Clearly the business is in decent shape, next year is going to...

Clearly the business is in decent shape, next year is going to be decently profitable even if you assume no meaningful contract wins in the 2nd half of this year. In the upcoming 4C and half year results I want to see management start to preview what that level of profitability might look like and maybe give some sense of the operating leverage that additional sales might produce.

It would be understandable for management to be a bit gun shy with forecasts given some huge misses in the last 18 months, but I think it is really important that they start to lay out (realistically) what profitability in FY2021 might look like and what the possible impact of additional sales in the back half of this year might have on that number. With what is in the bag at the moment we should be looking at @ $ 3.5 to $4 million of EBITDA next year and normalized contract wins in the second half could add another $1 to $ 2 million to that figure.

I am ready to get egg all over my face but here are my EBITDA predictions for next year. Bear Case $4 million (20.5 x), Base Case 6 million (13.75 x), Bull Case 9.5 million (8 x). Bear case is no new contracts won in 2nd half .... Base case is 6 million won (assumption 60% of contract won pays out in FY2021 and 60% net margin) Bull case is 10 m of new contracts won in 2nd half (same assumptions as base case). A couple of big AD contracts and there is upside to the Bull case. Cash collection should be well ahead of those numbers given the high amortization figures we run. Where could I be wrong .... on going high software development costs (these should be easing off given the new system is up and running but history suggests this number never goes down) higher than anticipated costs related to Eisai JV .... that recent contract wins have a higher than normal distribution to revenue in later years than has historically been the case.

From a strategic viewpoint I also want to see much more insight in to what the Eisai JV might deliver and where we are with a US roll out. It has always struck me that Cognigram would be a natural fit for a Teledoc or a Livongo especially now both are giving focus to addressing mental health issues. You would have to assume that management are at least having discussions in this area. A deal with one or both of those would be transformational to Cogstate. Just for clarity I am using A$ numbers above not US$.