Freelancer — Primed for margin expansion

Freelancer (ASX: FLN)

Last close As at 24/04/2024

AUD0.21

−0.01 (−2.38%)

Market capitalisation

AUD93m

More on this equity

Research: TMT

Freelancer — Primed for margin expansion

Freelancer’s FY23 results marked a key milestone as the group moved to positive operating EBITDA. Profitability was driven by lower opex than we anticipated as gross marketplace volume (GMV) and revenue declined due to a delayed recovery in the core retail platform and Escrow. Loadshift momentum following its transition to a more value-driven marketplace model, along with Enterprise growth, softened the size of the revenue decline. While Escrow volumes and revenue were down, lead indicators remain positive, with two major e-commerce platforms expected to deploy the Escrow service in H124. Loadshift, Enterprise and the retail platform also provide diverse levers to drive a return to growth, where delivery on a lower cost base will be key to a re-rating.

Max Hayes

Written by

Max Hayes

Associate Analyst

TMT

Freelancer

Primed for margin expansion

FY23 results

Software and comp services

29 February 2024

Price

A$0.18

Market cap

A$81m

Net cash (A$m) at 31 December 2023

(excluding A$17m of lease liabilities)

21.0

Shares in issue

451.7m

Free float

16.9%

Code

FLN

Primary exchange

ASX

Secondary exchange

OTC FLNCF

Share price performance

%

1m

3m

12m

Abs

(14.3)

(18.2)

(21.7)

Rel (local)

(15.7)

(25.4)

(26.7)

52-week high/low

A$0.29

A$0.18

Business description

Freelancer is an Australian company, operating one of the world’s largest online marketplaces for freelancers. Its marketplace division has two business units: 1) its core platform, which provides services targeted at small and medium-sized companies and includes an enterprise service for large multinationals; and 2) Loadshift, which is Australia’s largest marketplace for heavy haulage freight. Separately, the company owns Escrow.com, which is a large transactions processor.

Next events

FY23 annual report

April 2024

Q124 update

April 2024

Analysts

Max Hayes

+44 (0)20 3077 5700

Katherine Thompson

+44 (0)20 3077 5700

Freelancer is a research client of Edison Investment Research Limited

Freelancer’s FY23 results marked a key milestone as the group moved to positive operating EBITDA. Profitability was driven by lower opex than we anticipated as gross marketplace volume (GMV) and revenue declined due to a delayed recovery in the core retail platform and Escrow. Loadshift momentum following its transition to a more value-driven marketplace model, along with Enterprise growth, softened the size of the revenue decline. While Escrow volumes and revenue were down, lead indicators remain positive, with two major e-commerce platforms expected to deploy the Escrow service in H124. Loadshift, Enterprise and the retail platform also provide diverse levers to drive a return to growth, where delivery on a lower cost base will be key to a re-rating.

Year end

Revenue (A$m)

EBITDA*
(A$m)

PBT**
(A$m)

EPS**
(c)

EV/EBITDA
(x)

P/E
(x)

12/22

55.7

(6.6)

(6.9)

(1.5)

N/A

N/A

12/23

53.3

0.6

0.3

0.1

99.1

348.0

12/24e

57.3

2.5

2.2

0.3

24.2

52.6

12/25e

61.6

3.6

3.3

0.5

16.8

35.3

Note: *Operating EBITDA includes depreciation and interest charges associated with capitalised leases. **PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.

Several lead indicators point to FY24 momentum

FY23 GMV fell 6% y-o-y to A$1,021m and revenue declined 4.2% to A$53.3m. The retail marketplace has seen a prolonged recovery after pandemic highs, partially offset by strong performance elsewhere. Enterprise momentum accelerated in Q4 with 55% y-o-y revenue growth (12% for FY23), with several new contracts expected to contribute in H124. Loadshift saw a 238% increase in GMV, validating the marketplace model strategy. While subdued domain name transaction volumes affected Escrow in FY23, Q4 volumes rebounded. The division recently signed two new e-commerce partners that could help diversify risk from domain names, the largest contributor to revenue.

FY23 profit target achieved

Despite 2.6% lower FY23 revenue than our A$54.8m forecast, operating EBITDA and net income exceeded expectations at A$0.6m (forecast A$0.3m) and A$0.2m (forecast A$0.0m). Lower opex, primarily staff costs, drove profitability, while a A$3.5m working capital outflow led to lower net cash than forecast of A$21m. Our updated forecasts are aligned to FY23 performance, indicating slower top-line growth at c 7% across FY24 and FY25 but greater margin expansion than previously expected underpinned by greater visibility of the cost base. Management’s investments in AI to drive internal and freelancer efficiency will be key to unlocking new growth opportunities and operating leverage.

Valuation: Growth on a lower cost base key to rating

On EV/sales, Freelancer trades at a 1.0x average across FY24e and FY25e, a discount to Fiverr and Upwork’s 2.1x and a peer group average of 2.3x. Demonstrating the potential for operationally geared growth is key for a re-rating.

Key profitability target met in FY23

Total GMV decline slowed to 6% y-o-y after reaching FY20 and FY21 highs in Online Marketplace and Online Payments (Escrow), respectively. Looking at the revenue breakdown, Freelancer discloses Enterprise operations separately, but includes Loadshift in marketplace and payment services, which we also expect to be disclosed separately given its current growth rate.

Online Marketplace GMV was up 2.9% to A$132.1m, while revenue was down 2.8% y-o-y to A$44m, relating to Loadshift’s greater contribution to GMV, which we discuss below. With Loadshift and Enterprise strength (see Exhibit 1), we assume the retail platform’s performance was due to a prolonged recovery post-FY20 highs relating to pandemic demand for freelancers.

In Escrow, GMV fell by 7% y-o-y to A$889m and revenue by 10% y-o-y to A$9.1m, primarily from subdued domain name transactions in FY23. However, as detailed below, Q4 volumes rebounded and there are several positive lead indicators for FY24, including two new e-commerce partners.

Exhibit 1: Summary of results, FY20–23

A$000s

FY20

FY21

FY22

FY23

GMV

Total

841,274

1,212,901

1,081,900

1,029,800

y-o-y change (%)

14%

44%

-11%

-6%

Online Marketplace

141,574

133,901

128,400

132,100

y-o-y change (%)

8%

-5%

-4%

3%

Online Payments

699,700

1,079,000

953,500

888,600

y-o-y change (%)

15%

54%

-12%

-7%

Revenue

Marketplace and payment services

47,742

43,374

42,305

40,592

y-o-y change (%)

6%

-9%

-2%

-4%

Enterprise services

2,785

2,725

3,286

3,672

y-o-y change (%)

-46%

-2%

21%

12%

Payment services

8,244

11,320

10,069

9,070

y-o-y change (%)

9%

37%

-11%

-10%

Source: Freelancer

Notably, Freelancer achieved a key profitability target in FY23, reaching EBITDA positivity in both divisions. As shown in Exhibit 2, profitability was achieved via cost optimisation, primarily by reducing staff who were originally hired to support rapid growth seen in FY20 and FY21.

Delivering this profitability milestone supported the group’s net cash position of A$21m by year-end, below our forecast of A$24.1m, due to working capital movements.

Exhibit 2: Reaching EBITDA positivity across the business

A$000s

FY20

FY21

FY22

FY23

Profit/loss

Online Marketplace

Costs (pre-D&A, SBP)

(44,658)

(44,040)

(47,050)

(38,063)

y-o-y change (%)

-8%

-1%

7%

-19%

EBITDA

5,868

2,059

(1,459)

6,201

y-o-y change (%)

205%

-65%

-171%

N/A

Profit/(loss) before tax

(496)

(4,780)

(7,449)

(62)

y-o-y change (%)

-64%

864%

56%

-99%

Online Payments

Costs (pre-D&A, SBP)

(8,319)

(9,407)

(9,356)

(8,487)

y-o-y change (%)

11%

13%

-1%

-9%

EBITDA

(75)

1,913

713

583

y-o-y change (%)

-178%

N/A

-63%

-18%

Profit/(loss) before tax

(396)

1,667

419

281

y-o-y change (%)

21%

N/A

-75%

-33%

Source: Freelancer

Loadshift drives FY23 and short-term growth forecasts

In our initiation note, we discussed the FY23 transition from a classified membership model to a marketplace model. The classified membership model relies on recurring monthly fees, while the marketplace model allows for a take rate per posted job and potential premium monthly income, underpinning the greater growth opportunity. We note that Loadshift revenue most likely lags GMV expansion given the lower take rate (5–10%) versus the core marketplace (10–15%), therefore growing Loadshift’s take rate offers substantial revenue potential.

Management believes the updated model encourages increased freight job postings by streamlining the process to find qualified specialists and establishing a more certain pay structure for contractors. The benefits are evident from the 220% y-o-y quotes rise in Q4 to 73,017 and 272.7% uplift in awarded jobs.

The group’s marketplace strategy was key to Loadshift’s performance in FY23. We believe replicating this strategy could be used to enter and drive strong growth in new verticals.

Momentum in Freelancer Enterprise improved, with the division delivering 55% y-o-y revenue growth in Q4 versus 12% for the full year, with highlights including:

Deloitte MyGigs expanding beyond the US to Europe, Middle East and Africa and Asia-Pacific, with similar global roll-outs for a oil/gas giant, a beauty leader and governments expected to contribute in H124.

Volumes in global field services grew by over 150% in India in FY23, but we believe expansion into the much larger US market offers the greatest opportunity. While volume growth was impressive, project sizes in India are substantially smaller than in the US, which requires significantly less volume to see a similar material benefit. In the US, management expects to move into installation work, rather than the more capital-intensive hardware repair, which could also drive margin progression. We expect to see progress from FY24.

NASA competitions generated a robust US$1.05m in FY23 revenue and US$340k in Q4 alone.

AI underpins the mid-term outlook

In the FY23 presentation, management discussed how the emergence of generative AI has bolstered project quality and efficiency, but also expanded the skillset of its freelancers. Further use of AI could boost liquidity and GMV, as CEO Matt Barrie noted small businesses still find it more effective to utilise freelancer specialists on AI platforms versus doing it in-house. The combination of a global pool of freelancers, many from developing countries with lower costs, and the quality boost from AI tools is compelling for smaller businesses, especially those with tightening budgets.

Additionally, Freelancer’s investment in AI is creating internal efficiencies, including updated features like an automated AI agent that can build the scope of a client’s project end-to-end, facilitating operating leverage.

Exhibit 3: Gross payment volumes in Freelancer and Escrow, FY10–23

Source: Freelancer. Note: *Gross payment value (GPV) is the sum of revenue and GMV. **Including Loadshift and Enterprise.

In Escrow, domain name transactions remain the largest GMV contributor, driven by trends like crypto demand in FY21 when gross payment value (GPV) peaked. Management uses venture capital funding as a barometer for domain name transactions activity. While investment has declined from the FY21 high, it shows signs of stabilising in FY24. Escrow expects a more pronounced AI investment rebound, potentially driving domain transactions across traditional and exotic types, especially ‘.ai’ domains, where transactions reached a record high in Q423.

Notably, Escrow signed partner agreements with a Fortune 500 e-commerce platform and a Nasdaq-listed e-commerce company, which should support revenue diversification outside of domain names. While deployment is expected in H124, the time it will take for consumers to become aware of and comfortable with the service means these deals will likely drive mid-term rather than near-term growth.

Updates to forecasts

As previously discussed, we believe Loadshift currently provides the greatest opportunity in the short term, while new opportunities in AI and several pipeline opportunities could drive a return to growth in the other divisions. That said, we have moderated our revenue forecast assumptions to reflect the FY23 progress.

Exhibit 4: Updates to forecasts

FY23

FY24e

FY25e

A$m

Reported

Forecast

% difference

New

Old

% change

New

Old

% change

Revenues

53.3

54.8

-2.6%

57.3

59.5

-3.7%

61.6

64.7

-4.8%

y-o-y change

-4.2%

-1.6%

-2.6%

7.5%

8.6%

-1.1%

7.5%

8.8%

-1.3%

Gross profit

44.2

46.2

-4.2%

48.3

50.2

-3.7%

52.0

54.6

-4.8%

Gross margin

83.0%

84.3%

-1.6%

84.3%

84.3%

0.0%

84.3%

84.3%

0.0%

Operating EBITDA

0.6

0.3

85.1%

2.5

1.8

38.2%

3.6

3.1

17.3%

Operating EBITDA margin

1%

1%

0.5%

4%

3%

1.3%

6%

5%

1.1%

Normalised net income

0.2

0.0

392.2%

1.6

1.1

44.7%

2.3

1.9

18.7%

Normalised diluted EPS (c)

0.05

0.01

394.3%

0.34

0.24

44.8%

0.51

0.43

18.8%

Net debt/(cash)

(21.0)

(24.1)

-12.7%

(26.1)

(27.1)

-3.7%

(30.8)

(31.6)

-2.4%

Source: Freelancer, Edison Investment Research

The group believes that costs were at a more stable position at end-FY23, after a 19% y-o-y reduction in opex. We expect that the use of AI technologies will allow costs to grow at a slower rate than revenue; in FY24 and FY25 we forecast a 5% y-o-y increase in staff costs, the largest contributor to opex. We expect lower forecast costs to more than offset our lower revenue expectations, leading to greater operating EBITDA and normalised net income margin expansion than previously forecast.


Exhibit 5: Financial summary

A$'k

2018

2019

2020

2021

2022

2023

2024e

2025e

31-December

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

INCOME STATEMENT

Revenue

 

 

51,675

57,911

58,771

57,419

55,660

53,334

57,323

61,630

Cost of Sales

(7,651)

(9,455)

(9,786)

(9,689)

(8,740)

(9,093)

(9,001)

(9,677)

Gross Profit

44,024

48,456

48,985

47,730

46,920

44,241

48,322

51,952

EBITDA

 

 

(672)

2,044

5,793

3,972

(746)

6,784

8,657

9,747

Operating EBITDA

 

 

(705)

(1,084)

(447)

(2,690)

(6,579)

608

2,495

3,585

Normalised operating profit

 

 

(1,202)

(1,170)

1,081

(922)

(5,216)

2,051

3,921

5,007

Amortisation of acquired intangibles

0

0

0

0

0

0

0

0

Exceptionals

0

0

0

0

0

0

0

0

Share-based payments

(558)

(329)

(192)

(156)

(159)

(115)

(115)

(115)

Reported operating profit

(1,760)

(1,499)

889

(1,078)

(5,375)

1,936

3,806

4,892

Net Interest

(33)

(219)

(1,751)

(2,035)

(1,655)

(1,717)

(1,703)

(1,703)

Joint ventures & associates (post tax)

0

0

0

0

0

0

0

0

Exceptionals

0

0

0

0

0

0

0

0

Profit Before Tax (norm)

 

 

(1,235)

(1,389)

(670)

(2,957)

(6,871)

334

2,218

3,304

Profit Before Tax (reported)

 

 

(1,793)

(1,718)

(862)

(3,113)

(7,030)

219

2,103

3,189

Reported tax

309

127

216

856

1,617

(30)

(631)

(957)

Profit After Tax (norm)

(1,235)

(1,389)

(670)

(2,957)

(6,871)

234

1,552

2,313

Profit After Tax (reported)

(1,484)

(1,591)

(646)

(2,257)

(5,413)

189

1,472

2,232

Minority interests

0

0

0

0

0

0

0

0

Discontinued operations

0

0

0

0

0

0

0

0

Net income (normalised)

(1,235)

(1,389)

(670)

(2,957)

(6,871)

234

1,552

2,313

Net income (reported)

(1,484)

(1,591)

(646)

(2,257)

(5,413)

189

1,472

2,232

Basic average number of shares outstanding (m)

449

450

450

450

451

451

452

452

EPS - basic normalised (c)

 

 

(0.27)

(0.31)

(0.15)

(0.66)

(1.52)

0.05

0.34

0.51

EPS - diluted normalised (c)

 

 

(0.27)

(0.31)

(0.15)

(0.66)

(1.52)

0.05

0.34

0.51

EPS - basic reported (c)

 

 

(0.33)

(0.35)

(0.14)

(0.50)

(1.20)

0.04

0.33

0.49

Dividend (c)

0

0

0

0

0

0

0

0

Revenue growth (%)

0.0

12.1

1.5

(2.3)

(3.1)

(4.2)

7.5

7.5

Gross Margin (%)

85.2

83.7

83.3

83.1

84.3

83.0

84.3

84.3

EBITDA Margin (%)

-1.3

3.5

9.9

6.9

-1.3

12.7

15.1

15.8

Normalised Operating Margin

(2.3)

(2.0)

1.8

(1.6)

(9.4)

3.8

6.8

8.1

BALANCE SHEET

Fixed Assets

 

 

33,459

60,699

61,727

66,372

66,248

60,502

60,086

59,667

Intangible Assets

26,429

26,429

26,457

34,119

34,120

34,120

34,120

34,120

Tangible Assets

557

27,446

22,785

19,392

18,323

13,751

13,335

12,916

Deferred tax & other

6,473

6,824

12,485

12,861

13,805

12,631

12,631

12,631

Current Assets

 

 

37,657

37,326

41,964

38,955

30,797

28,182

34,335

39,372

Stocks

0

0

0

0

0

0

0

0

Debtors

3,474

4,003

5,593

6,448

4,825

3,927

4,969

5,342

Cash & cash equivalents

33,211

32,014

34,341

30,316

23,358

21,153

26,263

30,927

Other

972

1,309

2,030

2,191

2,614

3,102

3,102

3,102

Current Liabilities

 

 

38,628

42,984

48,170

50,849

48,831

45,009

49,159

51,430

Creditors

35,898

36,607

39,166

41,259

39,647

36,529

40,679

42,950

Tax and social security

71

57

87

43

18

4

4

4

Short term borrowings

121

121

286

121

121

121

121

121

Lease liabilities

0

3,248

5,628

5,709

5,562

4,842

4,842

4,842

Other

2,538

2,951

3,003

3,717

3,483

3,513

3,513

3,513

Long Term Liabilities

 

 

1,413

25,102

26,356

23,148

21,749

16,850

16,850

16,850

Long term borrowings

0

0

0

0

0

0

0

0

Lease liabilities

0

23,134

19,094

16,082

15,519

12,187

12,187

12,187

Other long term liabilities

1,413

1,968

7,262

7,066

6,230

4,663

4,663

4,663

Net Assets

 

 

31,075

29,939

29,165

31,330

26,465

26,825

28,412

30,759

Minority interests

(20)

(20)

(20)

(3,674)

(3,674)

(3,674)

(3,674)

(3,674)

Shareholders' equity

 

 

31,055

29,919

29,145

27,656

22,791

23,151

24,738

27,085

CASH FLOW

Op Cash Flow before WC and tax

(717)

1,623

4,066

2,637

(943)

4,922

6,209

6,972

Working capital

(660)

300

5,094

(1,463)

(3,930)

(3,505)

3,108

1,897

Exceptional & other

(160)

(196)

(1,439)

1,313

535

339

0

0

Share-based payments

558

329

192

156

159

115

115

115

Net operating cash flow

 

 

(979)

2,056

7,913

2,643

(4,179)

1,871

9,431

8,985

Capex

(135)

(227)

(221)

(429)

(149)

(53)

(120)

(120)

Acquisitions/disposals

23

0

(28)

(7,662)

0

0

0

0

Borrowings

121

0

176

0

0

0

0

0

Equity financing

57

340

0

3,987

0

0

0

0

Dividends

0

0

0

0

0

0

0

0

Other

86

(3,091)

(2,721)

(3,479)

(3,845)

(4,201)

(4,201)

(4,201)

Net Cash Flow

(827)

(922)

5,119

(4,940)

(8,173)

(2,383)

5,110

4,664

Opening net debt/(cash)

 

 

(31,908)

(33,090)

(31,893)

(34,055)

(30,195)

(23,237)

(21,032)

(26,142)

FX

2,130

(275)

(2,792)

915

1,215

178

0

0

Other non-cash movements

(121)

0

(165)

165

0

0

0

0

Closing net debt/(cash)

 

 

(33,090)

(31,893)

(34,055)

(30,195)

(23,237)

(21,032)

(26,142)

(30,806)

Source: Edison Investment Research, company accounts


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Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

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20 Red Lion Street

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United Kingdom

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

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Copyright: Copyright 2024 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

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Actinogen Medical — Pressing forward with Xanamem

Having shown cognitive activity in prior trials, Actinogen began its XanaMIA Phase IIb study of lead candidate Xanamem in patients with cognitive impairment (CI) associated with mild-to-moderate Alzheimer’s disease (AD). The study will assess c 220 biomarker-positive AD patients, with interim results expected in H1 CY25. Actinogen recently reported results from a human positron emission tomography (PET) imaging study, which affirm the drug’s mechanism of action (MoA) in healthy subjects and patients with AD, by showing that Xanamem exhibited high target enzyme occupancy designed to impede cortisol production, as well as favourable safety and tolerability. Our risk-adjusted net present value (rNPV) remains essentially unchanged at A$528m.

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