Company Reports

Fineos is a core software vendor to the global life, accident, and health, or LA&H, insurance industry. Customers are primarily large multinationals and midmarket insurers. The firm generates revenue mainly from subscriptions and product implementation services. About 80% of revenue is generated from the US, the rest from the Asia-Pacific and Europe.

Wide-moat Fineos' first-half 2024 results affirm our thesis for improved medium-term earnings. The results met expectations, with revenue growth, a positive mix shift, and cost control driving improvements in gross profit and EBITDA by around 7% and 60%, respectively, from the previous corresponding period. Gross profit and EBITDA margins improved by around 4% to 74% and 11%, respectively. Free cash flow more than doubled to EUR 5 million from EUR 2 million in the PCP. Notably, subscription revenue now comprise 54% of total revenue, up from roughly 40% three years ago. Fineos’ shift to a cloud-based software-as-a-service model boosts gross profit margins, which we expect to improve further as more customers transition from on-premises licenses to the cloud.

Wide-moat Fineos’ second-quarter 2024 update shows continued progress toward maintainable cash flow generation. We remain optimistic about Fineos’ earnings outlook, which is driven by product up/cross-selling, new client wins, and strong cost control. Free cash flow generation has improved considerably from prior quarters, mainly from cost reductions. Amid these measures, the firm still secured a new client, and numerous product upsells with existing core business clients, demonstrating its product utility. While the loss of two clients is disappointing, these are noncore clients, meaning they are not part of Fineos’ core customers of life, accident, and health insurance carriers. This makes the impact immaterial to our unchanged AUD 3.10 per share fair value estimate.

Fineos is a core software vendor to the global life, accident, and health, or LA&H, insurance industry. Customers are primarily large multinationals and midmarket insurers. The firm generates revenue mainly from subscriptions and product implementation services. About 75% of revenue is generated from the US, the rest from the Asia-Pacific and Europe.

Wide-moat Fineos’ margins are improving, as evidenced by positive free cash flow generation in the March quarter of 2024. This follows three consecutive quarters of negative free cash flow since June 2023.

Fineos is a core software vendor to the global life, accident, and health, or LA&H, insurance industry. Customers are primarily large multinationals and midmarket insurers. The firm generates revenue mainly from subscriptions and product implementation services. About 75% of revenue is generated from the US, the rest from the Asia-Pacific and Europe.

Fineos is a core software vendor to the global life, accident, and health, or LA&H, insurance industry. Customers are primarily large multinationals and midmarket insurers. The firm generates revenue mainly from subscriptions and product implementation services. About 75% of revenue is generated from the U.S., the rest from the Asia-Pacific and Europe.

Fineos is a core software vendor to the global life, accident, and health, or LA&H, insurance industry. Customers are primarily large multinationals and midmarket insurers. The firm generates revenue mainly from subscriptions and product implementation services. About 78% of revenue is generated from the U.S., the rest from Asia Pacific and Europe.