FY23 Trading Update & NEDs Appointment

For FCA purposes, this is a marketing communication Price: 50p Shares in issue: 35m 52 week high/low: 119p/50p Market cap: £17m Market: AIM Broker: Dowgate/Panmure Ticker: COG.L Target: 245p E xe cu tive S u mmar y FY23 Trading Update & NEDs Appointment Cambridge Cognition has released a positive FY23 Trading Update with profits well ahead of our forecast. A reacceleration of revenue growth to +12% in H2 combined with synergies from the integration of Winterlight and Clinpal led to Adjusted Operating Profit turning around from a -£2.1m loss in H1 to a £0.9m profit in H2, well ahead of DCe -£0.1m. The group ended the year with gross cash of £3.2m which after the £3.0m term loan results in £0.2m net cash. After a challenging market backdrop last year, the outlook is more promising in 2024 and we expect the group to benefit from the combined offering with Winterlight and ClinPal. We raise our AOP forecasts to -£1.2m (was -£2.1m) for FY23 though prudently leave 2024 unchanged at £0.3m at this early stage of the year. We view this as a positive H2 performance, the group is well positioned to deliver continued revenue growth. • FY23 Trading Update. Cambridge Cognition has reported a positive FY23 Trading Update with profits well ahead of our expectations. After a challenging H1 reflecting market conditions, revenue growth reaccelerated to +12% in H2 to deliver a FY23 outcome of £13.5m (DCe £14.0m). The integration of Winterlight and ClinPal has delivered annualised savings of £1.5m which combined with tight cost control resulted in Adjusted Operating Profit moving from a -£2.1m loss in H1 to an impressive £0.9m profit in H2, which was well ahead of our forecast for a -£0.1m H2 loss. Gross cash finished the year at £3.2m which combined with the £3.0m term loan equates to net cash of £0.2m (DCe £1.3m). • Outlook. After a challenging market in 2023, Cambridge Cognition believes that recent M&A in the Central Nervous System drug development sector and an improving macroeconomic outlook could lead to more activity in CNS clinical trials this year. In addition, we note that the enlarged group has started to secure major contracts which combine its capabilities, with a £1m contract that combines CANTAB and Winterlight functionality announced in October. Further, Cambridge Cognition sees considerable medium-term potential in AQUA, an automated quality assurance solution for CNS clinical trials which is powered by Winterlight’s speech and language platform. • NED appointments. The group has announced the appointment of two NEDs to further strengthen the board. Stuart Gall is CEO of Intelligent Ultrasound and was previously joint founder of Fusion IP. Nick Rodgers is chair of SEHTA and was previously Chair of Destiny Pharma and Oxford BioMedica. A ctivit ie s Cambridge Cognition is a leading neuroscience technology company that optimises the assessment of cognition for better brain health research with scientifically validated digital health solutions. Man age me n t Dr Stephen Powell Chairman Dr Matthew Stork CEO Stephen Symonds CFO Majo r S h are h o l de r s , % Paul Richards Paul.Richards@Dowgate.co.uk 0203 903 7732 Lorne Daniel Lorne.Daniel@Dowgate.co.uk 0203 416 0188 Nigel Wray 14.4 Canaccord Genuity 10.1 Lombard Odier Brett Gordon Perpetual 8.2 6.3 5.0 AXA IM 5.3 A n al yst s Performance 1m 3m 12m Absolute (%) (3) (36) (56) Rel Index (%) (4) (31) (57) Relative to FTSE All Share Financial Summary Year to December (m) 2021 2022 2023E 2024E Revenues 10.1 12.6 13.5 16.0 Adjusted EBITDA 0.4 0.0 (1.1) 0.5 Adjusted PBT 0.3 (0.1) (1.3) 0.0 Adjusted EPS, p 1.4 0.2 (3.0) 0.0 DPS, p 0.0 0.0 0.0 0.0 Net cash (net of debt) 6.8 8.3 0.2 0.5 Adjusted P/E, x n/a n/a n/a n/a Source: Cambridge Cognition, Dowgate Capital estimates For FCA purposes this is a marketing communication Cambridge Cognition 30th January 2024 For FCA purposes, this is a marketing communication 2 Cambridge Cognition 30th January 2024 Profit & Loss Year to December 2021 2022 2023E 2024E Revenues Software 3.6 5.0 6.2 7.5 Services 5.6 6.5 6.6 7.8 Hardware 0.9 1.1 0.6 0.6 Group revenues 10.1 12.6 13.5 16.0 Growth, % 51 25 7 18 Gross Profit 7.7 9.3 10.9 12.3 Gross margin, % 76.1 74.0 81.0 77.0 Adjusted Group EBITDA 0.4 0.0 (1.1) 0.5 Margin, % 4.1 0.0 n/a 3.1 Depreciation & Amortisation of IGA 0.1 0.1 0.1 0.2 Adjusted Operating Profit 0.3 (0.1) (1.2) 0.3 AOP margin, % 2.6 (1.1) n/a 1.9 Net interest (0.0) (0.0) (0.1) (0.3) Share Based Payments 0.0 0.0 (0.3) (0.3) Exceptional items 0.0 (0.5) (1.4) 0.0 Adjusted PBT 0.3 (0.1) (1.3) 0.0 Headline PBT 0.3 (0.6) (2.7) 0.0 Tax, £m 0.2 0.2 0.2 0.0 Tax, % n/a n/a n/a n/a Adjusted Earnings 0.5 0.1 (1.1) 0.0 Shares in issue (m) 31.2 31.2 34.7 35.6 Adjusted EPS 1.4 0.2 (3.0) 0.0 DPS 0.0 0.0 0.0 0.0 Source: Cambridge Cognition, Dowgate Capital estimates For FCA purposes, this is a marketing communication 3 Cambridge Cognition 30th January 2024 Cash Flow Year to December 2021 2022 2023E 2024E Cash from operating activities Operating profit 0.3 (0.1) (1.2) 0.3 Depreciation 0.1 0.1 0.1 0.2 Working capital movement 3.2 1.8 (3.1) 0.3 Other 0.2 (0.3) (0.9) 0.0 Cash from operations 3.8 1.5 (5.1) 0.8 Interest (0.0) 0.0 (0.1) (0.3) Tax 0.2 0.2 0.1 0.0 Other 0.0 0.0 0.0 0.0 Net cash from operating activities 4.0 1.7 (5.1) 0.5 Capex & Leases (0.1) (0.2) (0.2) (0.2) Other 0.0 0.0 0.0 0.0 Net cash used in investing activities 3.9 1.5 (5.3) 0.3 Dividends 0.0 0.0 0.0 0.0 Acquisitions & Disposals (0.0) 0.0 (3.0) 0.0 Share issues 0.0 0.0 0.0 0.0 Other/Finance lease payments 0.0 0.0 0.1 0.0 Net flow from financing (0.0) 0.0 (2.9) 0.0 Net flow 3.8 1.5 (8.2) 0.3 Closing net cash (net of debt) 6.8 8.3 0.2 0.5 Gross Cash 6.8 8.3 3.2 2.6 Gross Debt 0.0 0.0 (3.0) (2.1) Source: Cambridge Cognition, Dowgate Capital estimates For FCA purposes, this is a marketing communication 4 Cambridge Cognition 30th January 2024 Regulatory Notice and Disclosures This document is non-independent research and a marketing communication under the FCA Conduct of Business Rules. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of the investment research. The research analyst who prepared this research report was Paul Richards. Paul is employed by Dowgate Capital as an Equity Analyst. This material is issuer-sponsored and has been prepared pursuant to an agreement between Dowgate Capital and the issuer in relation to the production of research and is made available at the same time to any person wishing to see it, as such this research constitutes a minor non-monetary benefit under MiFID II rules. The views expressed in this note are those of Dowgate Capital's analyst. They are based on information believed to be reliable but no warranty or representation, express or implied, is made about the accuracy or completeness of this information, which may be subject to change without notice. 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For FCA purposes, this is a marketing communication 5 Cambridge Cognition 30th January 2024 Conflicts of Interest Dowgate has detailed written policies and procedures intended to recognise and manage potential conflicts of interest that arise in connection with production and issuing of investment recommendations. Dowgate's Sales and Research department involved in issuing and disseminating investment recommendations operate independently of Dowgate's Corporate Broking department. Chinese Walls and Information barriers procedures are in place to ensure that confidential and/ or inside information is handled according to applicable laws and regulations. Information barriers also arise around Research Analysts to ensure that the knowledge and timing of the publication of reports containing investment recommendations are not communicated selective to buy-side clients or to the trading parts of Dowgate. 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For a list of all recommendations on any financial instrument or issuer disseminated by the research department in the past 12 months, please contact Dowgate at Compliance@dowgate.co.uk For FCA purposes, this is a marketing communication 6 Cambridge Cognition 30th January 2024 This document is not for distribution into the United States, Japan, Canada or Australia Neither this document nor any copy of it may be taken or transmitted into the United States of America, or distributed, directly or indirectly, in the United States of America or to any US person as defined in Regulation S under the United States Securities Act of 1933. Any failure to comply with this restriction may constitute a violation of United States securities laws. Neither this document nor any copy of it may be taken or transmitted into or distributed in Japan or to any resident thereof for the purpose of solicitation or subscription or offer for sale of any securities. 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Expected absolute returns: • BUY is an expected return greater than 10% • HOLD is an expected return -10% to +10% • SELL is an expected return less than -10% Distribution of Investment Recommendations as per 31/12/2023 Corporate Corporate, % Total Total, % Buy 364 100 364 100 Hold 0 0 0 0 Sell 0 0 0 0 Valuations, Key Assumptions and Risks Details relating to valuation (including material information about proprietary models), key assumptions and risks are available by contacting compliance@dowgate.co.uk