to submit anything else that's on your mind. The next question we have here is regarding the growth that was mentioned in CNS trials, that it's second only to oncology.

And that begs the question then, so what might Cogstate be doing in oncology?

Rachel, do you want to take this one?

Yes. So our role in the oncology trials is really those trials that have cognitive endpoints.

And so often in pediatric oncology, they'll be looking at indicators of development to ensure that these drugs aren't having a detrimental impact on the kid's development. And then in adult cancers, there's a number of trials where it's either CNS oncology, so brain tumors and the like, or things that have a metastasis in the brain.

So these are areas where they're looking at these types of endpoints to understand how the drug is working or safety measures within the trials for different treatment approaches. So that's typically where we see sort of our corner of that market.

And we support those trials with either our digital cognitive assessments, because they are quite scalable and applicable in areas like oncology where the research centers are not as familiar with cognitive assessment. And then sometimes traditional cognitive assessments are used.

In those cases, we're doing greater training and central monitoring to ensure that they're being done correctly.

Thank you so much, Rachel. And with that, we'll actually go ahead and I'll open the line -- oh, sorry, we got one more question that snuck in here.

Let's see. Do we have any updates on how we're progressing and securing a partnership in primary health care to adopt technology now that we are controlling our IP?

Yes, good question. So just again, just to run back through the background, we amended our agreement with Eisai in April of 2024.

Eisai continuing to push Cogstate technology into the primary care market in the United States and into consumer markets in Asia. We've been in discussions with some pharmaceutical companies in relation to their interest in the primary care market, but also in relation to use Cogstate technology as a prescreening activity as part of clinical trial enrolment.

Whilst that sounds like perhaps a different market, we wouldn't have been able to go into that prescreening market without first regaining control of that IP from Eisai. So there's a number of different things that we're doing there in the pharmaceutical industry.

And I would imagine by the time we announce the full year results, we'll be able to talk to what we're doing there in a little bit more detail. In terms of pushing into primary care markets, we're still evaluating what the ideal opportunity for Cogstate is.

Obviously, we're continuing to leverage the Eisai relationship and the work that they're doing, and we're absolutely not giving up on that. But we want to see particularly what happens when blood-based biomarkers are available in primary care.

We see that as a really critical aspect in terms of an increase in diagnosis rates for Alzheimer's dementia and want to think about what is the opportunity for digital cognitive assessments to work in tandem with those blood-based biomarkers. And our expectation is that those probably hit the market within the next 1 to 2 years.

Brad, thank you so much. And thanks again also to Darren and Rachel.

We will go ahead and wrap up. It's been a great discussion.

We've certainly covered a lot of area from partnerships to AI to health care and all that we're excited to endeavor in all these areas. And with that, Brad, any final words for our audience here?

Just thank you for your interest. We -- I think the business is in really good shape, looking at a strong financial year '25, continuous strong cash flow and profit results.

And we think with the business really operating efficiently now, we are really primed to add scale to this and so we are really hopeful of what our channel partnership strategy can add to the business. So again, thank you for your interest and have a good day everyone.