Preliminary Results, Trading Update & Board Change

Cambridge Cognition Holdings PLC

01 May 2024

 

1 May 2024

Cambridge Cognition Holdings plc

("Cambridge Cognition", the "Company" or the "Group")

Preliminary unaudited results for the year ended 31 December 2023, trading update and Board changes

Cambridge Cognition Holdings plc (AIM: COG), which develops and markets digital solutions to assess brain health, is pleased to announce its preliminary unaudited results for the year ended 31 December 2023 as well as an update on its outlook and current trading.

Financial highlights

●	Revenue up 7% to £13.5m (2022: £12.6m).
●	Gross profit increased by 8%, with margin improving from 73.9% to 79.9%.
●	Adjusted operating loss of £1.1m for the year (2022: £0.1m profit), exceeding market expectations, with profitability achieved in the second half.
●	Loss per share 10.1 pence (2022: 1.3 pence loss per share).
●	Cash balance of £3.2m at 31 December 2023 (31 December 2022: £8.3m).
●	Continued reduction in cost base post year-end.

Corporate and operational highlights

●	Successful integration of two acquisitions, Clinpal and Winterlight, diversifying our offering and realising annualised cost synergies in excess of £1.5m.
●	Launched a novel automated quality assurance product, AQUA, based on the Winterlight technology.
●	Major contract wins included two £2m+ clinical trials and one for £1m combining CANTAB, Winterlight and AQUA.
●	Contracted order book of £17.2m at 31 December 2023 providing good visibility over future revenues (2022: £17.6m).
●	Approximately 69% of our revenue in 2023 (2022: 68%) from top 10 customers, all of whom have been long-term clients.
●	Post-period end, strengthened the sales and marketing teams to drive commercialisation.

Outlook and current trading

The Company's pipeline of opportunities for the remainder of 2024 is healthy. The first quarter has already seen an increase in contract wins compared to the same period last year, however, with several major contract delays, the majority of new business is expected to occur in the second half of 2024. Depending on the timing of these contract wins, the Company expects full year revenues to be within the range of £13.0m to £15.0m.

With an objective to increase profitability, the Company has reduced its 2024 operating and research and development costs further, resulting in annualised overhead savings in excess of £2m (which were in addition to the 2023 cost synergies noted above).  As a result, the Company expects to generate a full year adjusted operating profit at least in line with or ahead of current market expectations.  

The Company's focus in 2024 continues to be commercialising our digital solutions for Central Nervous Systems ("CNS") clinical trials. It has recently made a step change in commercial capability with four new sales and marketing related hires with deep experience in the clinical trials market. This has already resulted in an increase in new lead generation and the number and value of proposals being submitted.

As a digital health technology provider operating in the large and growing CNS clinical trial market, with a healthy pipeline of opportunities, strengthened commercial team and substantially reduced cost base, the Company looks forward to delivering profitable growth in 2025 and beyond. In the meantime, it continues to manage working capital based on its current expectations.

Management and board changes

The Company has recently broadened its Board with two additional Non-Executive Directors, Nick Rogers and Stuart Gall, post period-end. The Company is already benefitting from their expertise and they are making significant contributions to support future growth.

The Company has also strengthened its commercial leadership. Alex Livingstone-Learmonth joined Cambridge Cognition as Chief Commercial Officer in February, bringing a wealth of sector experience, having worked in the clinical trial technology, services and solutions industry for over 20 years.

In addition, Stephen Symonds, who joined the Company as Chief Financial Officer in April 2022, will step down by 30 September 2024 to join an unrelated business. Stephen has made an important contribution to the leadership and development of the Company and will continue as CFO to support a smooth handover while a successor is recruited. The Board wishes him well in his future endeavours.

Matthew Stork, Chief Executive Officer of Cambridge Cognition, commented:

"With continued revenue growth in 2023, over the last five years we have delivered a CAGR of 20% plus. The start of 2024 has seen year-on-year orders growth and we have stepped-up our commercialisation capability and activities. Pharma companies are investing more in CNS drug development and we anticipate that market conditions will improve throughout 2024. With a focus on commercial growth, tight control of costs and operating in fast-growth markets, we believe the long-term future for Cambridge Cognition is a bright and profitable one."

This announcement contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) 596/2014 as it forms part of UK domestic law by virtue of the European Union (Withdrawal) Act 2018 ("MAR"), and is disclosed in accordance with the Company's obligations under Article 17 of MAR.

Enquiries:

Cambridge Cognition Holdings plc  Matthew Stork, Chief Executive Officer  Stephen Symonds, Chief Financial Officer  Tel: [phone]  Panmure Gordon (UK) Limited (NOMAD and Joint Broker)  Freddy Crossley / Emma Earl   Rupert Dearden  Tel: [phone]  (Corporate Finance)  (Corporate Broking)  Dowgate Capital Limited (Joint Broker)  David Poutney / James Serjeant  Tel: [phone]  Hudson Sandler (Financial PR and IR)  Dan de Belder / Hattie Dreyfus  Tel: [phone]  [e-mail]

Notes to Editors

About Cambridge Cognition

Cambridge Cognition is a technology company marketing digital health products to better understand, detect and treat conditions affecting brain health. The Company's software products assess cognitive health in patients worldwide to improve clinical trial outcomes, identify and stratify patients early and improve global efficiency in pharmaceutical and healthcare industries.

For further information visit www.cambridgecognition.com

CHAIR'S INTRODUCTION

2023 was an important year for the Company with two acquisitions which have expanded our addressable market and broadened our product portfolio. Clinpal (the trading name for eClinicalHealth Limited) was acquired in October 2022 and Winterlight Labs Inc in January 2023. These acquisitions enable the Company to offer customers an end-to-end solution for central nervous system ('CNS') clinical trials and enhance our competitive position. Following the acquisitions the Company undertook a significant restructuring, which enabled a return to profitability in the second half of the year.

Despite a widely reported slowdown in the clinical trials market in 2023, customer activity began to improve late in the year and we expect this to impact positively on contracted business in the second half of 2024. We remain well positioned for sustainable profitability over the next 24 months.

Post-period end, in February 2024, we welcomed Stuart Gall and Nick Rodgers to the Board as Non-Executive Directors. They each bring broad expertise and experience in the healthcare and technology sectors, and further strengthen the Board and its ability to support our growth plans, bringing additional commercial, investor relations and financial expertise.

We have strengthened our executive leadership team and welcome the appointment of Alex Livingstone-Learmonth as Chief Commercial Officer in early 2024. Alex is an experienced commercial leader with vast experience leading teams selling digital solutions into clinical trials.

Finally, I would like to thank all of our operational teams in the UK and North America, who have continued to work with commitment to grow and develop our business as we continue our transition to a highly profitable company.

CHIEF EXECUTIVE OFFICER'S REVIEW

Cambridge Cognition took a major step forward in 2023, through acquisitions and internal developments, to be positioned as an end-to-end provider of CNS clinical trial solutions. The Company now a broad range of solutions with a focus on commercialisation.  These strategic developments underline our commitment to boost growth and profitability.

After the acquisitions in late 2022 and early 2023, we have successfully integrated Clinpal and Winterlight and been able to realise significant synergies that resulted in an adjusted operating profit in the second half of 2023. 

We were able to deliver 7% revenue growth and we improved our gross margin to 80%. Operating expenses were higher than the previous year, as expected, following the acquisitions, however we took steps to reduce operating costs with the integration of the organisational structures, systems and processes, driving cost efficiencies.

Although our new contracted orders, at £10.9m in 2023, were below those of the prior year, we saw increasing activity and engagement with major pharmaceutical companies and clinical research organisations ("CROs") through the second half of 2023. There have been longer lead times to contracting and delays to commencing studies, though as noted above, we have made a step-up to commercial capability and activity and consequently expect an acceleration in orders in 2024.

Our strategy is to provide researchers with precise measures of patient symptoms and set benchmarks for accurate, patient-focused measurements in clinical trials. Developments to our offering during 2023 included:

●	Completion of the Winterlight acquisition to expand our expertise and offering in voice-based assessments, complementing our existing gold standard, touch screen assessments.
●	Integration of the acquisitions under one operational and commercial structure that can clearly promote our unique end-to-end offering to customers and enable larger, multi-product orders.
●	Launch of the AQUA (automated quality assurance) product for clinical trials, the first collaboration of the Cambridge Cognition and Winterlight technologies.
●	Go-live of our RADIAL app, an enhancement of the Clinpal product including eConsent and telemedicine, for the large Trials@Home clinical trial.
●	Launch of new tasks for use on mobile devices, a key growth area for clinical trials.

Market Overview

We continue to operate across three main business areas: pharmaceutical clinical trials, academic research and healthcare.

Pharmaceutical clinical trials

Our digital outcomes assessment solutions, including software, configuration (with customisation options), consulting and reporting services, accounts for approximately 90% of revenue. 

Table summarising total addressable markets and growth rates:

Market sector	Market size	Market growth per annum	Source
Digital cognitive outcomes assessments	$67m US only in 2021	30%	Independent report
eCOA for CNS clinical trials	£185m in 2023	16% from 2024	Independent report x CNS proportion
IT systems for CNS decentralised clinical trials	£140m in 2023	15% from 2024	Calculated by Company
Patient recruitment for CNS trials	£100m in 2023	10%	Independent report x CNS proportion

We have three active target market opportunities: digital cognitive outcomes assessments, automated quality assurance and electronic clinical outcomes assessments ('eCOA'), and two passive, decentralised clinical trials and recruitment solutions.  

1.     Digital Cognitive Outcomes Assessments

Approximately 500 clinical trials each year use measures of cognition¹. Traditional assessments require clinicians to ask patients questions and score the answers, and can be more subjective, costly and inconvenient. Our touchscreen and voice-based cognitive assessments can be used alongside or even instead of traditional methods. The US market for digital cognitive assessments in clinical trials was estimated to be $67m in 2021 growing at 32% per annum².

2.     Quality Assurance

In later phase clinical trials for diseases such as Alzheimer's and Parkinson's Disease, the patient consults may subsequently be reviewed for quality assurance. Our new AQUA offering automates this process.  The market for quality assurance for clinical trials is likely to be measured within the overall eCOA market.

3.     Electronic Clinical Outcomes Assessment ('eCOA')

The clinical trials market is moving from pen and paper to electronic solutions.  eCOA systems are designed to capture patient, carer or clinician-reported data on a patient's outcomes during a clinical trial. Taking a proportion of the reported global market for all therapeutic areas, the eCOA market for CNS disorders was estimated to be $250m in 2023 and predicted to grow at 16% per annum from 2024 to 2029³.

4.     In-Clinic, Hybrid and Virtual/Decentralised Clinical Trial Systems

Pharmaceutical companies and CROs depend on various information technology systems to effectively communicate with patients, schedule events, gather and analyse clinical data and prepare reports. A wide range of providers offer one or more of these systems, with some designed for in-clinic or virtual use or both. The global market for these solutions in CNS virtual clinical trials was estimated to be $200m per annum in 2023⁴.  A recent report stated that market growth is forecast to be 15% from 2024⁵.

5.     Patient Recruitment

There is a market opportunity for Cambridge Cognition to provide the digital solutions to support patient recruitment for a wide range of CNS clinical trials. The Company has several partners and provides clinical consulting, patient tracking systems and clinical screening solutions. The CNS clinical trial patient recruitment market, excluding advertising, is estimated at just over $140m with 10% annual growth⁶.

Academic research

The supply of cognitive outcomes assessments for use in research by academics via a software-as-a-service ('SaaS') solution generates valuable evidence of the utility of our solutions as academics publish papers and give presentations referencing our data and software. This peer generated evidence is useful in marketing and securing new clinical trial contracts with our pharmaceutical customers.

Healthcare

Cambridge Cognition has two FDA and EU approved medical devices to aid in the triage and diagnosis of patients with cognitive impairment, one for primary care practitioners and one for secondary care specialists. The products are supplied to health centres in the UK direct and in the US via a distributor.

Demand is currently limited as there is minimal reimbursement, although it could grow rapidly with more interest in using digital cognitive biomarkers for healthcare, as there are new drugs to treat Alzheimer's disease.  For that reason, we are in discussions with several potential partner companies to extend distribution.

Innovation and Product Review

There was considerable innovation in 2023 across the Company's expanded range, with combined offerings, product improvements and new products. 

The Company launched two new products: AQUA, that leveraged the capabilities acquired with Winterlight; and RADIAL, a new decentralised clinical trial app for the Clinpal platform specifically for the IMI-funded Trials@Home project, a 600 patient European clinical trial.  In 2024 we will prioritise incremental developments and system maintenance as we step-down investment in new product development and focus on commercialisation of the portfolio.

Cognitive assessments

The Company has three types of cognitive assessments, screen-based, verbal and short daily tasks on mobile phones, that make up the widest range of assessments available on the market, so that clients can select those that most suit their clinical trial requirements. Our leading scientists also make recommendations dependent on the research objectives and patient population.

A particular success in 2023 was a sizeable contract win for a Phase IIb clinical trial for Alzheimer's disease, utilising both CANTAB™ and Winterlight assessments, which went live with the first patients in March 2024. The Company's assessments were selected because they can identify smaller changes in the effect of a drug and, as a result, a smaller population can be enrolled compared to traditional assessments. 

CANTAB™ cognitive assessments

Cambridge Cognition's core product, CANTAB™, constitutes most of the Company's revenues. It comprises 15 main tasks that cover all of the cognitive domains typically measured in a clinical trial. The number of publications on CANTAB™ trials is now over 3,250.  

CANTAB™ assessments are available on Apple iPads™, through a web browser and mobile phones. The project to enable and validate screen resizing for our tasks on mobile screens continued through 2023, and concluded in early 2024, with the addition of two further frequently used tasks in the mobile format.  We have also developed an R&D version of our CANTAB™ App that can be used flexibly with individuals to test variants of assessments.

Daily cognitive assessments

The Company markets several short mobile phone assessments that can be done daily, or multiple times each day. The Company currently has three assessments and progressed two further assessments in 2023 to be ready for validation and sale.

Voice-based cognitive assessments

In 2023, the Company expanded its range of voice-based cognitive assessments with the acquisition of Winterlight. The full portfolio now includes 11 verbal assessments which are mostly automated versions with unique features of well-known assessments used by psychologists or neurologists to assess patients, such as asking someone to describe a picture or to memorise pairs of words.  Many are multilingual, which is essential for international clinical trials.  The Winterlight solution was also used to develop AQUA.

AQUA, Automated quality assurance

The AQUA opportunity was part of the rationale for acquiring Winterlight. Product development was completed post-acquisition and the product was launched in Q4 2023.  It uses the Winterlight transcription engine and provides a report on the quality of clinical consults for clinical trials.  In 2022, we commissioned independent market research that estimated the potential market opportunity for the solution could reach £16m per annum within five years of being launched⁷.

Research Collaborations

As well as providing a SaaS product for academics, the Company actively collaborates with academic organisations and pharmaceutical company consortia to gather data to validate and promote solutions and broaden the user base for our products. Some of these are grant-funded, providing additional income for the Company. 

During 2023, in addition to the Trials@Home trial, there were notable achievements with several high profile collaborations, including:

●	Publication by the IdeaFAST Consortium of the multi-device pilot, showing Cambridge Cognition's fatigue assessments were effective, usable and sensitive in the pilot, and appropriate for use in clinical trials by pharma clients.
●	Announcement of the inclusion of the Company's solutions in the EU & UK funded AD-RIDDLE project that aims to pair real world solutions for Alzheimer's Disease detection with targeted interventions.
●	Selection of our assessment by the Michael J Fox foundation for use in their Parkinson's Disease PPMI study.

Clinical Trial Solutions

The Company's clinical trial solutions, eCOA and decentralised clinical trial product, saw major progress in 2023:

●	The combined product offering has enabled the Company to bid for major eCOA tenders.
●	The Clinpal solution was developed further, with a new app, eConsent and Telehealth modules, and launched as the RADIAL solution.
●	A third regional data centre was opened, enabling the Company to provide services within the US, EU and Asian blocks meeting local patient privacy and data transfer requirements.

Combined product offering

An early objective of the acquisition of Clinpal and Winterlight was to put together a combined offering with seamless functionality within a single front-end user interface. This was done in early 2023, enabling sales of the combined solution in the second half of the year. 

Operational Review

We operate to high regulatory standards, supporting Good Clinical Practice for clinical trials so that clients can use the data collected for new drug applications and label claims. We continue to deliver outstanding services to clients, supported by a customer satisfaction net promotor score of 66 in 2023, which is 32 above the average⁸.

Over the course of the year, the Company made considerable improvements in internal operations, introducing new cloud-based systems for operational management, people management, quality assurance and learning and training record-keeping. We completed 21 client and certification audits, including recertification during the year for ISO9001 and ISO 14001 and we maintained ISO 27001. 

In 2023, the three companies were restructured into one single organisation to provide a seamless service to customers. In completing this, costs were reduced whilst maintaining the same high level of client delivery and a strong customer focus.

Business Model

The Company's business model centres around the provision of easy-to-use applications to measure patients in clinical trial site settings or at home. The primary advantage for clients is that the Company gathers reliable, novel data that can demonstrate the efficacy or safety of a therapeutic agent and, moreover, may do so with more reliability and accuracy than alternatives, and measuring a smaller effect size or specific elements.

The key components of the business model are:

●	Fully serviced solution, such that a preconfigured application is provided for patients or clinicians on a device and training is provided as required to client project managers and site staff.
●	Scientific consultancy, using a data-based approach to recommend outcome assessments for clinical trials, leveraging our existing publications and expert scientists.
●	Provider of data and final reports that can be used to guide pharmaceutical company decision-making during the clinical phase of drug development or used for a data package for a new drug.
●	Consultancy services that require a bespoke solution. These services can contribute additional revenue streams and strengthen client relationships.
●	SaaS solution provided to academics, so that they configure and manage trials themselves at accessible prices.
●	Maximising value of non-core solutions, such as the spin-out of Monument Therapeutics to develop and commercialise drug and digital diagnostic therapeutics for CNS disorders.

Advantages of the business model include:

●	Highly configurable system with no software development required for standard cognitive assessment and eCOA studies, enabling a rapid service delivery and higher margins.
●	Scientific rigour and verification ensures a high level of accuracy, reliability and validity, providing confidence in the data results.
●	Diversified offering, with functional assessments, eCOA and quality assurance, reducing dependency on a single market and broadening our customer base.
●	Long-term relationships with many existing clients and customer advocates brings business from existing and new clients, supported by exceptional customer service and multiple senior scientist contacts.

The business model is expected to provide returns on the investments made over time through:

●	Market leading position with a range of proprietary products widely validated both academically and commercially, led by CANTAB™ and supported by emerging voice technologies and a differentiated eCOA offering.
●	Significant addressable and growing market.
●	Diverse, blue-chip customer base that includes many of the world's leading pharmaceutical companies.
●	Fully integrated acquisitions with synergies realised and positioned to capitalise on market opportunities.
●	Experienced leadership team strengthened by new Non-Executives Directors and the recently formed Scientific Advisory Board.

Acquisition Performance

Having acquired Clinpal and Winterlight, our primary goals in 2023 were to integrate the three organisations into one operational structure and to promote multi-product, end-to-end solutions. We are pleased to have achieved this, with cost synergies realised above our original expectations.

Following the acquisition of Winterlight, the combined team continued the development and production of AQUA, which helped to secure a significant contract with a new customer. The Clinpal team focused on the launch of RADIAL, which went live in July 2023, and we leveraged the Clinpal platform to enhance our eCOA offering, an area for growth in 2024.

Commercially, the acquisitions performed in line with the rest of the business.  We remain confident there is significant potential in the medium term, as we are able to offer a broader range of solutions to support larger contract opportunities.

Monument Therapeutics ('Monument')

Cambridge Cognition spun out Monument in 2021 to combine the Company's digital biomarkers with novel drugs and provide targeted precision therapeutics.  Cambridge Cognition had been incubating Monument since 2018, with early-stage research supported by two Innovate UK grants. Monument is now a novel drug development company with a pipeline of promising drug development programmes, with the most advanced being for cognitive impairment in schizophrenia. 

Over 2023, Monument made positive progress in clinical trials, demonstrating stability and activity of the compounds and validity of the digital biomarkers.  As a result, the fair value of Monument has been increased to £156k, although significantly discounted to reflect the level of risk in early stage companies and the inherent risk of future fundraising by Monument. 

Subsequent to the period-end, Monument announced a fundraising of £1.0m and a grant of £0.5m that will enable to the initiation of clinical trials for the digital assessment and drug combination for schizophrenia. The fundraising valued Monument at approximately £7m with Cambridge Cognition holding 25% post raise.  This, together with the license agreement that includes royalties on future sales by Monument may generate considerable financial benefit for Cambridge Cognition if Monument is successful.

Growth Strategy

Our overarching goal as we entered 2023 was to continue to grow revenue and move to sustainable profitability. Good progress was made, with revenue growth of 7% in 2023 and profitability achieved in the second half of the year. Our strategy was to complete development and commercialise our unique set of well protected, high value and validated solutions. We continue to monitor the healthcare market with the readiness to promote our medical devices as and when increased demand resurfaces. 

Our progress for 2023 and the non-financial strategic objectives for 2024 are set out below:

Area of focus	Progress in 2023	Objectives in 2024
Driving sales of existing products and winning a greater volume of clinical trial work for our broader portfolio, including combined offerings	Multiple major contracts won including a combined project that incorporated CANTAB™, Voice and AQUA	Target well-funded companies with active programs through an extensive science led pre-sales process to demonstrate unique technology solutions
Establishing partnerships in the sector, such as with major pharmaceutical companies, CROs and suppliers	Agreed a co-promotion with Actigraph (announced early 2024) and progressed discussions with a  with major pharmaceutical company and CRO	Progress existing and seek partnerships with global pharmaceutical and CRO companies
Investing in innovation to maintain our brand position and complete the development of our offering	Launch of AQUA, integration with eCOA product offering, and launch of RADIAL app	Analyse new data and present advantages of our solutions and form a scientific advisory board to support our growth
Realising synergies from acquisitions, driving efficiencies in the business, and ensuring continued customer focus	Integrated the three businesses to one operational structure with a single go-to-market strategy and introduced multiple cloud-based systems for operational efficiencies	Leverage operational systems for further cost-reduction and implement internal AI large language models ('LLM') solutions to gain productivity advances
Focusing on our people and ensuring Cambridge Cognition is a great place to work	Integrated the Clinpal and Winterlight teams with Cambridge Cognition	Develop career pathways and competency led career journeys

External factors: Economic, Technical, Regulatory Environment

External factors have and continue to impact our market and operations, presenting opportunities and also challenges for the Company.

Inflation and high interest rates affected the Company in 2023 with rising costs, though these were mitigated through cost-saving measures and margins have improved.  At the same time, we have taken advantage of considerable advances in cloud-based solutions to enable operational efficiencies in 2024.

The global macro-economic environment, which affected our market, has improved recently.  There was cost-cutting across major pharmaceutical companies and a drop-off in investment in biotech companies. We have seen the impact of these on the demand for more experimental assessments. There has been continued demand for eCOA solutions.  We are now seeing an increase in investment in the CNS sector by major pharmaceutical companies and expect the market will normalise late in 2024 or in 2025. That is aligned with the independent market reports that indicate eCOA market growth of 16% from 2024 to 2029.  

Cambridge Cognition is at the forefront of advances in AI present opportunities. The Company provides solutions that involve complex machine learning models that are trained on clinical data sources.  In addition, there was a new programme of work in 2023 to identify operational processes that could be improved by leveraging LLMs and this is continuing in 2024.

The regulatory environment continues to be encouraging, with the FDA and the EMA setting out clear guidance and discussion documents for new approaches for digital biomarkers, decentralised trials and the use of real-world evidence for clinical trials. A major shift that could support further use of our solutions is the FDA's focus on the importance of patient meaningfulness of outcome measures, such that they are starting to require evidence that translates to an impact on a patient's life. Our measurements are inherently meaningful, for example memory, speech and language are necessary for normal day-to-day functioning.

Longer-term Outlook

The Company has grown consistently over the last five years with a revenue CAGR of over 20%.  Despite a challenging global economic environment in 2023, we have grown revenue whilst managing our cost base accordingly.

We operate in a large market that is forecast to grow at 16% per annum over the next five years.  We have been further encouraged by the recent M&A activity in the CNS sector, with over $30bn being invested by major pharma recently. We are confident that the investment in neurological research will result in more opportunities for Cambridge Cognition in the future as the adoption of digital clinical trial solutions increases and, in time, becomes the industry measurement standard.

With the products in our portfolio, both developed and acquired, we have a fully-developed end-to-end solution for clinical trials that we are actively commercialising.  Post-period end, we invested in our team with key appointments to drive greater lead generation, increase the quality and conversion of opportunities, and to promote Cambridge Cognition as a leader in CNS clinical trials solutions.

The longer-term growth outlook remains exciting for Cambridge Cognition, with a strong addressable market and a well-positioned portfolio of products. Following our refreshed focus on commercial execution, we have seen levels of engagement from our customers that will enable us to win more consistent and sizeable contracts and grow profitability in the coming years. I look forward to updating you on our progress during the year.

References:

1.	Citeline TrialTrove, April 2024.
2.	Astute Analytica (2021) US Cognitive Assessment Market.
3.	Markets & Markets (2024), eCOA Solutions Size And Global Industry Forecast 2029
4.	Estimate from Global Data, April 2023, and Assessing the Financial Value of Decentralised Clinical Trials, Therapeutic Innovation & Regulatory Sciences, 57, 209-19, 2023.
5.	Global Market Estimates (2024), Decentralized Clinical Trial (DCT) Platforms Market.
6.	Grandview Research (2022), Clinical Trial Patient Recruitment Market; Adjusted by CNS studies as a proportion of all.
7.	Extrapolated from independent market research report commissioned by Cambridge Cognition.
8.	Retently (2024), Data of average customer satisfaction for healthcare.

CHIEF FINANCIAL OFFICER'S REVIEW

Overview

The Company saw revenue growth of 7% in 2023 and returned to profitability in the second half of the year following growth in the contracted book in the first half and from realising cost benefits associated with the integration of Clinpal and Winterlight. The Company ended the year with cash of £3.2m.

This review includes a comparison of the financial KPIs used to measure progress over the year:

KPI	2023	2022	Movement	Movement
Revenue	£13.5m	£12.6m	£0.9m	7%
Gross margin	79.9%	73.9%	600bps	8%
Adjusted operating (loss)/profit	£(1.1)m	£0.1m	£(1.2)m	-%
Investment in R&D	£3.8m	£2.3m	£1.5m	168%
Sales orders	£10.9m	£13.1m	£(1.2)m	(9)%
Contracted order book	£17.2m	£17.6m	£(0.4)m	(2)%
Cash	£3.2m	£8.3m	£(5.1)m	(61)%

After a tax charge of £0.1m (2022: £0.2m tax credit), the post-tax loss for the year was £3.5m (2022: £0.4m) which equates to a loss per share of 10.1 pence (2022: 1.3 pence loss per share).

Adjusted operating (loss)/profit

We have presented a non-GAAP measure of adjusted operating loss to enable year on year comparison of ongoing operational results, which excludes non-recurring items associated with acquisitions and restructuring, non-cash charges associated with acquisitions and share-based payment charges as follows:

	2023 £m	2022 £m
Operating loss	(3.3)	(0.6)
Amortisation of acquired intangibles	0.5	-
Share-based payment charges	0.2	0.2
Non-recurring items	1.5	0.5
Adjusted operating (loss)/profit	(1.1)	0.1

 
Non-recurring items include costs associated with acquisitions and integration of £1.3m (2022: £0.5m) as well as restructuring costs of £0.2m (2022: £nil).

Revenues and gross profit

Revenue grew by 7% to £13.5m compared to £12.6m in 2022 in difficult market conditions with a good conversion from the contracted order book. A large proportion of our contracts are for clinical trials, which usually commence three to six months after the signing of the contract and can run for several months or up to five years. As a result, the Company recognised more than half of the revenue in 2023 from orders won in previous years, with the remaining balance from in-year contract wins.

We anticipate the £17.2m contracted order book at 31 December 2023 will generate at least £8.0m of revenue to be recognised in 2024, subject to customer schedules and start dates, with the balance to be recognised in subsequent years.

Recognised revenue split by type was as follows:

	2023 £m	2022 £m	Movement £m	Movement %
Software	6.5	5.0	1.5	30%
Services	6.4	6.5	(0.1)	(2)%
Total Software & Services	12.9	11.5	1.4	12%
Hardware	0.6	1.1	(0.5)	(45)%
Total Revenue	13.5	12.6	0.9	7%

As expected, software revenue continued to grow in 2023 and increased by 30%, reflecting the usage of assessments from large contracts signed in previous years. Services revenue decreased marginally in 2023 and is reflective of the data and study management services being provided evenly over the term of the contracts following go-live. Hardware, which is procured from third parties, decreased in the year due to the prior year including a contract with an unusually high hardware element.

Gross profit was £10.8m (79.9% margin) compared with £9.3m (73.9% margin) in 2022. The improvement in margin was due to higher third-party costs on three large, one-off contracts delivered in 2022 (won in 2021) as well as a lower number of new study starts in 2023 (where a large proportion of third-party costs are incurred).

Expenditure

In the first half of 2023, we completed the operational integration of Clinpal and Winterlight, resulting in a single organisational structure and a commercial team with a single go to market strategy. This resulted in the realisation of more than £1.5m of cost synergies that we had not anticipated from the acquisitions and the Company returning to profitability in the second half of 2023, ahead of expectations. 

Operating expenses have been presented by function for 2023 according to the following definitions:

Category	Description	2023 £m	2022 £m
Research and development expense	New product development including software research and development and scientific support	3.8	2.3
Sales and marketing expense	Commercial, marketing and pre-sales scientific support	3.0	2.5
Administrative expenses	Corporate management, product and platform maintenance, finance, legal, HR, quality and IT	6.1	4.8
Non-recurring items	Acquisition, integration and restructuring	1.5	0.5
Total operating expense		14.4	10.1

Total operating expense increased to £14.4m (2022: £10.1m), driven primarily by additional costs from the acquired businesses, the non-recurring items directly related to the acquisition and integration and amortisation of acquired intangible assets (included in Research and development expense: £0.5m, Sales and marketing expense: £0.1m).

In recent years, we have maintained a high level of expense on research and development to complete the development of key products. This expenditure increased in 2023 from £2.3m to £3.8m following the acquisition of Clinpal and Winterlight. During 2023, we continued to invest in developing the portfolio through the launch of new tasks for mobile devices, the development of AQUA, integration of Winterlight voice tasks to the Connect platform and the completion of our multi-region server programme to ensure more secure data protection for our customers.  Going forward we expect research and development expenditure to reduce as we focus on maximising the commercial opportunities from our current product portfolio.

Sales and marketing expense increased from £2.5m in 2022 to £3.0m for the current year, as we made selective hires to the team in order to strengthen our position in key regions.

Administrative expense increased from £4.8m in 2022 to £6.1m due primarily to the higher initial costs associated with the larger group following the Clinpal and Winterlight acquisitions.  Following the integration and efficiency measures that we have implemented over the last 12 months we expect this to reduce in 2024.

Taxation

The tax charge for the year includes tax charges for foreign entities of £0.2m, including adjustments to prior period provisions, offset by R&D Credits of £0.1m.

Cash and capital expenditure

As of 31 December 2023, cash was £3.2m (31 December 2022: £8.3m), with the cash outflow from operating activities during the year was £5.0m (2022: inflow £1.7m), reflecting the lower sales order levels as well as the higher operating expense following the acquisitions. During the year, £3.0m of cash was paid to acquire Winterlight. In September 2023, the Company secured a fully drawn £2.9m term loan to provide working capital and enable investment in product development and solution integration during 2023. The loan has been fully drawn down with a term of 36 months and is repayable, with interest, in 30 monthly instalments following an initial six-month interest only period.

Capital expenditure was £0.1m, primarily related to IT hardware and office equipment. We have not capitalised any development expenditure in the year as the criteria has not been met for new product development, primarily due to the timing between the costs to develop being incurred and the clinical validation needed to make the product available to market.

Balance sheet

The Company held an investment of 28% in Monument Therapeutics Limited ('Monument') at 31 December 2023, the digital phenotyping drug development business that was spun out in 2021. The fair value of the investment in Monument has been increased from £49k to £156k and reflects a non-controlling interest in an unquoted investment whilst recognising that there are significant risks associated with early-stage biotechnology companies, including future fund raising. Monument has continued to make positive progress during the year, including the grant of a US patent supporting MT1988 program for Schizophrenia, and remains on track with our expectations.

Subsequent to the year end, Monument secured further investment of £1.0m valuing Monument at approximately £7m and reducing the Company's holding to 25%.  Monument also secured a further £0.5m of grant funding, which together with the investment will enable it to continue its development programmes.

Goodwill and other intangible assets increased to £7.7m (2022: £1.4m). This reflects assets arising from the acquisition of Winterlight in January 2023.

Trade and other receivables decreased to £2.4m (2022: £4.7m) due to the timing of customer invoicing and the release of prepayments associated with contract delivery.

Deferred income on contracts with customers decreased to £7.7m (2022: £12.3m) due to the lower level of invoicing on contracts in 2023 relative to revenue recognised. Deferred revenue balances primarily arise early in a contract as software licenses are typically invoiced at signing of the contract.

Financial outlook

Cambridge Cognition ended 2023 with £3.2m cash and a healthy pipeline, although the Company has continued to experience longer lead times for contracting and impacting on invoicing levels.  With the current expectations on conversion of opportunities in the pipeline, revenue is expected to be in the range of £13.0m to £15.0m for 2024, although the Company continues to engage in discussions with strategic partners that could deliver revenue above this level.   The Company expects to recognise £9m of revenue in 2024 from the contracted order book, including revenue recognised in the first quarter.

The cost base continues to be managed relative to the revenue growth prospects and the Company has structured its operations to achieve profitability and provide a stable base for future growth. We anticipate that operating expenses and particularly research and development expense will reduce in 2024 as we focus on the commercial execution of our existing product portfolio leading to profitability for the full year. In the meantime, we continue to manage working capital based on our current expectations and the reduced cost base.

The Company aims to deliver continued revenue growth at above market levels into 2025 and beyond with a cost base that will provide significant operational leverage and strong potential for future earnings growth.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

		(Unaudited) Year to 31 December 2023		(Audited) Year to 31 December 2022
	Notes	£'000		£'000
Revenue	3	13,515		12,613
Cost of sales		(2,717)		(3,291)
Gross profit		10,798		9,322
Research and development expense		(3,847)		(2,285)
Sales and marketing expense		(2,983)		(2,528)
Administrative expense		(6,139)		(4,803)
Non-recurring items		(1,456)		(479)
Total operating expense		(14,425)		(10,095)
Other operating income		322		156
Operating loss		(3,305)		(617)
Adjusted operating (loss)/profit		(1,128)		68
Adjusting items1		(2,177)		(685)
Operating loss		(3,305)		(617)
Interest receivable		16		9
Finance costs		(168)		(16)
Loss before tax		(3,457)		(624)
Tax (expense)/credit		(51)		215
Loss for the year		(3,508)		(409)
Other comprehensive loss
Items that may subsequently be reclassified to profit or loss:
Exchange differences on translation of foreign operations			(210)	(302)
Fair value movements in equity investments			107	-
Total comprehensive loss for the year			(3,611)	(711)

Loss per share (pence)
Basic	4	(10.1)	(1.3)
Diluted	4	(10.1)	(1.3)

All items of income are attributable to the equity holders in the Parent.

The above results relate to continuing operations.

1.     Adjusting items comprise amortisation of acquisition related intangible assets of £561,000 (2022: £32,000), non-recurring items of £1,456,000 (2022: £479,000) and share-based payments of £160,000 (2022: £174,000).

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

		(Unaudited) At 31 December 2023	(Audited) At 31 December 2022
	Notes	£'000	£'000
Assets
Non-current assets
Goodwill		3,653	482
Other intangible assets		4,089	939
Property, plant and equipment		133	188
Investments		156	49
Trade and other receivables		20	-
Total non-current assets		8,051	1,658
Current assets
Inventories		187	216
Trade and other receivables		2,417	4,680
Current tax receivable		351	231
Cash and cash equivalents	5	3,222	8,322
Total current assets		6,177	13,449
Total assets		14,228	15,107
Liabilities
Current liabilities
Trade and other payables		2,603	2,718
Deferred income on contracts with customers	3	7,699	12,294
Loans and borrowings		566	-
Current tax payable		99	-
Total current liabilities		10,967	15,012
Non-current liabilities
Loans and borrowings		1,978	-
Total non-current liabilities		1,978	-
Total liabilities		12,945	15,012
Equity
Share capital		350	312
Share premium		15,169	11,151
Other reserves		5,613	5,823
Own shares		(71)	(71)
Retained earnings		(19,778)	(17,120)
Total equity		1,283	95
Total liabilities and equity		14,228	15,107

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

		Share capital	Share premium	Other reserves	Own shares	Retained earnings	Total
		£'000	£'000	£'000	£'000	£'000	£'000
At 1 January 2022		312	11,151	6,125	(78)	(16,878)	632
Loss for year		-	-	-	-	(409)	(409)
Other comprehensive loss
Exchange differences on translation of foreign operations		-	-	(302)	-	-	(302)
Total comprehensive loss for the year		-	-	(302)	-	(409)	(711)
Transactions with owners
Transfer of own shares		-	-	-	7	(7)	-
Credit to equity for share-based payments		-	-	-	-	174	174
Transactions with owners		-	-	-	7	167	174
At 31 December 2022 (audited)		312	11,151	5,823	(71)	(17,120)	95
Loss for the year		-	-	-	-	(3,508)	(3,508)
Other comprehensive loss
Exchange differences on translation of foreign operations		-	-	(210)	-	-	(210)
Fair value movements in equity investments		-	-	-	-	107	107
Total comprehensive loss for the year		-	-	(210)	-	(3,401)	(3,611)
Transactions with owners
Issue of new shares in relation to business combinations		34	3,966	-	-	-	4,000
Issue of new shares in relation to exercise of employee share options		4	52	-	-	-	56
Credit to equity for share-based payments		-	-	-	-	160	160
Deferred contingent consideration movements		-	-	-	-	309	309
Issue of warrants		-	-	-	-	274	274
Transactions with owners		38	4,018	-	-	743	4,799
At 31 December 2023 (unaudited)		350	15,169	5,613	(71)	(19,778)	1,283

CONSOLIDATED STATEMENT OF CASH FLOWS

		(Unaudited) Year to  31 December 2023	(Audited) Year to  31 December 2022
	Notes	£'000	£'000
Net cash flows (used in)/generated from operating activities	5	(4,967)	1,668
Investing activities
Acquisition of subsidiary, net of cash acquired		(3,002)	-
Interest received		16	9
Purchase of property, plant and equipment		(33)	(189)
Net cash flow used in investing activities		(3,019)	(180)
Financing activities
Proceeds from borrowings, net of fees incurred		3,054	-
Proceeds from exercise of share options		56	1
Repayment of borrowings		(116)	(133)
Interest payments		(109)	-
Net cash flows generated from/(used in) financing activities		2,885	(132)
Net (decrease)/increase in cash and cash equivalents		(5,101)	1,356
Cash and cash equivalents at start of year		8,322	6,810
Exchange differences on cash and cash equivalents		1	156
Cash and cash equivalents at end of year	5	3,222	8,322

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1.     General information

Cambridge Cognition Holdings plc ('the Company') and its subsidiaries (together, 'the Group') develops and markets digital solutions to assess brain health.

The Company is a public limited company which is listed on the AIM market of the London Stock Exchange (symbol: COG) and is incorporated and domiciled in the UK. The address of its registered office is Tunbridge Court, Tunbridge Lane, Bottisham, Cambridge, CB25 9TU.

2.     Basis of preparation

The preliminary financial information for the year ended 31 December 2023 is unaudited. As such, the unaudited preliminary financial information presented does not represent statutory financial statements within the meaning of section 435 of the Companies Act 2006.

The statutory financial statements for the year ended 31 December 2022, upon which the auditors issued an unqualified opinion, have been delivered to the Registrar of Companies and did not contain statements under section 498(2) or (3) of the Companies Act 2006.

The accounting policies adopted are consistent with those followed in the preparation of the consolidated financial statements for the year ended 31 December 2022 The accounts are presented in Pounds Sterling ('£'), and to the nearest £1,000.

The consolidated financial statements incorporate the results of the Company and of its subsidiaries. All intra-group transactions, balances, income and expenses are eliminated in full on consolidation. All of the Group's subsidiaries are wholly owned.

The Group has made the following changes to the presentation of the Consolidated Statement of Comprehensive Income and Consolidated Statement of Financial Position, which have resulted in restatements of prior period balances:

●	Consolidated Statement of Comprehensive Income: the Group previously combined Research and development expense, Sales and marketing expense and Administrative expense (excluding non-recurring items) into Administrative expense (excluding non-recurring items). These have been separately presented in 2023 to better represent the nature of the expenditure. The overall operating loss for 2022 remains unchanged.
●	Consolidated Statement of Financial Position: the Group previously combined Goodwill and Other intangible assets within Intangible assets. These have been separately presented in 2023 due to their materiality. The overall total and net asset balance for 2022 remain unchanged.
●	Consolidated Statement of Financial Position: the Group previously combined Trade and other payables and Deferred income from contracts with customers within Trade and other payables. These have been separately presented in 2023 due to their materiality. The total liability and net asset balances for 2022 remain unchanged.

The Directors have adopted a going concern basis of accounting and, in doing so, have considered the cash requirement of the Group through to the period ended 30 June 2025. The Directors expect that the Group will remain cash positive throughout the going concern period, with a net cash outflow for 2024 and a net cash inflow thereafter. The Directors have considered mitigating actions that could be taken in the event of downside scenarios and will take action to manage working capital.  Delays to orders that reduce cash below the downside case are likely to require the need to raise additional funds for working capital. The preliminary unaudited results for the year ended 31 December 2023 have been prepared on the going concern basis of accounting.

3.     Revenue

An analysis of the Group's revenue for each major product and service category is as follows:

	(Unaudited) 2023 £'000	(Audited) 2022 £'000
Software	6,532	5,027
Services	6,364	6,528
Hardware	619	1,058
	13,515	12,613

Costs cannot be directly attributed to the products and services above so profit measures are not presented.

Geographical information

The revenue from external customers by geographical location is detailed below:

	(Unaudited) 2023 £'000	(Audited) 2022 £'000
United Kingdom	1,010	1,088
United States of America	9,368	7,422
European Union	2,505	3,195
Rest of World	632	908
	13,515	12,613

Non-current assets held in the United Kingdom amounted to £4.7 million (2022: £1.7 million). Non-current assets held in all foreign countries amounted to £3.3 million (2022: £nil). Material non-current assets are held in Canada amounting to £3.1 million (2022: £nil). No other country holds material non-current assets.

Information about major customers

One customer accounted for more than 10% of reported revenue in 2023, amounting to 18% of the total (2022: three customers amounting to 34%).

Revenue from contracts with customers

All revenue in 2023 and 2022 comes from contracts with customers.

Timing of revenue recognition

Some software and services are recognised over a period of time, and some at a point in time. The split of revenue in line with these factors is as follows:

	(Unaudited) 2023 £'000	(Audited) 2022 £'000
Software - delivered over a period of time	6,440	4,535
Software - delivered at a point in time	92	492
Services - delivered over a period of time	5,492	5,173
Services - delivered at a point in time	872	1,355
Hardware - recognised at a point in time	619	1,058
	13,515	12,613

Of the £12.3 million Deferred income from contracts with customers at 31 December 2022, £9.1 million was recognised as revenue in 2023. Of the £8.8 million Deferred income from contracts with customers at 31 December 2021, £6.0 million was recognised as revenue in 2022.

Payment terms can vary from customer to customer and are subject to negotiation. Normally, software will be invoiced at the point of initial sale and services invoiced as delivered. This creates a deferred income balance in respect of software which will be reduced as the software is used.

Contract balances

Contract balances are as follows:

	(Unaudited) 2023 £'000	(Audited) 2022 £'000
Trade receivables	1,039	2,073
Accrued income on contracts with customers	211	206
Deferred income on contracts with customers	7,699	12,294

Trade receivables decreased due to improved cash collection, and significant deals with large up-front billing closing in November and December 2022.

Accrued income on contracts with customers did not materially change.

Deferred income on contracts with customers decreased as revenue was recognised in excess of new sales invoicing.

Deferred commissions

Deferred commissions are presented as part of Trade and other receivables. The Group does not consider any of these amounts impaired. The movement of this account specifically is as follows:

	(Unaudited) 2023 £'000	(Audited) 2022 £'000
At 1 January	706	728
Recognised in Consolidated Statement of Comprehensive Income	(385)	(332)
Net addition from sales in year	71	283
Exchange adjustments	(10)	27
At 31 December	382	706

4.     Earnings per share

The calculation of basic and diluted earnings per share ('EPS') is based on the following data:

Earnings

	(Unaudited) 2023 £'000	(Audited) 2022 £'000
Earnings for the purposes of basic and diluted EPS per share being net loss attributable to owners of the Company	(3,508)	(409)

Weighted average number of ordinary shares:

	(Unaudited) 2023 '000	(Audited) 2022 '000
For the purposes of basic EPS	34,586	31,170
For the purposes of diluted EPS	34,586	31,170

The diluted loss per share is considered to be the same as the basic loss per share.  Potential dilutive shares are not treated as dilutive where they would result in a loss per share.

	(Unaudited) 2023 pence	(Audited) 2022 pence
Basic EPS	(10.1)	(1.3)
Diluted EPS	(10.1)	(1.3)

5.     Notes to the cash flow statement

	(Unaudited) 2023 £'000	(Audited) 2022 £'000
Loss before tax	(3,457)	(624)
Adjustments for:
Depreciation of property, plant and equipment	97	57
Impairment of property, plant and equipment	3	-
Amortisation of intangible assets	568	37
Share-based payments charge	160	174
Finance costs	168	-
Acquisition related expenses deferred amounts	318	6
Interest receivable	(16)	(9)
Research and Development expenditure tax credit	(73)	-
Operating cash flows before movements in working capital	(2,232)	(359)
Decrease/(increase) in inventories	29	(88)
Decrease in trade and other receivables	2,235	1,012
Decrease in trade and other payables	(445)	(1,718)
(Decrease)/increase in deferred income on contracts with customers	(4,667)	2,630
Cash (used in)/generated from operations	(5,080)	1,477
Taxation credit received less tax paid	113	191
Net cash (used in)/generated from operating activities	(4,967)	1,668

Reconciliation of liabilities arising from financing activities

	(Unaudited) 2023 £'000	(Audited) 2022 £'000
Net Debt at 1 January	-	-
Debt acquired in business combination	-	133
Term loan draw down	3,054	-
Repayment of borrowings	(116)	(133)
Interest expense	147	-
Interest paid	(88)	-
Offsetting
-     Transaction costs	(175)	-
-     Warrant costs	(274)	-
Exchange adjustments	(4)	-
Net Debt at 31 December	2,544	-

Cash and cash equivalents

	(Unaudited) 2023 £'000	(Audited) 2022 £'000
Cash and cash equivalents	3,222	8,322

Cash and cash equivalents comprise cash and short-term bank deposits with an original maturity of three months or less. The carrying amount of these assets is approximately equal to their fair value.

6.     Annual Report and Annual General Meeting

The Company announces its intention to hold its Annual General Meeting ('AGM') on 27 June 2024. Details of the AGM will be communicated to shareholders via the Company's website and a Regulatory Information Service as soon as they are finalised. This notice will also include the date on which the notice of AGM and the Annual Report will be posted to shareholders.

 

END