FINEOS : Annual Report to shareholders

Annual Report 2023

FINEOS Corporation Holdings plc | ARBN 633 278 430

Contents

Chairman and CEO's Report	1
Environmental, Social and Governance Report	4
Board of Directors	16
Directors' Report	18
Remuneration and Nomination Committee Report	25
Directors' Responsibilities Statement	32
Independent Auditor's Report	33
Consolidated Statement of Comprehensive Income	42
Consolidated Statement of Financial Position	43
Company Statement of Financial Position	44
Consolidated Statement of Changes in Equity	45
Company Statement of Changes in Equity	47
Consolidated Statement of Cash Flows	49
Company Statement of Cash Flows	50
Notes to the Consolidated Financial Statements	51
Additional Security Holder Information	90
Company Information	93

ii FINEOS Corporation Holdings plc

Chairman and CEO's Report

Dear Securityholder,

Welcome to the FINEOS Annual Report for the 12 months ended 30 June 2023 (FY23).

As in previous years we would like to thank our people, customers and investors for their continued dedication and support, which has enabled FINEOS to continue to thrive and achieve strategic breakthrough milestones during this financial year. Our people continue to be our greatest asset, and we have an enviable and growing client base who invest in the FINEOS Platform, as well as strongly advocating for FINEOS in the marketplace.

In June 2023 FINEOS reached the important milestone of 30 years in business. Our Company was founded to put the customer at the heart of the life insurance industry. We are proud of the positive contribution we have made in supporting our clients in this endeavour, through living our values and remaining true to our core purpose for all these years.

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Chairman and CEO's Report (continued)

FINEOS Purpose: We help our customers care for the people they serve through the delivery of superior insurance technology.

The impact of the market environment on our clients during this financial year has been relatively positive. We began to witness recovery from the global pandemic, and we also witnessed rising interest rates as a result of increased inflation in most of the developed world. The impact of higher interest rates is good news for our insurer clients as it means a positive return on their reserves. In addition, our markets continue to experience solid employment rates, which again has been good news for our employee benefit carriers.

This financial year has been another solid year of growth for FINEOS, as we signed three new clients and our existing clients continued to migrate to the FINEOS Platform, to enable excellent digital customer experience, process efficiency and transformation of their business operations.

The ongoing adoption of our platform has once again delivered substantial growth in our product subscription revenues, and for the first time our subscription revenues have surpassed our professional services revenues. We expect this positive trend to continue as we grow our footprint with more new customers, increase sales to existing customers, train system integration partners and as we build out the FINEOS Platform to be the market leading core system for employee benefits.

A solid year of exciting break-through growth, while exceeding client expectations

Through the course of the year, we had many successful client implementations and upgrades. We continued to scale our clients business on the FINEOS Platform, assisting them to migrate away from outdated end-of- life legacy core systems.

Halfway through our financial year we changed our services revenue guidance due to one of our largest US clients entering a strategic product partnership with FINEOS to address the larger employer segment of the US market (i.e., above 100,000 lives). While this is an exciting strategic product partnership, it meant the revenue profile we originally forecasted had to be modified to reflect reduced services revenues in this year in favour of the medium-term additional product subscription revenues, which should positively impact our revenue growth in the future.

In last year's annual report, we mentioned our joint case study with New York Life - Group Benefits Service (NYL- GBS) and how they have used the FINEOS Platform to transform their business enabling the retirement of six legacy core systems. Today - the FINEOS Platform supports their entire $4.1 billion policy portfolio for their nine million clients. This case study helped to propel FINEOS into serious contention as an end-to- end platform for the group insurance market and for the first time FINEOS was given a leadership position in the group core systems market by noteworthy North American industry analysts. Our case study and analyst market recognition has been further endorsed by our announcement in May of this year of top ten group insurer, Guardian Life, contracting for the FINEOS Platform, incorporating policy administration, billing, claims and absence management.

FINEOS continues to enhance our ability to demonstrate our capabilities within all core functional areas in the North American employee benefits market and this was further verified by our case study with American Public Life (APL) on the successful implementation of the FINEOS Platform for new business and underwriting purposes.

In addition to the above, FINEOS has just recently entered the Direct-to-Employer market for our absence management product, and we have already gained our first employer client.

Growing revenue and earnings, with strong growth in subscription revenues

Total revenue for FY23 was down 1.7% to €125.0 million (compared to FY22). However, and importantly, our higher margin subscription revenue was up 15.9% to €62.4 million. As mentioned earlier, during the year a large FINEOS client switched investment from custom extensions to augmenting our product R&D investment leading to a reduction in our services revenues compared to FY22. However, this will lead to incremental subscription fees from this customer as we progress through FY25 and FY26 and facilitate more efficient upgrades into the future as product enhancements continue.

Many of our clients use resources from major consultancies in systems project management and implementation. Increasingly, we are working to leverage those resources, suitably trained on FINEOS products, rather than engaging large implementation teams ourselves.

2 FINEOS Corporation Holdings plc

EBITDA - earnings before interest, taxes, depreciation and amortisation - was down 70.2% (compared to FY22) to €2.0 million, reflecting increased product development and delivery supporting future subscriptions growth.

Our people headcount (including contractors) marginally reduced during FY23, going from 1,081 on 30 June 2022 to 1,042 on 30 June 2023. Headcount is expected to remain about this level for the duration of FY24. However, we expect continuing change in the mix of skills and geographic locations to meet our business needs and deliver further savings as part of our cost reduction initiatives.

Continued investment in the drive for future growth

Research and development investment was up slightly to €48.5 million, reflecting the hiring of additional engineers to accelerate product to market. We continue to generate a strong return on investment (ROI), with subscription revenue growth the key measure, up 15.9% in FY23.

The FINEOS Platform remains the number one platform for employee benefits in the North American market, measured by revenue, number of clients and quote- to-claim product deployments. In the North American market, where 78.1% of our revenue is now sourced, and subscription revenue grew 18.6% in FY23, we have continued to grow rapidly since listing on ASX in August 2019, reflecting strong execution of our growth strategy.

The Company had a cash balance of €25.5 million on 30 June 2023, and expects to generate free cash flows for the second half of our next financial year (FY24). Meanwhile, in order to fund working capital and to maintain flexibility for timing of cash flows (e.g., upfront investment for new client wins before subscriptions flow), we undertook an institutional placement in August 2023. This raised $35 million (before costs) with a further $5 million to be invested by our CEO and Founder, subject to securityholder approval at the AGM later this calendar year. In addition, a Share Purchase Plan for up to $5 million has been launched to enable eligible retail investors to buy CDIs at the same price as provided in the institutional placement.

Our people - our most important asset

Our people continue to enjoy an engaging and rewarding work environment which is evident in our consistent high retention rates of key talent year on year and where their contribution is appreciated and recognised.

As a 'remote first' organisation we continually focus on embedding DEI in our ways of working and that our employees' health and wellbeing including, mental, physical and emotional needs are supported, whilst ensuring that our leaders and our people are offered learning and development opportunities to expand their skills, knowledge and competencies. We continue to celebrate our successes and different ways of working together and give recognition to employees who go the extra mile to help a client or another employee.

FINEOS recognises the importance of being able to demonstrate our ESG credentials for all our stakeholders. Our people are increasingly engaged in ESG matters with direction being provided by our internal ESG Council. We have considerably expanded our disclosures in this year's ESG report and will continue to enhance our efforts and reporting in this area.

FINEOS is well known for contributing to society and the environment by supporting pro-bono, philanthropic and charitable activities in the places where we work and live.

Positive outlook

The achievements of FY23 in terms of delivering for our clients and our clients achieving growth in their business facilitated by FINEOS technology combined with new client wins provide considerable momentum for FY24 to enable our guidance of low to mid-teen growth in subscription revenues in FY24. This combined with continuing to realise 'cost out' benefits provide the path to generation of positive free cash flows for the second half of FY24 and for FY25 in aggregate.

Our refreshed balance sheet strength following the recent capital issue provides the backing for continued expansion of our platform and our customer base, providing exciting work for our people and the basis for growing returns for our securityholders.

Your sincerely,
Anne O'Driscoll	Michael Kelly
Chairman	Founder and CEO

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