Cambridge Cog Regulatory News (COG)

3 May 2023

Cambridge Cognition Holdings Plc

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

Preliminary results for the year ended 31 December 2022

Cambridge Cognition (AIM: COG), which develops and markets digital solutions to assess brain health, is pleased to announce its preliminary audited results for the year ended 31 December 2022.

2022 performance

Cambridge Cognition had a transformative year in 2022, recording 25% revenue growth and a profit before acquisition-related costs, continuing to commercialise and develop new solutions, and making two bolt-on acquisitions (including one completed post period end), as it enhances its position as a leading digital health tech provider for CNS clinical trials.

Corporate and operational highlights

· 25% revenue growth year-on-year and underlying profitability.

· Innovative new product development and acquisitions that added to the technology offering and expanded the addressable market.

· Leading market position with unique digital technology solutions and full commercial coverage of the clinical trial market for cognitive assessments.

· Major contract wins, including two over £2m for sizeable clinical trials.

· Sales order intake of £13.1m, up 8% on like-for-like prior year (2021: £12.1m excluding £3.6m of large one-off orders).

· Contracted order book increased to £19.1m following the acquisition of Winterlight Labs on 10 January 2023.

Financial highlights

· Revenue up 25% to £12.6m (2021: £10.1m).

· Gross profit up 21% to £9.3m (2021: £7.7m).

· Profit for the year, adjusted for acquisition-related expenses of £0.5m, of £0.1m (2021: £0.5m).

· Loss per share 1.3 pence (2021: 1.4 pence earnings per share).

· Cash generative with cash balance of £8.3m at 31 December 2022 (31 December 2021: £6.8m).

Commenting on the results, Matthew Stork, Chief Executive Officer, said:

"2022 was a transformational year for Cambridge Cognition, marked by significant multi-year orders, sustained revenue growth, and the expansion of our core product set. We also successfully concluded an acquisition in 2022 with another right at the start of 2023. These have strengthened our technology portfolio and enable us to provide a full offering for CNS clinical trials. Looking ahead, we remain committed to our objectives of driving revenue and profit growth by increasing our market share through offering the most innovative technology, supported by outstanding scientific evidence and a very experienced team, in the high-value market for CNS drug development."

Investor webinar

Cambridge Cognition's management will be hosting an online presentation and Q&A session at 5.30 p.m. BST on Wednesday 3 May 2023. This session is open to all existing and prospective shareholders. Those wishing to attend should email cog@investor-focus.co.uk and they will be provided with log in details.

Participants will have the opportunity to submit questions during the session, but questions are welcomed in advance and may be submitted to: cog@investor-focus.co.uk.

Enquiries:

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. 

CHAIR'S INTRODUCTION

2022 was a pivotal year for our business with significant achievements at all levels of the organisation. We achieved growth in like-for-like orders and revenues, underlying business profitability, cash generation and major progress in innovation. In addition, two acquisitions also further expanded our position in the market, positively impacting both our technology capabilities and future revenue growth.

Cambridge Cognition's strategy is to develop and commercialise unique, well-protected, high-value solutions supported by extensive scientific evidence and expertise for central nervous system ("CNS") clinical trials. There has been excellent progress in delivering this strategy and we believe Cambridge Cognition is exceptionally well-placed for the future.

Over the year, the Board has continued to focus on careful capital allocation as the Company has expanded organically and inorganically. The acquisitions of Clinpal (the trading name for eClinicalHealth Limited) in October 2022 and Winterlight Labs Inc ("Winterlight") at the start of 2023 enhance our portfolio, expand the addressable market for our products and add to our revenue growth and drive to sustained profitability. We also expect the acquired products and technologies to prompt incremental use of the Company's existing products.

In April 2022, we welcomed Stephen Symonds as Chief Financial Officer and he was appointed to the Board in August 2022. Stephen brings a wealth of top-four audit and clinical trial market expertise at a senior level and is already making a strong contribution to the growth of our company. The Board has concluded that with the Company's continued growth, adding a Non-Executive Director would be beneficial later in 2023 to bring further independent guidance, scrutiny and experience.

Cambridge Cognition is positioned for accelerated revenue growth and sustainable profitability in the coming years, both from its current offerings and new products in development. The Board expects the Company to grow rapidly and deliver substantial, sustainable shareholder value in both the short and medium term.

Steven Powell

Chairman

CHIEF EXECUTIVE OFFICER'S REVIEW

Introduction

I am delighted by Cambridge Cognition's performance in 2022. We worked on a record number of clinical trials and increased revenue substantially, while laying the foundations for further growth in future years. In tandem with this growth, we have focused on delivering high-value technology solutions and excellent customer service.

Our overarching strategy is to develop and commercialise a unique set of high-value solutions for CNS clinical trials. Those solutions are well protected and supported by extensive scientific evidence and expertise. Our product offerings and capabilities have undergone a step-change through customer-oriented product development and strategic acquisitions. Specifically, we have:

· Further developed our suite of leading cognitive assessments, making them accessible on more devices, in more than 50 languages, and in any country.

· Set up a global software infrastructure that adheres to stringent data protection requirements and enables us to store patient data locally, as mandated by regulations.

· Acquired leading voice-based and decentralised clinical trial solutions to establish the broadest offering in CNS-related outcomes measurement.

· Brought in expert-level capability in machine learning for digital biomarkers, deep knowledge of computational linguistics, and new clinical trial solutions, such as electronic consent and telemedicine.

· Expanded our software team to accelerate the development of new modules, opening an office and recruiting an entire team of software developers in South Africa.

· Invested in sales and marketing, bolstering our brand presence and providing full coverage across the US and Europe. Additionally, we have established a distributor relationship in Asia to expand our reach further.

These accomplishments position Cambridge Cognition to secure more contracts and capture a more substantial share of the growing market opportunity.

Overall, our 2022 financial results were very strong, with revenue growth of 25% to £12.6m (2021: £10.1m) and orders growth of 8% (on a like-for-like basis) over 2021 to £13.1m. Administrative expenses were well managed during the year, and although the gross margin percentage was slightly down on the prior year, this was in line with expectations. In 2022, we changed our accounting policy for cost of sales and have included pay costs directly related to revenue (with the prior year restated to the same basis).

The financial results for the year were tempered by a slightly slower-than-expected final quarter as we experienced delays and scope reduction associated with large orders. Market forecasts suggest that this is not representative of a long-term trend. The Company's strategy is designed to address intermittent slow periods through a broader product offering and increasing volumes across all contract sizes.

Activity has been high in the first quarter of 2023 and a positive response from customers to developments in 2022 and early 2023. The Company ended 2022 with a strong contracted order book of £17.6m which increased further to £19.1m in January 2023 following the acquisition of Winterlight. Moreover, with the broadened portfolio and additional business capabilities, we have a solid platform to achieve future profitable growth.

Market Overview

Cambridge Cognition operates across three main business areas:

1. Pharmaceutical clinical trials: The Company has a fully serviced digital outcomes assessment solution including software, configuration (with customisation options), consulting, and reporting services that accounts for approximately 90% of revenue.

2. Academic research: The supply of cognitive outcomes assessments is via a software-as-a-service solution for use in research by academics.

3. Healthcare: The Company has two products to aid in the triage and diagnosis of cognitive impairment, one for primary care practitioners and one for secondary care specialists, that are FDA and EU-approved medical devices. Demand is currently limited as there is minimal reimbursement; this may change with more interest in using digital cognitive biomarkers with new drugs being approved for Alzheimer's disease.

Primarily related to clinical trials, five areas represent substantial market opportunities for the Company:

1. Digital Cognitive Outcomes Assessments

Approximately 500-600 clinical trials each year use measures of cognition1. The traditional assessment method requires clinicians to ask patients questions and score the answers and can be subjective, costly, and inconvenient. Touchscreen or voice-based cognitive assessments can be used alongside or even replace traditional assessment methods. The US market for digital cognitive assessments was estimated at £70m in 2022 and growing at 10% per annum2.

2. Automated Quality Assurance

In later phase clinical trials for diseases such as Alzheimer's and Parkinson's Disease, patient consults are reviewed for quality assurance. This is a new market opportunity for the Company: our new offering automates part of the process and enables quality assurance at a lower overall cost. We commissioned independent market research and estimate the market opportunity could be £16m per annum within five years3.

3. Electronic Clinical Outcomes Assessment ("eCOA")

eCOA systems are designed to capture patient, carer, or clinician-reported data on a patient's outcomes during a clinical trial. This is accomplished through using licensed questions or scales that are usually widely used in clinical studies. Uptake is gradual and clinical trial sites report that they use eCOA half the time or less4. The remainder still rely on pen-and-paper methods to collect outcomes. Taking a proportion of the reported global market for all therapeutic areas, the eCOA market for CNS disorders was estimated to be £160m in 2022, growing at 15% per annum5.

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. Among the most used modules are e-Consent, which captures participation agreements, Electronic Document Management ("EDC"), which stores all the clinical data, and Telehealth, which enables clinician-patient consults. A wide range of providers offer one or more of these systems, with some designed for in-clinic or virtual use or both. No provider currently markets a CNS-dedicated solution. The global market for these solutions in CNS virtual clinical trials was estimated to be £140m per annum, growing at 15%6. 

5. Patient Recruitment

There is a market opportunity for Cambridge Cognition to recruit patients for a wide range of CNS clinical trials. Recruitment is notoriously challenging: less than half of studies meet enrolment goals7. We collaborate with several partners to provide clinical consulting, patient tracking systems and clinical screening as part of a dedicated patient recruitment offering. The CNS clinical trial patient recruitment market, excluding advertising, is estimated at £100m annually growing at 10% per annum8.

Operational Review

In 2022, the Group significantly enhanced its operational capability and performance across commercial, clinical services, product development, people management, and delivery. We successfully provided solutions to a more extensive customer base than ever before.

Considerable investment has been made in expanding our commercial team, increasing the number of sales and sales support staff from four to eight. These investments were made towards the end of the year, with the aim of making an impact in 2023. As a result, we now have full coverage of the cognitive assessment market for clinical trials, a new sales team dedicated to virtual clinical trials, and an experienced proposal management function.

We achieved 100% on-time-in-full delivery of clinical trial starts and a continued high customer service record, enhancing our brand position as a gold-standard provider of assessments. Excellent clinical project management and scientific support were provided to academic customers, scientific collaborators, and pharmaceutical clients.

The numerous publications and presentations referencing new data by Cambridge Cognition employees, leading scientists, and pharmaceutical companies continue to provide valuable evidence to help secure contracts. The total number of papers citing studies using the Company's assessments now stands at over 3,000. Two notable examples of such partnerships in 2022 are the Company's participation in the IdeaFast project to develop new digital biomarkers of fatigue, and the Brain Health Registry programme, to understand mild cognitive impairment globally.

Cambridge Cognition has continued to provide a single-source service by shipping hardware to support clinical trials. Chip shortages and production delays throughout 2022 increased the challenge of obtaining and shipping hardware to clients. Despite this, we achieved all contractual obligations and established an additional inventory of the most used tablets and mobile phones.

Over the year, the Company transformed its product development function, introducing new systems and roles to streamline and improve the efficacy of product development and maintenance. We recruited considerable expertise in the product and research and development teams with several senior-level new starts.

Software development resources were enhanced by opening a new office in South Africa. The region boasts a large pool of highly skilled software developers. As a result of natural attrition in the UK, most of the Company's software development capacity at the year-end was based in South Africa.

Investments have been made in the management team, training for people managers, and role-specific training and development. We saw some pay inflation as we ensured salaries were competitive for the sector. At the same time, we reduced our recruitment costs substantially during a growth period through more successful direct hires managed by our internal team.

Corporate Business Development Review

Over the last two years, Cambridge Cognition had established an ambitious strategic roadmap to develop new product and service offerings, including building out modules to support clinic-based and virtual clinical trials and developing a free-speech-based verbal cognitive assessment. To accelerate the development of the business and respond to demand, we made two acquisitions to obtain those technologies and competencies.

In October 2022, the Company acquired Clinpal™ (the trading name for eClinicalHealth Limited), a digital technology provider of virtual clinical trial solutions that has been working on trials for three of the world's top ten largest pharmaceutical companies. With a patient-centric platform that connects patients, sites, and pharmaceutical companies, Clinpal™ enables all the essential steps in a clinical trial.

Clinpal was acquired for a total amount payable of £1.7m, and the acquisition is expected to positively contribute to profitability in 2024. The Clinpal acquisition immediately allowed the Company to offer full in-clinic and virtual clinical trial solutions, including specialised CNS clinical trial patient recruitment solutions. This has already enabled us to respond to a tender issued by a top-ten pharmaceutical company for a recruitment contract.

The acquisition of Winterlight was completed in January 2023. Winterlight, based in Toronto, Canada, has developed machine-learning-based voice assessments using free-speech inputs or those that require deductive reasoning or interpretation, as well as a unique automated quality assurance service for clinicians. Winterlight has an excellent customer list, including five of the top ten global life sciences companies, and limited overlap with Cambridge Cognition's existing customer base, providing the potential to cross-sell and generate further revenue growth.

The acquisition of Winterlight was completed for a total amount payable of £7.0m. As at the acquisition date, Winterlight had a strong pipeline of opportunities and a contracted order book of £1.5 million (reduced subsequently from the previously announced £2.5m as a Winterlight customer failed to secure adequate financing and is now seeking a sale of its assets). As well as actively cross-selling solutions at this time, the unique quality assurance offering has enabled Cambridge Cognition to bid on a large tender for cognitive assessments and clinician services as a single provider, differentiating us from competitors.

In December 2022, Cambridge Cognition also entered into an agreement with Luca Healthcare to commercialise our suite of cognitive assessment tools in the China market. Luca Healthcare, which has existing contracts with pharmaceutical companies in other therapeutic areas, is now offering solutions for CNS clinical trials and developing a healthcare solution. Our assessments are hosted on a secure cloud-based server in China and can be run seamlessly on Luca Healthcare's platform using Application Process Interfaces ("APIs").

Having made the two recent acquisitions, we have prioritised our go-to-market strategy for the combined business, including opportunities to cross-sell from the enlarged portfolio, and the focus is now on integrating operations and supporting functions. These are critical next steps to ensure we achieve the expected acquisition returns. While the Company remains open to other corporate business development opportunities, such as partnerships, licensing opportunities, or mergers and acquisitions, future opportunities will be considered primarily in relation to contribution to the Company's profit.

Innovation Review

Cambridge Cognition has a well-established reputation for leadership in the sector and a history of firsts, which supports the brand's reputation and creates unique differential advantages. These are protected mainly through trademarks, copyright, and some patents, establishing our intellectual property (or 'moat').

With continued investment in innovation in 2022, the three companies, Cambridge Cognition, Clinpal, and Winterlight, all made major advances.

CANTAB™ cognitive assessments

Cambridge Cognition's core product, CANTAB™, constitutes most of the Company's revenues. It comprises 18 main tasks that cover all the cognitive domains typically measured in a clinical trial. In 2022, the number of publications supporting CANTAB™ grew to 2,850 and as at the end of April 2023 stands at over 3,000.

CANTAB™ assessments are available on Apple iPads™ and most can be accessed through a web browser. In 2022, a development project enabled screen resizing and demonstrated validity of results for an assessment on a mobile phone as well. This development will enable use of CANTAB™ in a much broader context in the future.

Daily cognitive assessments

In 2022, the Company broadened its existing range of daily mobile phone assessments by developing four additional prototypes, due for launch in 2023. Three of these are screen-based, and one voice-based. This will bring the Group's total number of short daily assessments covering the main cognitive domains to six by the end of the current year.

The use of these daily assessments is gaining traction. Two major pharmaceutical companies published the results of their studies in 2022:

1.  Takeda, together with the University of Toronto, presented data showing that a short daily task was well correlated with the pen and paper version concluding that it could help with guiding treatment choice for patients with depression9.

2. Sage published data showing that patients with Parkinson's and Alzheimer's disease improved using a novel drug as measured by two quick daily cognitive assessments10. Early in 2023, Sage also published data showing that they could demonstrate the day-by-day impact of their drug on cognitive function.

These new daily assessment are ground-breaking, novel application of digital technologies with the potential to objectively demonstrate drug effects in ways that have not been possible before.

Voice-based cognitive assessments

Significant progress was made in 2022, both within the Company and by Winterlight, in advancing the development of voice-based cognitive assessments.

The in-house solution developed by Cambridge Cognition progressed by:

· Establishing a roadmap for multi-language support development in 2023, essential for the widespread use of assessments in clinical trials.

· Creating a short daily assessment prototype for a pharmaceutical company with a well-known verbal assessment but with daily monitoring, allowing for quicker observation of drug effects and potentially shorter and more efficient trials.

· Agreeing on collaborations with two major universities to validate existing assessments. These projects took considerable time from initial discussion to full grant funding and commencing work, though are now underway.

Winterlight achieved a number of milestones with its free-speech solution. These milestones include:

· Adding additional languages to bring the total number to nine (more than any other company in the sector).

· Establishing a quality assurance solution for clinical trials with considerable market potential.

· Improving its automated solution with better speech recognition to simplify and reduce transcription costs.

Cambridge Cognition is now the only company offering such a wide range of automated voice-based cognitive assessments. These have the potential to replace many of the existing assessments commonly conducted in clinical trials.

Academic Collaborations

As well as co-creating solutions with pharmaceutical companies, Cambridge Cognition participated in several widely recognised academic collaborations in 2022. Some of the most high-profile ones include: the EU IMI grant-funded IDEA-FAST study to identify digital endpoints for fatigue; the US NIHR-funded Brain Health Registry that assesses cognition worldwide; the Deep and Frequent Phenotyping longitudinal study of dementia and AI Brain, an EU Horizon grant-funded study developing multi-modal biomarkers for dementia. As well as showcasing our solutions and gathering data, these have provided reference points for and contact with target customers. By way of example, 13 major pharmaceutical companies take part in IDEA-FAST.

Clinical Trial Solutions

2022 saw significant progress in clinical trial solutions through the combined efforts of Cambridge Cognition and Clinpal. Prior to the acquisition, a proportion of the software development for the Clinpal solution was completed by Cambridge Cognition under contract. Progress made in the year included:

· Moving from installed solutions in data centres to cloud-based servers in two regions with a plan to open a third in 2023. This improves patient data management and facilitates compliance.

· The Clinpal solution added patient-data management communication features designed for a global virtual study that started in 2022.

· A next-generation patient application for Android and iOS was designed for the IMI grant-funded Radial clinical trial due to start in 2023.

· New or upgraded modules for eConsent and Telehealth with the release set for Q2 2023.

Combined product offering

A key objective is to provide a unified solution incorporating modules developed by Cambridge Cognition, Clinpal, or Winterlight. All three solutions feature APIs to allow seamless functionality within a single front-end user interface. This currently puts us in a strong position to select one of the solutions to run as the customer user interface while incorporating modules from the other two. We are now bidding with solutions that integrate the three platforms.

We plan to converge all three solutions, which will require time and investment. We plan to accomplish this gradually, likely on a module-by-module basis, as we perform maintenance or make improvements to the system, taking the best of each platform.

In the medium term, there is the opportunity to create multi-modal digital biomarkers by combining solutions. As well as using touchscreen and voice data, this could also include actigraphy or other clinical information to provide even greater accuracy of diagnostic information. This is an exciting area of future development that is likely to be funded by grants or development partners.

Growth Strategy

Our overarching goal is to achieve profitable growth. Our strategy in the short to medium term from 2023-2025 is to complete development and commercialise our unique set of well-protected, high-value, and validated solutions. In addition, our strategy includes having a watching-brief on the healthcare market with the readiness to promote our medical devices should demand and reimbursement surface.

To achieve our strategic goals, Cambridge Cognition's areas of focus for 2023 are:

1. Driving sales of existing products, including Winterlight and Clinpal and winning a greater volume of clinical trial work for our broader portfolio, including combined offerings.

2. Establishing partnerships with high-impact organisations in the sector, such as major pharmaceutical companies and CROs.

3. Investing in innovation to maintain our brand position and complete the development of our offering.

4. Realising synergies from acquisitions and ensuring continued customer focus as we integrate the three businesses.

5. Focusing on our people and ensuring Cambridge Cognition is a 'great place to work'.

Economic and Political Environment

Amidst the COVID-19 pandemic, there was a surge in the adoption of digital solutions, with virtual trials gaining remarkable traction among our customers. This interest continues.

The ongoing war in Ukraine was and continues to be a cause for concern, and our thoughts are with all those affected, including several academic centres in the region that use our solution. No contracts are being progressed with Russian centres at this time. The conflict has had no material effect on revenues.

Inflation has had an impact on salary levels and may be contributing to a reduced investment in the development of CNS drugs. This could lead to a short-term decline in demand. We expect the situation to normalise during 2023 and do not anticipate any material impact on the Group's overall performance.

Corporate Outlook

Despite a turbulent global economic and political environment, 2022 was an excellent year for Cambridge Cognition. We saw remarkable growth in orders, strong revenue growth, cash generation, and considerable progress in innovation and corporate business development.

The Company had a strong contracted order book at the end of 2022 that provides excellent revenue visibility through 2023 and a promising pipeline of further opportunities for the year. With our broader portfolio, we expect a considerable step-up in our total addressable market and there is the potential for a considerable increase in investment in CNS drugs with the successes recently in Alzheimer's Disease with new drugs being approved. There does remain some uncertainty around the global macroeconomic outlook, though that is expected to be transitory to our markets.

The Company has extensive market opportunities within existing and new growth markets. We estimate average growth rates across the markets we are targeting to currently be approximately 10 percent per annum, and we believe our revenue growth will exceed this rate of market growth. We will continue to manage costs carefully and aim to move back into profitability. 

The outlook is very exciting as we have a full commercial team and a much broader portfolio and can win many more sizeable contracts as we build on our current position over the coming years. 

Matthew Stork

Chief Executive Officer

References:

1. Global Data, April 2023

2. Astute Analytica (2021) US Cognitive Assessment Market; Adjusted using internal data to 10% from 2022.

3. Extrapolated from independent market research report commissioned by Cambridge Cognition.

4. DT Consulting, Clinical Digital Tracker, 2022

5. Grandview Research (2023), eCOA Market Analysis; Adjusted by CNS studies as a proportion of all.

6. Estimate from Global Data, April 2023, and Assessing the Financial Value of Decentralised Clinical Trials, Therapeutic Innovation & Regulatory Sciences, 57, 209-19, 2023.

7. Strategies to improve recruitment to randomised trials. Cochrane Database Syst Rev. 2018 Feb 22;2(2)

8. Grandview Research (2022), Clinical Trial Patient Recruitment Market; Adjusted by CNS studies as a proportion of all.

9. An App-Based DSST for Assessment of Cognitive Deficits in Adults With Major Depressive Disorder: Evaluation Study, JMIR Ment Health 2022;9(10).

10. Sage Therapeutics Conference Poster at CTAD 2022.

CHIEF FINANCIAL OFFICER'S REVIEW

Overview

The Company delivered another strong performance in 2022 with growth in the contracted order book and revenues, coupled with continued positive cash generation that has enabled the completion of two acquisitions, one in October 2022 and one in January 2023. This review includes a comparison of the financial KPIs used to measure progress over the year:

Revenues and Gross Profit

We are pleased to report that our revenue grew by 25%, reaching £12.6m compared to £10.1m in 2021. A large proportion of our contracts are for clinical trials, which usually commence three to six months after the signing of the contract and run for several months or even a few years. As a result, most of the revenue recognised in the year came from orders won in previous years, with the remaining balance from in-year contract wins.

We anticipate the £19.1m contracted order book as of 10 January 2023 (following the acquisition of Winterlight) will generate, subject to customer delivery schedules, at least £9.5m of revenue to be recognised in 2023, with the balance to be recognised in subsequent years. Recognised revenue split by type was as follows:

Services revenue grew by 16% in 2022 as more implementation and bespoke development work were carried out, as well as the additional data and study management provided as part of our support to larger clinical trials. Software revenue increased by 39% but given the time lag between contract signature and software usage, we would expect this to grow further in 2023. Hardware, which is procured from third parties, is supplied by the Company to support specific projects.

Three large, one-off contracts won in 2021 were for supplying and supporting digital wearables for CNS clinical trials in 2022. These had a high third-party cost of sales component that reduced overall gross margin percentage in 2022. Gross profit was £9.3m (73.9% margin) compared with £7.7m (76.1% margin) in 2021.

In 2022, we have changed our accounting policy for cost of sales and now include pay costs directly related to revenue, with the prior period restated. The impact on the current year was to include £477,000 (2021: £394,000) of pay costs in cost of sales that would have been in administrative expenses under the previous accounting policy.

Expenditure

Administrative expenses, excluding acquisition expenses, increased by 29% to £9.6m (2021: £7.4m), driven by two main factors. Firstly, investment in commercial activities increased considerably as the team expanded to provide complete market coverage and to support further sales of decentralised clinical trial modules. Secondly, we expanded our in-house software and product teams to develop new and existing solutions to meet customer demands and provide future sales opportunities. As with many technology companies, we experienced inflationary pressure on pay during the year, which we have addressed in part with the addition of a software team based in South Africa.

Maintaining our position at the forefront of the sector requires a sustained focus on research and development, a subset of our administrative expenses. In 2022, a total of £2.2m was invested, an increase from £1.7m in 2021. These funds were primarily allocated towards developing novel high-frequency cognitive assessments to broaden the portfolio, moving to Amazon Web Services, strengthening our cyber-security, and conducting essential maintenance of existing products. R&D spending as a percentage of revenue was 17.4% in 2022 (2021: 16.8%), reflecting our continued investment in our product portfolio, and we expect this to decrease as revenue grows.

Capital Expenditure and Cash

Capital expenditure was £0.2m, primarily related to IT hardware and office equipment. We have not capitalised any development expenditure in the year.

Excluding acquisition-related costs, we had a marginal loss before tax of £0.1m (2021: profit before tax of £0.3m). R&D tax credits receivable were £0.2m (2021: £0.2m). The post-tax loss for the year was £0.4m (2021: profit after tax of £0.5m), which equates to a loss per share of 1.3 pence (2021: 1.4 pence earnings per share).

As of 31 December 2022, cash was at £8.3m (31 December 2021: £6.8m), and the cash inflow from operating activities during the year was £1.7m (2021: £3.9m), again driven by sales orders. During the year, £1.1m of cash was utilised to acquire eClinicalHealth Limited. Sales contracts for clinical trials typically include a billable amount upon signing, which means that cash flow is generally ahead of revenue recognition.

The Company continues to hold an investment in Monument Therapeutics Limited ("Monument"), the digital phenotyping drug development business that was spun out in 2021. The investment in Monument is carried at fair value and reflects the risks attributable to early-stage biotechnology companies. Monument's progress with early clinical trials remains on track and aligned with our expectations. It is currently seeking Series A investment.

Financial Outlook

Cambridge Cognition ended 2022 with sufficient cash to acquire Winterlight and fund expected growth through to profitability. We are optimally positioned for further growth in orders of our existing solutions and to support our continued commercial expansion. Considered investments will continue to be made to achieve our strategic goals.

While low double digit revenue growth is expected in 2023, the positive impact of acquisitions and continued investment in product development is expected to see a decrease in cash balances and operating losses for the year. With this investment and the associated increase in scale, we anticipate a return to profitability in the second half of 2024 and growth in profitability thereafter.

The Company will continue to manage costs carefully with a focus on realising synergies as we review our operational structure following recent acquisitions. We anticipate that administrative expenses and research and development costs will reduce through 2023 relative to revenues whilst we continue to invest in the product portfolio and increase sales coverage.

We have set out five strategies to help improve people's health globally while generating future revenue growth above expected rates of growth, currently estimated at more than 10%, in the markets in which we are operating. Accordingly, the Company is targeting revenue growth in excess of the market growth rates with increasing levels of growth in the medium-term driving towards material profitability in 2025.

Stephen Symonds

Chief Financial Officer 

Consolidated Statement of Comprehensive Income For the year ended 31 December

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

The above results relate to continuing operations.

CONSOLIDATED STATEMENT OF FINANCIAL POSITION As at 31 December

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the year ended 31 December

CONSOLIDATED STATEMENT OF CASH FLOWS

For the year ended 31 December

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 financial information of the Group set out above does not constitute "statutory accounts" for the purposes of Section 435 of the Companies Act 2006.

Statutory accounts for the year ended 31 December 2021 have been filed with the Registrar of Companies. The statutory accounts for the year ended 31 December 2022 will be delivered to the Registrar in due course. Those accounts have been reported on by the Independent Auditors; their report for the accounts for both financial years was (i) unqualified; (ii) did not include a reference of any matters to which the auditor drew attention by way of emphasis without qualifying their report; and (iii) did not contain a statement under 498 (2) or 498 (3) of the Companies act 2006.

The Group financial statements will be properly prepared in accordance with UK adopted international accounting standards. The accounting policies adopted will be consistent with those followed in the preparation of the consolidated financial statements for the year ended 31 December 2021, except as noted below.

The Group has reconsidered its accounting policy for the presentation of expenses in the income statement to include staff and related costs relating to the delivery of those services within cost of sales. The prior year income statement has been restated for the reclassification of costs between cost of sales and administrative expenses. As a result, the prior year has been restated to reflect an increase in cost of sales of £394,000 with a corresponding decrease in administrative expenses. The overall operating profit for 2021 remains unchanged.

At the time of approving the preliminary results statement, and based on a review of the Group's forecasts and business plan, the Directors have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. Thus, they continue to adopt the going concern basis of accounting in preparing the preliminary statement.

3. Segmental information

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

4. Earnings per share

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

Earnings

5. Notes to the cash flow statement

Reconciliation of liabilities arising from financing activities

Cash and cash equivalents

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 & Annual General Meeting

The Company announces its intention to hold its Annual General Meeting ("AGM") on Wednesday 28 June 2023. 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.