The share price of ASX insurance software company FINEOS Corporation Holdings PLC (ASX: FCL) has been on the decline recently – dropping almost 30% from its August 52-week high of $5.75 to $4.01 at the time of writing.
It joins a number of ASX technology and software companies that surged to new highs last year but have so far underperformed in 2021.
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Company background
FINEOS is a Dublin-based company that develops a suite of software for the life, accident and health insurance industries.
Its platform is capable of supporting insurers in the end-to-end processing of claims, including quotes, billing and payments. It can also provide insights through reporting and analytics.
FINEOS' customer-centric software automates and streamlines processes for insurance providers and aims to be an all-in-one replacement for legacy insurance administration platforms.
Financials
The company's recent financial performance has been a bit of a mixed bag. For the first-half FY21, the company reported top-line revenue growth of a touch over 30% versus the prior comparative period to €52.6 million ($81.2 million).
However, statutory earnings before interest, tax, depreciation and amortisation expenses (EBITDA) declined by 53.6% to $4.9 million and FINEOS reported a net loss after tax of $7.8 million, down from a net profit after tax of $0.15 million in first-half FY20.
The losses came due to an increase in operating expenses, which jumped 43.6% to $47.3 million. FINEOS acquired US-based insurance software company Limelight Health during the half for US$75 million. This increased personnel costs during the period due to the additional headcount brought over from Limelight.
Outlook
FINEOS reaffirmed its full-year outlook for revenue in the range of $157 million to $162 million. It will be hoping that it can keep its costs under control over the second half, or else shareholders may start to doubt the wisdom of the Limelight acquisition.
Even if the Limelight acquisition is revenue accretive, if that benefit is outweighed by ballooning personnel costs it may continue to drag on the company's bottom line growth.
Other recent news
In its first-half results announcement, FINEOS teased that it had signed a new client in the Australia and New Zealand region – which turned out to be New Zealand-based insurer Partners Life.
Following a "comprehensive market evaluation", Partners Life selected FINEOS' platform to process its insurance and medical claims. The deal is for a 5-year initial term.
Where next for the FINEOS share price?
FINEOS joins a growing list of COVID-19 market darlings – mostly technology companies – that enjoyed stellar share price growth last year but have run out of gas in 2021.
Companies like Bigtincan Holdings Ltd (ASX: BTH), Megaport Ltd (ASX: MP1) and Damstra Holdings Ltd (ASX: DTC) have all followed this pattern – with recent declines spurred by major selloffs on the tech-heavy NASDAQ index in the US.
It's hard to say where the FINEOS share price will head next. It already jumped as high as $4.75 earlier this month before dropping back down again. This level of volatility could be the new normal – at least over the short-term – as the market continues to try to work out what effect a post-COVID economic recovery might have on tech companies (like FINEOS) that actually grew during the pandemic.
Either way, all these tech companies are still worth watching closely this year – there could be some potential bargains available for opportunistic investors.
