Cogstate is expecting a fairly decent first half

Unaudited revenue jumped 18% YoY to $23.9M, driven by a 27% surge in Clinical Trials revenue, now 95% of total revenue. Sales contracts for Clinical Trials hit $20.3M, with Alzheimer’s programs being a standout, more than doubling compared to 1H24.

CGS said efficiency gains are showing, with headcount slightly down while revenues grow. Although gross profit margins and EBIT margins remain about the same as the preceding quarter, they are up a lot from the pcp..

The balance sheet looks healthy: cash at $34.2M (up from $30.1M in June), no debt, and an ongoing share buyback.

Cogstate is scaling up via partnerships, which contributed 36% of sales opportunities in 1H25, while continuing to expand outside Alzheimer’s into other indications like cancer and rare diseases.

The PE based on the TTM is roughly 18x. Not terrible if they can sustain sales momentum and unlock more operating leverage.

Cogstate has renegotiated the terms of its license agreement with Eisai -- in essence, Eisai no longer has exclusive rights to distribute Cogstate's digital assessment technology. The catch is that Cogstate will forgo $15m in future minimum royalties (although the main impact wont be felt until FY28).

This allows Cogstate to "progress exploratory plans regarding alternative distribution approaches for our digital cognitive assessment technologies"

Clearly the board reckons this will lead to superior outcomes, and have apparently already formulated some exploratory plans. Importantly, all payments to date will be retained and the relationship with Eisai (which owns 6.8% of CGS).

I take this as mildly good news. You wouldn't bother unless you thought it would result in more income (although hubris can sometimes misinform!)

ASX announcement here

Cogstate has issued FY23 NPAT guidance of between US$0.6-1.6 million (FY22 was US$7.5m, FY21 was US$5.2m)

Further revenue delays and one-off restructure costs (redundancies) of $600k seem to be the issue, with revenue expected to be 9-12% below FY22, and EBITDA margins expected at 9-12% of revenue (formerly guided for 12-15%).

They had also previously said to expect positive operating cash flow, but that's now looking to be US$1m either side of breakeven in H2, following -US$0.2m in H1 (they still have close to $30m in cash).

Restructure costs will be absorbed prior to June 30, and going forward they expect to save US$2.6m annually. The question is, of course, whether they can fulfil their growth ambitions with a smaller workforce (thumb sucking, it looks like the savings represents about 18% of employee and admin expenses). CEO Brad O'Connor reckons that with technology investments and efficiency gains, the business will be appropriately resourced to handle the expected revenue growth. Moreover, these issues of FY23 are "isolated factors that do not impact our medium- and long-term [potential]"

As of yesterday's close, shares were on a forward EV/EBITDA of around 40 so we certainly need to see growth resume if shares are going to do well from here. That being said, the margins can swing around a bit here and revenue can be lumpy -- originally they were guiding for EBITDA margins of 27-29% of revenue -- so if revenue delays abate and trading conditions improve, things could change quickly.

Full announcement here