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FINEOS (ASX:FCL) share price under spotlight with HY21 report, new contract win

ASX share price movement represented by doctor pressing digitised screen with array of icons including one entitled health insurance
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The FINEOS Corporation Holdings PLC (ASX: FCL) share price will be on watch tomorrow after the insurance software business released its FY21 half-year result. It also announced a new contract.

Why the FINEOS share price will be on the radar

The FINEOS share price will be in focus tomorrow after the company told investors its half-year revenue increased by 30.1% to €52.6 million. This was made up of 20.1% organic growth and 10% growth from acquisition.

Software revenue was €19.1 million. There was organic subscription recurring revenue growth of 35.1% year on year, or 51.5% growth including the contribution from a US acquisition called Limelight Health (LLH) which was acquired in August 2020. Initial license fee (ILF) revenue was down 16.8% to €1.5 million, reflecting a run off of the old pricing model revenue.

Services revenue was €33.4 million in the first half of FY21. There was organic services revenue growth of 15.9%, or 23.3% growth in the contribution from LLH.

Gross profit rose by 20.1% to €33.8 million.

The company reported that its underlying earnings before interest, tax, depreciation and amortisation (EBITDA) fell by 42.8% to €5.1 million and its statutory EBITDA fell 53.6% to €3.2 million.

FINEOS showed that there was a sizeable increase in its various spending categories including research and development (up 29.9%), sales and marketing (up 41.2%), cloud operations and support (up 434.7%) and general and administration (up 116.2%). The company explained that it continues to invest for growth and some of the expenses increased because of the higher headcount (up 40.8% to 1,043) after the LLH acquisition, as well as some one-off costs.

The company reported an underlying loss after tax of €2.5 million and a statutory net loss after tax of €5.1 million.  

Recent FINEOS share price movements

Over the last year the FINEOS share price is up around 15.7%. However, over the last six months the FINEOS share price has dropped almost 25%. 

FY21 outlook

FINEOS is expecting the FY21 revenue contribution to be in the range of €102 million to €105 million, after the foreign currency exchange impact.

The company reaffirmed its guidance of 30% growth in subscription revenue, that’s before the contribution from LLH which is expected be approximately €4 million of subscription revenue in FY21.

The company also announced a new client in ANZ, representing the first in the region to feature on the FINEOS platform in the cloud.

New contract win

FINEOS said that Partners Life has selected the FINEOS platform for life insurance and medical claims after looking at a number of options.

The company said that the contract is a small-sized 5-year initial term software as a service (SaaS) contract. The expected revenue is already factored into the guidance.

Partners Life chief claims officer Tracey Lonergan said:

“It was important that the provider had the capability, experience and infrastructure to deliver and support a claims management system that would integrate into the Partners Life ecosystem. Also important to us was that the selected vendor come with a strong record of successful implementations and strong support of its claims management system within the New Zealand and Australian life and health insurance industry. FINEOS met those requirements. Our initial collaboration has been extremely positive, and we envisage that the project will deliver high quality results.

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Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. recommends FINEOS Holdings plc. The Motley Fool Australia has recommended FINEOS Holdings plc. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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