FINEOS Corporation Holdings plc
Annual Report 2022

Plain-text annual report

Annual Report 2022 FINEOS Corporation Holdings plc ARBN 633 278 430 Contents Chairman and CEO’s Report Environmental, Social and Governance Report Board of Directors Directors’ Report Remuneration and Nomination Committee Report Directors’ Responsibilities Statement Independent Auditor’s Report Consolidated Statement of Comprehensive Income Consolidated Statement of Financial Position Company Statement of Financial Position Consolidated Statement of Changes in Equity Company Statement of Changes in Equity Consolidated Statement of Cash Flows Company Statement of Cash Flows Notes to the Consolidated Financial Statements Additional Security Holder Information Company Information 1 4 12 14 21 27 28 36 37 38 39 41 43 44 45 84 87 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 2022 (FY22). We would like to begin by thanking all our team, senior executives, co-Directors, customers and investors for their continued dedication and support that has enabled FINEOS to achieve several significant strategic milestones over the past year. Our people continue to be our greatest strength and we have an enviable customer base who invest in the FINEOS Platform, as well as strongly advocate for FINEOS in the marketplace. This loyalty and engagement of our people and customers has underpinned the ongoing growth of our business and cemented its future through an incredibly challenging operating environment in FY22. Today FINEOS continues to progress on its mission to become a global market leader of core systems for group and individual life, accident and health insurers. Over the past six years we have specifically focused on building out our Platform for Employee Benefits, with core, digital and data capabilities to support group, voluntary and absence on our single SaaS Platform. Recently our partner on this platform investment journey, New York Life – Group Benefits Service (NYL-GBS), published a case study about how they have used the FINEOS Platform to transform their business enabling them to retire six legacy core systems so that the FINEOS Platform now supports their entire $4.1 billion policy portfolio for their nine million clients. This achievement gives FINEOS a unique and powerful position in the employee benefits market, with no other vendor in a position to claim a complete transformation reference on a full end-to-end modern, purpose built, platform for employee benefits.The case study is available to read on both the NYL-GBS website and the FINEOS website at FINEOS.com. Growing revenue and earnings, with strong growth in subscription revenues Total revenue for FY22 was up 17.5% to €127.2 million (compared to FY21). Importantly, our higher margin subscription revenue was up 34.2% to €53.8 million. Within this, organic growth was 33.0%, with the balance from the acquisitions we made last fiscal year – Limelight Health Inc. (Limelight) and DigIn Technologies LLC (Spraoi). Increasing subscription revenues is our primary focus. In terms of organic growth achieved, this reflected cross- selling and up-selling to existing customers, as well as new customer wins. As our customers further transform their businesses to generate efficiencies and streamline their operations, we believe they will continue to invest in extending their use of the FINEOS Platform to modernise and enhance their customer service, grow their business operations and replace outdated unsustainable legacy systems. EBITDA – earnings before interest, taxes, depreciation and amortisation – was up by €1.5 million (28.8%) to €6.7 million. Our people headcount (including contractors) remained relatively flat over FY22, going from 1,065 on 30 June 2021 to 1,075 on 30 June 2022. In line with our growth strategy, we have continued to invest in product research and development, sales and marketing, and cloud operations support. Headcount is expected to remain stable at this level in FY23, and we believe the greater use of talent in certain geographies will help contain employment cost increases in the current inflationary environment. Annual Report 2022 Annual Report 2022 1 1 Chairman and CEO’s Report (continued) Continued investment to drive future growth Research and development investment was up slightly to €43.2 million, reflecting hiring of additional product engineers and teams to accelerate product to market. We continue to generate a strong ROI on our investment, with subscription revenue growth the key measure, up 34.2% in FY22. We will continue to invest in the ongoing development of our product suite. Strong balance sheet supports growth plans The Company had a cash balance of €44.3 million as at 30 June 2022. This cash balance was bolstered in FY22 through the successful €46.0 million (before costs) placement and share purchase plan. FINEOS received strong support from shareholders at the time, as well as new institutional and sophisticated investors. Favourable exchange rates during the year also had a positive impact on the cash balance. Supporting group and individual life, accident and health insurers to evolve their businesses Insurance carriers in our target market have been shifting to more than just financial protection and case management. They are looking for ways to provide expanded service, which includes voluntary benefits, absence management and partnering with specialist service providers to improve the health and wellbeing of their clients. As the only pureplay end-to-end insurance software platform provider focussed solely on the group and individual life, accident and health market, FINEOS is facilitating the technological and business software needs of insurers as they deliver this evolving service to their clients. We partner with them on end-to-end delivery. The success of this engagement is demonstrated in the multiple testimonials and references our customers provide publicly quoting FINEOS, which continues to build our proven reputation in the market, including most recently the joint study with New York Life Group Benefit Solutions. Our clear focus and alignment at FINEOS have translated to the FINEOS Platform becoming the number one platform for group employee benefits in the North American market, measured by revenue, number of clients and end-to-end quote-to-claim product deployments. This success has contributed to 67.3% growth in North American cloud subscriptions and 79.4% of total revenue being in North America in FY22, continuing the trajectory since listing on ASX in August 2019 and reflecting the strong execution of our strategy. Strategic acquisitions successfully integrated The Spraoi team has been successfully integrated into the FINEOS organisation. Spraoi’s ML (Machine Learning) and AI (Artificial Intelligence) products bolster our FINEOS Insight and Engage capabilities and have had further sales success with new customer and cross- sell wins in FY22 and a growing pipeline for FY23. Investment in Limelight’s product roadmap continues within FINEOS and is aligned with current customer deployments and overall quote-to-claim strategic product capabilities. 2 FINEOS Corporation Holdings plc FINEOS is committed to creating a world-class Corporate Social Responsibility (CSR) program that reinforces and brings to life the company’s vision to create “A  world where protection from illness, injury and loss is accessible to everyone.” CSR has been incorporated into the FINEOS DEI “Embrace” program, which includes several employee- led CSR activities to fundraise for Breast Cancer Ireland, sports clubs who serve local disadvantaged communities and the Ukrainian war crisis. 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 Looking forward, we see exciting opportunities for its growth FINEOS. With the business continuing trajectory and cash flows strengthening, we remain on track to achieve a positive free cash flow position in FY24. We look forward to reporting on our future developments and progress towards this goal, and delivering growth for our people, customers and shareholders. Your sincerely, Anne O’Driscoll Chairman Michael Kelly Founder and CEO Our people are our most important asset One of our principal objectives is to drive organisational health by creating a great place to work that provides us with a competitive advantage, measured in part by successfully achieving high retention levels. Our health and wellbeing program at FINEOS focuses on three core dimensions: mental, physical and emotional. With most of our team continuing to work remotely over the past two years, the FINEOS health and wellbeing program really came to the fore. Our Connecting Culture program has continued with momentum, with the introduction of our new social recognition tool ‘Celebrating Success’ and Ways of Working (WOW), which includes a charter for how each FINEOS team works in collaboration as one team across multiple geographies in a hybrid work environment. FINEOS also recognises the value of inspiring innovation and collaboration in our people. Employee culture and engagement strategies are in place that enhance the Group’s ability to attract and retain talent. FINEOS seeks feedback from our people to progressively improve on all areas of our organisational health. We are currently launching a new ‘Discovery Chat program’ designed for leaders to continuously engage with employees to understand the reasons why each employee continues to work for the Company and gain diverse perspectives into how we can innovate across all pillars of our strategy. Achievements in the past year have included HR being shortlisted for numerous awards and winning ‘Champion Change Management Program’ at the Irish HR Champion Awards 2022, the LOMA ‘Educational Achievement’ award in North America and the prestigious CIPD Ireland ‘Inclusion and Diversity’ award for our FINEOS DEI ‘Embrace’ (Diversity, Equity and Inclusion) program. Annual Report 2022 3   Michael Kelly CEO, Letter for ESG FINEOS’ Purpose – “We help our customers care for the people they serve through the delivery of superior insurance technology.” FINEOS has always been focused first on helping improve the lives of people by supporting insurers around the world in their mission to provide coverage and care to the public. Our Environmental, Social and Governance (ESG) strategy has been woven into the FINEOS leadership direction and culture for the last 30 years, as seen more recently in our FINEOS Playbook, which outlines our values and their application toward our employees, our customers, and the world at large. As we have grown organically and through acquisition, we have updated our FINEOS Playbook to reflect our expanding and more diverse workforce. The FINEOS ESG strategy addresses each of the three underlying areas in an integrated fashion, tailored to address the requirements of an international software company. Environment Our environmental impact primarily concerns managing travel and facilities-related impact around energy, utilities and waste management. The measures FINEOS undertook to address the recent pandemic shutdowns and some of the resulting changes in general business interaction norms have enabled us to greatly reduce travel and re-evaluate our approach to office space management in general. Social Social impact is an important area for us at FINEOS, since software is a people business, both in the creation of software, and in the wide range of our global customers, partners and other stakeholders. Professional development, employee engagement and wellbeing, and fair compensation, are major initiatives that enable us to maintain a fresh and motivated team at a time where turnover and recruiting are critical industry – and international workforce -- issues. Our employee-directed Diversity, Equality and Inclusion (DEI) program is also a major element in maintaining a healthy working culture internally and seeks to ensure we are dealing with our customers, partners and other stakeholders correctly. We are proud that FINEOS was recently named winner of the Inclusion and Diversity Award at the CIPD Ireland HR Awards 2022 for our DEI program. Governance I have spent a lot of time with our Board and team on governance as we have grown dramatically, made acquisitions and moved our customers to a SaaS model that requires a higher standard of data security and privacy management than ever. Our Board members bring a variety of viewpoints and a high degree of independence that positively challenge me and my leadership to be broad thinkers and bring our best game to the table. This includes the Board as a whole taking an active interest in ESG matters, encouraging the preparation of this report and approving the report. The large amount of customer data necessary to provide life, accident and health insurance requires insurers to maintain a very high standard for data security and privacy. We have taken the right steps to ensure FINEOS maintains that standard both in our own people and processes and through having the right partners for cloud services, consulting services and audit. Our ESG initiative is in many ways inherent within FINEOS as it aligns with our FINEOS Playbook and overarching approach to doing business. The past few years have been very difficult for business and for the world in general. I am very proud of how my team has maintained these high standards and stepped up to the challenge of serving our customers at a time when insurance protection has been a critical need for people around the globe. Michael Kelly Founder and CEO 4 FINEOS Corporation Holdings plc Environmental, Social and Governance ReportAbout this Report FINEOS is proud to present our inaugural Environmental, Social and Governance (ESG) Report. This report showcases the work that we have done to date in these areas and provides a new level of transparency into how we operate and view our role with respect to our stakeholders. As a Software as a Service (SaaS) provider, our industry places a heavy emphasis on innovation and depends upon human and intellectual capital. FINEOS has specifically tailored this report to reflect the fact that we operate in a services-led industry. We believe that this report shows how we are establishing and maintaining a framework for evaluating, creating and maintaining our ESG-related work. In this inaugural report we reflect our focus on our people, our business and our customers. FINEOS has a strong people strategy with a focus on Organisational health, running regular Organisational health surveys and implementing changes to improve the Organisational health; annual benchmarking of salaries across regions; and performance management. The data we provide is current through 30 June 2022. Focus Areas We have identified nine focus areas within our evolving ESG strategy. We are working to establish quantifiable measurements across all these areas. ENVIRONMENT SOCIAL GOVERNANCE Travel, Water and Energy Management Materials and Waste Management Professional Development Wellbeing and Engagement Diversity, Equality, Inclusion (DEI) Compensation Board Independence, Structure and Tenure Data Security and Privacy Audit Risk and Oversight Environment FINEOS focuses on the environmental areas that are key/relevant to our mission as a global market leader in core systems for group and individual life, accident and health on a single technology platform. With FINEOS being a SaaS focused company, it has a relatively low carbon footprint in the context of direct emissions by facility or process (Scope 1), indirect emissions associated with purchased electricity (Scope 2) and supply-chain carbon emissions (Scope 3). FINEOS has made efforts to address the environmental concerns, regarding: Travel, Water and Energy Management FINEOS facilities management focuses on the efficient use of water and energy in all our office spaces. We are continuously reviewing best practice, cost management and adoption of new technologies. Commencing in 2007, FINEOS implemented a strategy to virtualise all backend Servers in the FINEOS Data Centre and completed this in 2010. Since 2017, FINEOS uses Cloud Service Providers to complement this. All third-party Data Centers used by FINEOS have a goal to reduce their carbon footprint by 2025 and/or be 100% powered by renewable energy. In 2020, FINEOS embraced a remote-first Hybrid Working Model for all regions where FINEOS has an office, offering a choice of being office based or remote based, thus reducing the amount of commuting to/from an office. In 2022, 100% of employees are using the hybrid working model. We encourage our employees to question the value of carbon intensive activities such as travel by car or plane and to choose an alternative such as video call instead. Adopting this hybrid working model, which encourages the majority of employees to work from home more so than in the office, means electricity consumption from office buildings is reduced significantly. Annual Report 2022 5 Materials and Waste Management FINEOS strives to reduce waste and recycle equipment (office and electrical) where it is safe and practical to do so. IT hardware (such as ink cartridges, batteries and electronics at end of life) is disposed of in an environment friendly way once any FINEOS information on the hardware has been destroyed securely so that recovery of the information is impossible. FINEOS has driven down the use of paper since 2016 investing in software solutions to reduce paper-based equivalents, for example: • 100% of employee contracts, customer contracts and third-party contracts are delivered and signed electronically, since 2020. FINEOS is reviewing other contractual areas where electronic signatures are acceptable. • FINEOS personnel are encouraged to not print documents. • A robust recycling program for office waste is in place as part of a global reduce, reuse, recycle program. Social FINEOS is immensely proud of its employees and as a SaaS company we view our employees as vital to our success. As such our People strategy has evolved, as the business has, since our Company was founded in 1993. A fair compensation and performance management program has always existed at FINEOS, while it has evolved over the years in line with people leadership best practices. We have also launched many people focused initiatives such as: • Corporate Playbook and defined values in 2012 • In 2014 FINEOS transitioned to safe, a scaled agile approach to software development which has people at the center empowering and trusting them with decisions. • Organisational Health in 2016 • Learning and Development Program in 2017 • Health and Wellbeing Program in 2018 • Employee share option scheme in 2019 following our successful IPO on the ASX • Diversity, Equality, and Inclusivity Program in 2021 Our FINEOS Playbook (launched in 2012) is our internal compass providing clarity and underpins everything we do in FINEOS, demonstrating what our vision, purpose, mission and values are. It infuses our culture into every team, every workstream and every task. At FINEOS we empower all our people to lead by example using our leadership principles. It is regularly reviewed, updated and communicated across FINEOS. Aspirational Values Striving to be more Core Values Who we are Permission to Play How we work Company-wide Collaboration Results Driven Positive Challenge Team Players High Achievers Customer Centric Respectful Professional Trustworthy 6 FINEOS Corporation Holdings plc Environmental, Social and Governance Report (continued)Compensation FINEOS offers a comprehensive total rewards package to all employees encompassing compensation plus employee benefits. Compensation comprises a combination of base salary and equity. Our benefits package includes health care coverage, retirement benefits, and wellness and employee assistance programs. The FINEOS philosophy and basis for our salary criteria in our annual salary review is based on a balance of factors, namely performance and equity: • Performance: First and foremost, our goal is to recognise and reward high performance in a fair and consistent manner. We recognise not only what has been achieved but also how goals were achieved. • Equity: We ensure individuals receive a fair salary which is aligned with external market and internal relativities. This is done through internal and external benchmarking. We also carry out internal benchmarking cross function and region to ensure internal equity. Our gender pay equity gap is sufficiently insignificant that we are confident our people are paid equally in like-for-like roles. However, we recognise that at an individual level, pay gaps can still occur and we are working to address any identified gaps through our ongoing salary review processes. Professional development FINEOS is committed to investing in our employees through continuing education programs and professional memberships. We value the contributions of our employees and want to see them succeed and grow professionally and we support learning on the job, formal classroom training and on-demand training. Wellbeing and Engagement FINEOS recognises the importance of supporting the health and wellness of our employees and has a Health and wellbeing program to support all employees by creating an environment where our people are encouraged to bring their best selves to work and are supported in achieving greater wellbeing by fuelling themselves across three core dimensions: Mind, Body and Life. FINEOS measures the engagement of our people using the Denison Organisational Health Culture survey, benchmarking against over 1,000 companies. CSR (Corporate Social Responsibility) FINEOS and our employees have a long history of contributing to society and the environment by supporting pro- bono, philanthropic and charitable activities in the places where we work and live. The FINEOS commitment to creating a world-class CSR program truly reinforces and brings to life the FINEOS Company vision to create “A world where protection from illness, injury and loss is accessible to everyone.” Our CSR strategy also supports our purpose “We help our customers care for the people they serve through the delivery of superior insurance technology.” Driven by our shared purpose, we are committed to using our expertise and technology to help make the world a better place. We do this by encouraging and supporting our people to think about how they can contribute to delivering on this commitment. FINEOS undertakes this work in collaboration with our clients. FINEOS has chosen to focus its pro-bono and charitable work and contributions in the following key strategic areas reflecting our commitment to diversity, equality and inclusion within our organisation: • Community Development: Supporting opportunities to contribute to and make a visible, positive and material impact in the communities where we work and live. • Education and Training: Enhancing through training, education, scholarships, internships, participation in association sponsored events, academic engagements, etc., and delivering education to urban and underserved communities • Employee driven activities: Promoting employee led CSR activities. For our employees it helps to create a greater sense of community within our organisation, employees are empowered to subscribe and fundraise for local charities and want to promote the FINEOS brand at such events. It means employees can self-actualise on personal goals, contributing to FINEOS and our greater diverse community to support meaningful lasting change across the world. Annual Report 2022 7 Diversity, Equality, Inclusion (DEI) FINEOS set a strategic Company goal of Diversity and Inclusion and in July 2021 we successfully launched our Embrace DEI program, meeting that business commitment. One of the measures FINEOS uses is the D&I module in the Denison Organisational Health Survey. FINEOS also looks for external validation of the DEI program and in April 2022 FINEOS won the top CIPD (Chartered Institute for Personnel and Development) award for Inclusion and Diversity. How are we embedding DEI across our strategic pillars? • People: – A Company-wide rollout saw employees globally attend the Embrace program launch. – Our people leaders and individual contributors globally participated in our Leadership Development program which included a DEI module. This is directly in response to their request for DEI training support in our Denison Culture survey. – – Formation of globally represented employee DEI committee to drive buy-in and engagement. FINEOS embraces a multi-cultural and diverse workplace by not tolerating any level of discrimination in the hiring process or any other day to day business activity. • Product: – Our increased focus on diverse ways of thinking/working in the Company has had an impact on the development of our product, bringing more innovation. • Customer: – We have seen we can serve our customers’ needs better with the introduction of our DEI program in their RFP (Requests for Proposals). For example, we are striving towards the incorporation of accessibility standards, such as WCAG (web content accessibility guidelines) and language translation configurations. This is important to FINEOS because we believe holding our customers to the same standards we hold ourselves to is what creates widespread positive change across industries. • Market: – Employer Branding – shortlisted and won Inclusion and Diversity awards. 8 FINEOS Corporation Holdings plc Environmental, Social and Governance Report (continued)Gender Diversity Insights A recent Deloitte Global report predicts that large global technology firms, on average, will reach nearly 33% overall female representation in their workforces in 2022. FINEOS is trending at 28% in the global workforce. Female representation in leadership positions in FINEOS globally is at 25%, coming in just at the industry average of 25.3% in the technology industry. (Source: Deloitte Insights: https://www2.deloitte.com/us/en/insights/industry/technology/women-tech-leadership.html). A Total Global Gender Spilt % graph 28.20% Female A Total Global Gender Leadership % graph 25% Female 71.80% Male 75% Male With the successful implementation of our new People system ‘Success Factors’ we are now focused on collating and reporting on greater DEI measured targets. Note: This data can be limited due to country specific privacy restrictions on information being requested, recorded and tracked. (Source: Deloitte Insights: https://www2.deloitte.com/us/en/ insights/industry/technology/women-tech-leadership.html). Annual Report 2022 9 Governance The FINEOS mission is to be the global market leader in core systems for group and individual life, accident and health on a single technology platform. Aligning our ESG strategy with this mission is more important now than ever and embedding the ESG strategy within our Company strategy is a core goal for us. This is important to our employees, our customers and our investors. As an ASX listed company since 2019, FINEOS has continued to improve and broaden our governance with a strong focus on our revenue and cost base, by investing in our products and our employees, by building and maintaining our customer trust in the security of their data. We have reaffirmed that we respect human rights by publishing our Anti-Slavery and Human Trafficking Policy, https://www.fineos.com/document/anti-slavery-and-human-trafficking- policy/, and we make ethical decisions that protect our customers and employees. We are including our ESG strategy within our overall corporate governance program. Our Chief People Officer (CPO) is the chair and sponsor of the ESG council, and reports to our Chief Executive Officer and the Board on our progress with the ESG strategy. Compliance FINEOS is committed to ensuring that we meet our compliance requirements such as governance, tax, health and safety, for our employees, for our responsibilities as a publicly listed company and for our duty to our shareholders. FINEOS has adopted a code of business conduct https://www.fineos.com/document/code-of-conduct/ in addition to our core values of Respect and Trust. The Company places importance on fostering a workplace culture where our people are empowered to speak up on issues that concern them and know they will be taken seriously. Our WhistleBlower Policy, https://www.fineos.com/document/whistleblowers-policy/, is in place to provide clarity on the support and protection available and outline how concerns are managed. Our Board has adopted a Corporate Governance Statement, https://www.fineos.com/document/corporate- governance-statement/, to establish the necessary authority and best practices to review and evaluate FINEOS as needed and to make decisions that are independent of our management. The standard sets out the practices for the board including the foundation for management and oversight including the board composition and selection; board responsibilities; board charter; board performance evaluation; board committees and compensation. Board Independence, Structure and Tenure FINEOS has several controls and charters in place which dictate the Board independence, structure and tenure. Board Members Independent Directors Standing Board Committees 6 4 2 Separate CEO and Chair roles Formal Board Diversity Policy Renumeration and Nomination Committee (RNC); Audit and Risk Management Committee (ARC) Yes Yes https://www.fineos.com/document/diversity-policy/ ESG formally considered at Board/Committee level Yes 10 FINEOS Corporation Holdings plc Environmental, Social and Governance Report (continued)Data Security and Privacy FINEOS is committed to information security, protecting personal data and respecting individual privacy. The Information Security Program includes administrative, technical and physical safeguards to: • Ensure the security and confidentiality of information with controls such as encryption at rest and in transit; and principle of least privilege access control; • Protect against any anticipated threats or hazards or integrity of such information with continuous monitoring; vulnerability management program; third party penetration testing; and security incident management; • Protect against unauthorised access to, or use of, such information that could result in substantial hardship or inconvenience to FINEOS, business partners, personnel or clients with controls such as user authentication managed by customers; multi-factor authentication; and attribute-based access control; • • Information Security Policies; Independent validation of the FINEOS Information Security program; – – In 2018 FINEOS successfully passed the AWS well architected review In 2019 FINEOS joined the AWS Financial Services competency network – Ongoing since 2020 when the first SOC 2 Type 2 Attestation report was published • FINEOS Security Council meets 12 times a year and is comprised of C-suite executives and business information security leaders; • FINEOS Security Risk log is reviewed at least annually. Audit Risk and Oversight FINEOS is governed by its Board of directors (“Board”) which oversees the overall business affairs of the Company. The Board sets high standards through its governance and by establishing and enforcing policies designed to promote and ensure the integrity and ethical values throughout the organisation. The Board has established two committees which operate according to their charter adopted by the Board. • Audit and Risk Committee (ARC): Assists the Board in fulfilling corporate governance and oversight responsibilities in relation to the Company’s financial reports and financial reporting process and internal control structure, risk management systems and the statutory audit process. The ARC Chair is a non-executive Board member and the Committee meets at least three times a year. • Remuneration and Nomination Committee (RNC): Assists the Board by reviewing and making recommendations in areas such as succession planning; remuneration and performance of the Board, Directors and senior leaders; and the Company’s performance in respect of the Diversity Policy and learning and development. The RNC Chair is a non-executive Board member and the Committee meets at least once a year. Annual Report 2022 11 Anne O’Driscoll Chairman Non-executive Director Chair, Remuneration and Nomination Committee Michael Kelly Executive Director Chief Executive Officer Gilles Biscay Non-executive Director Based in Australia, Anne joined the Board in 2019. Anne has over 35 years of business experience across a broad spectrum of the insurance industry. Anne is currently on the boards of ASX-listed companies, Steadfast Group Limited and Infomedia Limited, as well as non-listed companies, MDA National Pty Limited and Commonwealth Insurance Limited. Anne chairs the audit committee for each of these boards. Anne has held various other senior management roles within organisations such as Insurance Australia Group Limited and NRMA Group, as well as being the CFO of Genworth Australia between 2009 and 2012. She is also a former director of the NSW Self-Insurance Corporation and Australasian Investor Relations Association Limited. Anne qualified as a chartered accountant in Ireland with Haughey Boland (now Deloitte) before joining Coopers & Lybrand (now PwC) in London. Anne moved to Sydney in 1988 and is a graduate of the Australian Institute of Company Directors and a Fellow of the Australian and New Zealand Institute of Insurance and Finance, Chartered Accountants Ireland and Chartered Accountants Australia and New Zealand. Based in Ireland, Michael is the Chief Executive Officer and founder of FINEOS. Michael has more than three decades of executive leadership experience in the global life, accident and health industry. Michael began his career with FBD Insurance and then moved to Paxus Corporation, an Australian insurance core systems software vendor entering the European market. Michael assisted in establishing Paxus’ LIFE400 product as the market leading policy administration system in continental Europe, which was later acquired by CSC. Michael is a previous winner of the EY Ireland Technology Entrepreneur of the Year, and in 2015 was named as one of the top 10 most influential executives in the Irish international FinTech sector. Michael attended Dublin City University where he graduated with a BSc in Computer Science. Based in France, Gilles joined the Board in 2019, having previously served on the Board of FINEOS Corporation Limited, the main operating entity of the FINEOS Group from 2014. Gilles spent most of his career at Accenture, where he worked in multiple areas ranging from large system integration, post-merger implementations, case tools and enterprise resource planning software development. In 2005, Gilles was named as the managing director and global lead for Accenture portfolio in insurance systems. Under his leadership, Accenture’s vertical software activities grew significantly both organically and with new clients in countries such as Japan and Turkey, and externally with acquisitions such as NaviSys and Duck Creek, both insurance software providers. Gilles is also a founding partner and president of FutureWork SAS, a strategy consulting firm aimed at helping corporations manage digital transformations. 12 FINEOS Corporation Holdings plc Board of DirectorsBased in Australia, Martin joined the Board in 2019. Martin is the Chief Executive Officer (CEO) of the Association of Superannuation Funds of Australia (ASFA), the peak policy, research and advocacy body for Australia’s superannuation industry. Prior to this Martin was a senior partner in the management consulting practice of KPMG, where he led the firm’s Global Business Services and Business Process Outsourcing activities. From 2007 to 2011, Martin was CEO at the Financial Services Institute of Australasia (FINSIA) where he led the organisation’s transformation post the sale of its education business. Prior to FINSIA, he led strategy and development for the Chartered Institute of Management Accountants (CIMA) in Asia Pacific. Martin holds a Ph.D. from University College Cork, is a former Senior Fulbright Scholar and has extensive research and policy experience from his time as an academic in Ireland, France and the United States. Martin is a member of Chartered Accountants Australia and New Zealand. Based in the United States, David joined the Board on 14 October 2019. David has over 35 years of experience in the insurance, technology and professional services industries. David most recently served as Global Insurance Leader for Ernst & Young LLP (EY), responsible for all service lines and representing a global team of over 14,000 professionals. David currently sits on the Board of Directors at Northwestern Mutual, Westfield Insurance and Distinguished Programs, all based in the United States. Previously David served as the CEO of UNIRISX, a SaaS-based policy administration insurtech solution based in the UK. David began his career with Accenture (NYSE: ACN), where he served in a variety of leadership and client service roles including CEO of Accenture’s Financial Services Solutions Group. He led the creation of a 200-person global insurance software company within Accenture, driving more than US$1 billion in consulting and outsourcing pull-through revenues, in addition to leading the acquisition and integration of a major life and annuity software provider. Based in Ireland, Tom joined FINEOS in 2003 as Chief Financial Officer and was appointed to the Board in 2019. Tom has over 30 years of industry experience having worked in financial management with a number of global corporations across the IT, financial services, distribution and manufacturing industries. Prior to joining FINEOS, Tom spent seven years at Oracle where he held various positions including as a Board Member and Finance Director of Oracle Ireland and Finance Director for Oracle EMEA Ltd. Tom also gained expertise working across a number of financial and accounting roles at MFS Communications Ltd, Unisys World Trade Incorporated and Black & Decker Inc. Tom is a Fellow of the Chartered Institute of Management Accountants and a Chartered Global Management Accountant in Ireland. Dr Martin Fahy Non-executive Director Chair, Audit and Risk Management Committee David Hollander Non-executive Director Tom Wall Executive Director Chief Financial Officer Annual Report 2022 13 The Directors present herewith their report and audited consolidated financial statements for the year ended 30 June 2022. These financial statements reflect the performance of FINEOS Corporation Holdings plc and its subsidiaries (‘the Group’) for the fiscal year ended 30 June 2022. 1. Directors and Secretary The Directors of the Company during, or since the end of, the year are as follows. Directors were in office for the whole of the year unless otherwise stated. Chairman Anne O'Driscoll Chief Executive Officer Michael Kelly Other Directors Gilles Biscay Martin Fahy David Hollander Tom Wall Date of appointment 25 July 2019 12 December 2018 25 June 2019 25 July 2019 15 October 2019 25 June 2019 Tom Wall and Vanessa Chidrawi served as Joint Company Secretary for the period of 1 July 2021 to 16 June 2022. On 16 June 2022, Vanessa Chidrawi resigned and Natalie Climo was appointed as Company Secretary. Particulars of the Directors’ qualifications and experience as well as their directorships of other listed companies are set out under Board of Directors on pages 12 to 13. 2. Directors’ Meetings The number of meetings of the Company’s Board of Directors (the ‘Board’) and of each Board Committee held during the year ended 30 June 2022, and the number of meetings attended by each Director, were as follows: Board Audit and Risk Management Committee Remuneration and Nomination Committee A 6 6 6 6 6 6 B 6 6 5 6 5 6 A 4 - 4 4 3 – B 4 - 3 4 2 – A 3 - 3 3 3 – B 3 - 2 3 2 – Anne O’Driscoll Michael Kelly Gilles Biscay Martin Fahy David Hollander Tom Wall A: Meetings eligible to attend B: Meetings attended as a member 14 FINEOS Corporation Holdings plc Directors’ Reportfor the year ended 30 June 20223. Audit Committee The Audit and Risk Management Committee assists the Board in carrying out its accounting, auditing and financial reporting responsibilities, including those outlined in Section 167 of the Companies Act 2014. 4. Principal Activities and Review of the Development and Performance of the Business during the Financial Year The principal activity of the Group is the development and sale of software. FINEOS is a global software group providing modern customer-centric core software to Life, Accident and Health insurers and Employee Benefits providers. The Group helps its customers move on from outdated legacy administration systems to the cloud-native FINEOS AdminSuite for new business, billing, claims, absence and policy administration, enabling improved operational efficiency, increased effectiveness and excellent customer care. FINEOS AdminSuite is a purpose built, customer-centric, end-to-end core product suite designed to manage the modern complex structures and relationships of group and individual insurance processing to optimise plan, coverage and data management, operational processing and business intelligence. The Group is continuously developing, both organically and through acquisitions, the entire range of FINEOS Platform offerings, which today includes machine learning and data insight through artificial intelligence. Business summary and key performance indicators The key performance indicators of the financial results are as follows: • An increase in revenue from €108.3 million for the year ended 30 June 2021 to €127.2 million for the year ended 30 June 2022 which is a 17.5% improvement. • Subscriptions revenue is up 34.2% compared to the year ended 30 June 2021. • Services revenue is up 7.4% compared to the year ended 30 June 2021. • Employee retention rates are 88% for the year ended 30 June 2022. • The loss after tax for the year ended 30 June 2022 is €26.0 million compared to a loss after tax of €12.5 million for the year ended 30 June 2021 and is due to higher cost of sales and product development and delivery costs as a percentage of sales, higher amortisation charges on capitalised research and development costs and acquired intangibles, and an impairment charge recognised against goodwill in the amount of €12.6 million. The higher costs are offset by a tax credit of €4.2 million (2021: €1.0 million). • Basic loss per share of 8.23 cents (euro) for the year ended 30 June 2022 compared to a basic loss per share of 4.20 cents (euro) for the year ended 30 June 2021. The 2021 basic loss per share has been restated from a basic loss per share of 4.15 in cents (euro) to 4.20 in cents (euro), arising from a calculation error. The prior year calculation used total comprehensive loss attributable to ordinary shareholders rather than loss for the financial year after taxation attributable to ordinary shareholders. Subscription revenue growth of 34.2% reflects the increased scale and breadth of FINEOS products for the customer base. Services revenue growth of 7.4% was achieved even though several clients and potential clients faced reduced funding for systems investment in the context of the social and economic challenges generated by COVID-19. Overall revenue growth was 17.5%. During FY22, the FINEOS customer base continued to actively engage in new implementation activity, major product upgrades, and platform migrations to the cloud. We completed three new implementations and 12 major upgrades, and we enter FY23 with 19 active cloud customer projects. These include new implementations related to our acquisitions of Limelight Health and Spraoi, now marketed as part of the FINEOS Platform. Additionally, we are continuing to engage with our on-premise customers to plan their upgrades to the cloud across multiple countries including USA, Canada, Australia and New Zealand. Annual Report 2022 15 4. Principal Activities and Review of the Development and Performance of the Business during the Financial Year (continued) Anticipating clients’ need to undertake digital transformation drove the Group’s significant R&D investment over the past seven years. The value of that investment is now being realised with increasing billings on the cloud platforms. Part of FINEOS’ growth strategy is also to increase its use of strategic implementation partners going forward. The consolidated financial statements are presented in Euro which is the functional currency of the Group. Euro based currency volatility continued during fiscal year 2022 in relation to the US Dollar, British Pound, Australian Dollar, New Zealand Dollar, Polish Zloty and Canadian Dollar, resulting in a foreign exchange gain of €0.8 million for the Group in the year (2021: foreign exchange loss of €0.3 million). Foreign exchange continues to be a risk for FINEOS given the export profile of the Group. This is closely managed with part of the risk being covered by the natural hedge of the non-Euro denominated staff costs and other overheads being paid in local currency. The consolidated statement of comprehensive income for the year ended 30 June 2022 and the consolidated statement of financial position as at that date are set out on pages 36 and 37. The consolidated loss on ordinary activities for the year, before tax, amounted to €30.2 million compared to a loss before tax of €13.5 million in 2021. After adding back a taxation credit of €4.2 million (2021: €1.0 million), a loss of €26.0 million has been debited to reserves (2021: €12.5 million). Non-financial measures are also important to the Group and the Group’s first Environmental, Social and Governance Report is set out on pages 4 to 11. 5. Changes in the State of Affairs The cash reserves closed at €44.3 million as at 30 June 2022 compared to €14.0 million as at 30 June 2021. The Group had no external debt as at 30 June 2022. FINEOS undertook an equity raising on 2 September 2021 to provide funding towards FINEOS’ opportunity pipeline and provide working capital and balance sheet support for planned R&D investments and both organic and inorganic growth opportunities. FINEOS successfully completed a fully underwritten institutional placement, raising approximately AU$70 million through the issue of 16,279,069 new fully paid CHESS Depositary Interests over FCL shares (‘CDIs’). The placement was undertaken at an offer price of AU$4.30 per new CDI. Costs of the capital raise amounted to €0.7 million. FINEOS also undertook a non-underwritten Security Purchase Plan (‘SPP’) raising approximately AU$3.7 million through the issue of 862,261 new fully paid CDIs, at an offer price of AU$4.30 per new CDI, which completed on 7 October 2021. Equity increased by €33.0 million to €169.3 million from €136.3 million during the year with the significant movements being: • Net proceeds of €45.4 million from the new share capital • Credit of €10.6 million to foreign exchange reserve • Increase in share option reserve of €2.8 million • Loss for the year of €26.0 million. 16 FINEOS Corporation Holdings plc Directors’ Report (continued)for the year ended 30 June 20225. Changes in the State of Affairs (continued) Apart from the increase in cash reserves of €30.3 million noted above, other key movements in assets contributing to a growth in total assets of €38.9 million to €223.4 million were: • €8.7 million of a positive exchange difference on the retranslation of intangible assets • €25.8 million of internal development expenditure • €20.8 million combined amortisation charge • €12.6 million impairment charge • An increase of €3.5 million in trade receivables driven by the increase in revenue and lower cash receipts from customers in quarter 4 of FY22 • An increase in the deferred tax asset recognised of €4.2 million due to the tax restructuring of acquired entities providing a clear path to tax loss utilisation, favourable regional changes in R&D tax credits and the provision for offset of tax losses against future taxable profits in Ireland. Total liabilities increased by €6.0 million to €54.1 million from €48.1 million during the year with the significant movements being: • An increase of €8.8 million in deferred revenue due primarily to the increase in subscription revenue in the year. • A decrease of €1.6 million in trade payables due to the earlier receipt of invoices from some of our larger contractors in 2022 allowing for payment in advance of the balance sheet date. 6. Likely Developments and Outlook FINEOS completed FY22 with the exciting release of a market-first study in collaboration with New York Life Group Benefit Solutions. The study reflected the successful implementation of the Group’s strategy, with the Company’s purpose-built FINEOS platform successfully meeting the business challenges of one of the largest North American group insurers and delivering a full employee benefits core insurance system. The single FINEOS platform replaced six legacy back-office systems supporting $4 billion worth of business for 9 million customers. During FY22, FINEOS successfully raised net cash of €45.2 million from the issue of new CDIs, underpinning the Company’s strong year end capital position of over €44 million in cash and no debt. This capital position supports FINEOS’ organic growth plans and ongoing investment in R&D to further enhance the Company’s fully integrated, industry gold standard quote-to-claim product suite. The Group’s growth strategy remains focussed on: • winning new clients • driving up-sell and cross-sell revenues from existing clients • increasing market share in the Group’s chosen segments – life accident and health insurers and employee benefits providers. These growth paths are supported by a robust pipeline of significant cross-sell and up-sell opportunities with existing customers, in addition to new name opportunities. Despite the uncertainty caused by the COVID-19 pandemic, FINEOS successfully moved its workforce to a ‘remote first’ hybrid working model. Given the visible opportunities, the Company remains confident that it can continue its growth trajectory, and is targeting: • FY23 revenue of between €135 million and €140 million • Positive free cashflow position in FY24. 7. Dividends During the year the Company made no dividend payments to Ordinary shareholders. The Directors do not propose the payment of a final dividend for the year. Annual Report 2022 17 8. Political Donations There were no political donations made during the year ended 30 June 2022. 9. Principal Risks and Uncertainties Faced In the opinion of the Directors, the main risks and uncertainties faced by the Group, along with the nature of their potential impact, are as follows: • global economic and political uncertainty and volatility continues in all marketplaces where FINEOS trades, including potential recessions in key markets. This could potentially lead to further delays and uncertainty on the allocated budgets of existing and prospective customers; • FINEOS continues to face competition in its respective markets, and if FINEOS fails to compete successfully, market share will decline; • FINEOS subsidiaries and branches operate in currencies other than the Euro, and continued volatility in foreign exchange rates relative to the Euro could adversely affect the Group’s reported earnings and cash flow; • competitors’ products may replace existing FINEOS products and as a result, FINEOS may lose market share in the markets for these products; • major changes in technology could have an impact on FINEOS and its trading model unless it continues to nvest in research and development and remains competitive and current; • FINEOS sells product and services in the USA, Canada, Australia, New Zealand, the UK and Europe, which increases the complexity of local customer requirements, including addressing local compliance requirements in the respective countries; • the loss of the chief executive officer or other key employees, or the limited availability of qualified personnel, may disrupt operations or increase the cost structure; and • the loss of a significant customer could have a significant negative effect on revenues and profits. The impact of the above is difficult or impossible to predict accurately and many of the risks and uncertainties faced are beyond the Group’s control. In the normal course of business, the Group is also exposed to price risk, credit risk and liquidity risk, which are discussed in more detail in Note 24. 10. Events Subsequent to the Year End There are no events subsequent to the year end that would require disclosure in or adjustment to the consolidated financial statements. 11. Corporate Governance Statement The corporate governance statement of FINEOS Corporation Holdings Plc, as approved by the Board, can be found on the Company’s website at https://www.fineos.com/investors/corporate-governance/. 18 FINEOS Corporation Holdings plc Directors’ Report (continued)for the year ended 30 June 202212. Transactions with Directors There were no contracts of any significance in relation to the business of the Group in which the Directors had any interest, as defined by the Companies Act 2014, at any time during the year ended 30 June 2022, other than as disclosed in Note 25. 13. Controlling Party Michael Kelly is the ultimate controlling party of the FINEOS Group. 14. Directors’ and Secretary’s Interests The Directors’ and Company Secretary’s interests in shares and share options as at 30 June 2022 are set out on page 26 in the Remuneration and Nomination Committee report. 15. Group Companies Particulars of the companies within the Group required to be disclosed under Section 314(1) of the Companies Act 2014 in respect of Group companies are detailed in Note 27. 16. Directors’ Compliance Statement The Directors have drawn up a compliance policy statement setting out the Company’s policies (that, in the Directors’ opinion, are appropriate to the Company), respecting compliance by the Company with its relevant obligations. The Directors understand that they are responsible for securing the Company’s compliance with its relevant obligations. The Company has appropriate arrangements or structures that are, in the Directors’ opinion, designed to secure material compliance with the Company’s relevant obligations. The Company has conducted a review, during the financial year of the arrangements or structures that have been put in place. 17. Accounting Records The Directors are responsible for ensuring that proper books and accounting records, as outlined in Sections 281 to 285 of the Companies Act 2014, are kept by the Company. To achieve this, the Directors have appointed a professionally qualified Chief Financial Officer who reports to the Board and ensures that the requirements of Sections 281 to 285 of the Companies Act 2014 are complied with. These books and accounting records are maintained at the Company’s registered office at FINEOS House, East Point Business Park, Dublin 3, Ireland. 18. Statement on Relevant Audit Information In the case of all persons who are Directors at the time this report is approved in accordance with Section 332 of the Companies Act 2014: (a) so far as the Directors are aware, there is no relevant audit information of which the Company’s statutory auditors are unaware; and (b) the Directors have taken all steps that they ought to have taken as Directors to make themselves aware of any relevant audit information, and to establish that the Company’s statutory auditors are aware of that information. Annual Report 2022 19 19. Auditors Mazars, Chartered Accountants and Statutory Audit Firm, express their willingness to continue in office in accordance with Section 383(2) of the Companies Act 2014. 20. Takeover Provisions FINEOS is not subject to Chapters 6, 6A, 6B and 6C of the Companies Act 2014 dealing with the acquisition of its shares (including substantial holdings and takeovers). FINEOS has incorporated into its Articles shareholder protection provisions that are similar to the provisions of the Australian Corporations Act 2001. These provisions seek to protect the interests of shareholders where a person seeks to acquire a substantial interest in, or control of, FINEOS. The Articles prohibit a person from acquiring a relevant interest in issued voting shares in FINEOS if any person’s voting power will increase from 20% or below to more than 20%, or from a starting point that is above 20% and below 90%. Exceptions to the prohibition apply (e.g. acquisitions with shareholder approval, 3% creep over six months and rights issues that satisfy prescribed conditions). Compulsory acquisitions are permitted by persons who hold 90% or more of securities or voting rights in a company. 21. Restrictions on the Transfer of Securities under the Companies Act The Company is an Irish company formed under the laws of Ireland and therefore subject to the provisions of the (Uncertificated Securities) Regulations, 1996 (S.I No 68 of 1996) (‘1996 Regulations’) and its Articles of Association accordingly contain prohibitions on transfers. The provision of uncertificated securities is regulated by the 1996 Regulations, which is administered by the Corporate Enforcement Authority. The Company must comply with the provisions of the 1996 Regulations. The Company may therefore refuse to register transfers, pursuant to a direction from the Irish High Court, where the transfer is prohibited under another enactment, where the Company has noted the transfer is to a deceased person, or where the instruction requires a transfer of units to an entity which is not a legal person, a minor, or to be held jointly in the names of more persons than permitted under the terms of issue of the security. Refer to Articles 36.2 and 36.3 of the Company’s Articles of Association. On behalf of the Board Michael Kelly Director Tom Wall Director 23 August 2022 20 FINEOS Corporation Holdings plc Directors’ Report (continued)for the year ended 30 June 2022 As chair of the Remuneration and Nomination Committee (the Committee), I am pleased to present the report for the Committee for the year ended 30 June 2022. The objective of this report is to provide shareholders with information to enable them to understand the remuneration structures in place and how they relate to the Group’s financial performance. The report also provides a summary of the Committee’s roles and responsibilities and how these were discharged in the year ended 30 June 2022. Membership and Meetings of the Committee The members of the Committee during the year ended 30 June 2022 are set out in the table below. The members of the Committee were in place for the whole of the year unless otherwise stated. All members of the Committee are independent Non-executive Directors. Committee Member Ms Anne O’Driscoll Mr Gilles Biscay Dr Martin Fahy Mr David Hollander Position Appointed Chair Member Member Member 25 July 2019 25 June 2019 25 July 2019 15 October 2019 Attendance details for the three meetings held during the year are outlined on page 14 in the Annual Report. The Committee members’ biographies are set out on pages 12 to 13. Role of the Remuneration and Nomination Committee The purpose of the Committee is to assist the Board by reviewing and making recommendations to the Board in relation to: • the Group’s remuneration policy, including as it applies to Directors, and the process by which any pool of Directors’ fees approved by shareholders is allocated to Directors; • remuneration packages of Executive Directors, Non-executive Directors and senior executives; • equity-based incentive plans and other employee benefit programs; • • the Group’s pension/superannuation arrangements; those aspects of the Group’s remuneration policies and packages, including equity-based incentives, which should be subject to shareholder approval; • succession plans of the Chief Executive Officer, Executive Directors and senior executives; • Board succession issues and planning; • • • • • the appointment and re-election of Board and Committee members; the induction of new Directors and continuing professional development programs for Directors; the process for recruiting a new Director, including evaluating the balance of skills, knowledge, experience, independence and diversity on the Board; the process for the evaluation of the performance of the Board, its Board Committees and individual Directors; and the size and composition of the Board and strategies to address Board diversity and the Group’s performance in respect of the Group’s Diversity Policy, including whether there is any gender or other inappropriate bias in remuneration for Directors, senior executives or other employees. The Committee charter can be found at https://www.fineos.com/investors/corporate-governance/. Annual Report 2022 21 Remuneration and Nomination Committee Reportfor the year ended 30 June 2022Remuneration Policy The Group is committed to attracting and retaining the best people to work in the organisation, including Directors and senior management. Appropriate remuneration designed to reward, retain and motivate people is a key element in achieving that objective. Part of the Committee’s role is to assist the Board in implementing its Remuneration Policy. A copy of the policy can be found at https://www.fineos.com/investors/corporate-governance/. Executive Remuneration Framework There are two Executive Directors: the Chief Executive, Mr Michael Kelly, and the Chief Financial Officer, Mr Tom Wall. It should be noted that Mr Wall has announced his intention to retire on 30 September 2022. The Board has determined that the incoming Chief Financial Officer will not be a Director of the Company. The elements of the remuneration package which may apply to Executive Directors are base salary, pension contributions, other benefits and both short-term and long-term incentives. The tables below summarise the framework which was applied during the year ended 30 June 2022. A similar structure will apply during the year ended 30 June 2023. The relevant benefits are included in the Directors’ remuneration table shown below. Benefit Nature of Benefit Annual base salary Salary levels are reviewed annually by reference to market comparisons and reflect the individual’s level of expertise and contribution to the organisation, in conjunction with other benefits being provided. Salary increases are normally in line with the wider workforce. Pension contributions Participation in a defined contribution scheme available to employees in the same geography. There is a Company contribution of 10% of base salary for the CFO. The CEO does not utilise this benefit. Other benefits Benefits currently provided are healthcare cover, life insurance and permanent health insurance cover. Premiums payable are included in the remuneration disclosed in this report. 22 FINEOS Corporation Holdings plc Remuneration and Nomination Committee Report (continued)for the year ended 30 June 2022Incentive Basis of Incentive Maximum Opportunity Achieved for FY2022 Short-term Incentives (bonus) The CEO is entitled to receive an annual cash bonus in recognition of his contribution towards growth and lieu of pension contributions. in CEO: drives the growth of the Company and leads key customer relationships and sales acquisitions. CEO: Bonus payment of €100k. The CFO is entitled to receive an annual bonus based on achievement of agreed Company and individual performance targets. CFO: 15% of base salary if all objectives achieved and up to 25% where there is over-achievement beyond such agreed targets. CFO: Bonus of 20% of salary. Long-term incentives (equity-based remuneration) Equity long-term A incentive plan was established on admission to the ASX (‘the Incentive 2019 Plan’) (The Plan). Awards from this scheme may be made in the form of options, restricted shares, restricted stock units and performance shares. See Note 19 for more details. No more than 5% of the issued share capital of the Company may be issued or reserved under The Plan at any time. There were no awards to the CEO or CFO under The Plan during FY22. The terms and conditions of any awards made to Executive Directors under the 2019 Equity including Incentive Plan, those relating to targets, vesting and/or exercise (as the case may be), are determined by the Committee and the extent required, subject to CDI holder approval. to The Committee reviews the performance of the Executive Directors for the purposes of determining short-term incentives and makes recommendations to the Board as to the pay-out level. Annual Report 2022 23 Non-executive Directors The Board aims to recruit high-calibre Non-executive Directors, with broad commercial, international or other relevant experience. Non-executive Director remuneration is reviewed by the Board based on recommendations from the Committee. The aggregate amount paid to all Non-executive Directors in any financial year for their services must not exceed the amount fixed by the securityholders in general meeting. This amount is currently fixed at AU$800,000 (€514,7341) per annum. As Chair of the Board, I am paid a fee of AU$160,000 (€102,947) (2021: AU$160,000) per annum. David Hollander is paid a fee of US$170,000 (€150,723) (2021: US$170,000) per annum for acting as Non-executive Director. The other Non-executive Directors, Gilles Biscay and Martin Fahy, are paid fees of €55,000 (2021: €52,167) and AU$90,000 (€57,908) (2021: AU$90,000) per annum, respectively. These Non-executive Director fees include fees payable to each Non-executive Director for his/her role on the relevant Board committees. The amounts set out above are exclusive of pension/superannuation contributions where required by law to be made by FINEOS but such contributions are included in the remuneration set out in the Table of Directors’ Remuneration for the year ended 30 June 2022 below. Under their letters of appointment, the Non-executive Directors are not entitled to participate in any share, bonus, retirement benefit or other scheme operated by the Company or any Group company. In addition, all reasonable and documented expenses incurred in the performance of the Non-executive Directors’ duties are reimbursed. Service Contracts/Letters of Appointment Details of service contracts for the Executive Directors are outlined below. Name Michael Kelly Title Date of Contract Notice Period by Company or Director Chief Executive Officer and Founder 12 December 2018 12 months Tom Wall Chief Financial Officer 25 June 2019 6 months Each of the Non-executive Directors has received an appointment letter from FINEOS, confirming their respective roles and responsibilities as Directors, and FINEOS’ expectations of them as Non-executive Directors. The appointment letter includes membership of any Board Committees, the fees to be paid and the time commitment expected. The letter also covers matters such as confidentiality, data protection and securities dealing policy. In addition, Non-executive Directors are expected to acquire a beneficial interest in CDIs equivalent to their annual fees within 36 months of the Company’s IPO (which occurred in August 2019). Dates of appointment for the Non-executive Directors are set out below: Name Anne O’Driscoll Gilles Biscay Martin Fahy David Hollander Date of Appointment 25 July 2019 25 June 2019 25 July 2019 15 October 2019 1 Throughout this Committee report, amounts denominated in Australian or US dollars are translated into Euro at a rate of AU$/EUR 1.5542 and US$/EUR 1.1279, being the average rates for the year to 30 June 2022. 24 FINEOS Corporation Holdings plc Remuneration and Nomination Committee Report (continued)for the year ended 30 June 2022Annual Report on Remuneration 2022 The following table sets out the total remuneration for Directors for the year ended 30 June 2022. Salary/fees € Short-term incentives € Post- employment benefits € Other benefits € Shares allotted € Share awards gain on exercise € LTIP € Total 2022 € Director Executive Directors Michael Kelly 390,592 100,000 – 3,411 Tom Wall 287,418 57,484 28,742 12,235 Non-executive Directors Anne O’Driscoll 102,778 Gilles Biscay Martin Fahy 55,000 57,812 David Hollander 147,033 – – – – 10,294 – 5,791 – – – – – Total 1,040,633 157,484 44,827 15,646 – – – – – – – – – – – – – – – – – – – – 494,003 385,879 113,072 55,000 63,603 147,033 – 1,258,590 The equivalent table of total remuneration for Directors for the year ending 30 June 2021 is as follows: Salary/fees € Short-term incentives € Post- employment benefits € Other benefits € Shares allotted € Director Executive Directors Michael Kelly Tom Wall 380,592 277,418 57,089 55,484 – 3,265 27,742 12,904 Non-executive Directors Anne O’Driscoll 100,000 Gilles Biscay Martin Fahy 55,000 56,250 David Hollander 148,106 Peter Le Beau 22,917 – – – – – 9,507 – 5,348 – – – – – – – Total 1,040,283 112,573 42,597 16,169 Share awards gain on exercise(a) € LTIP € Total 2021 € – – 440,946 3,319,860 25,752 3,719,160 – – – – – – – – – - 109,507 55,000 61,598 148,106 22,917 3,319,860 25,752 4,557,234 – – – – – – – – (a) On 8 October 2020, Tom Wall exercised 1,300,000 options at €0.135 each and resultant CDIs were sold at AU$4.50 per security resulting in a net gain of €3,319,860. Annual Report 2022 25 Directors’ and Company Secretary’s Interests in Company Shares Total CDIs held at 1 July 2021 Purchases/ Increase in indirect holdings Acquired on exercise of options Sales/ Reductions Total shares/ CDIs held at 30 June 2022(a) CDIs held nominally at 30 June 2022(b) Anne O’Driscoll 70,399 37,000 Michael Kelly Gilles Biscay Natalie Climo Martin Fahy David Hollander Tom Wall 166,418,040 5,064,338 35,883 10,000 – 8,000 41,224 – – – – – – – – – – – – – 107,399 47,399 (2,924,429) 168,557,949 221,589 – – – – – 45,883 45,883 – 8,000 41,224 – – 8,000 – – (a) Total CDIs at 30 June 2022 represent CDIs held directly by the Director and indirectly by the relevant Director’s related parties inclusive of domestic partners, dependents and entities jointly controlled or significantly influenced by the Director. They also represent the relevant interest in the Company’s listed securities as notified by the Directors to the ASX in accordance with the ASX Listing Rules. (b) Shares/CDIs held nominally are those CDIs registered in the name of the individual Director. Directors’ Interests in Options The only options on issue that are held by Directors are as follows: Options held at Options 1 July 2021 Options issued exercised Options lapsed Options held at 30 June 2022 Tom Wall 1,150,000 – – – 1,150,000 Of the remaining options held by Tom Wall, 1,000,000 options over CDIs are exercisable at €0.135 and expire on 3 February 2026 and 150,000 options over CDIs are exercisable at AU$4.2688 and expire on 6 November 2027. See Note 19 for further detail on the Company’s equity incentive schemes. Committee Activities During FY22 the Committee continued to receive regular reporting from the Chief People Officer and the Chief Executive Officer on matters pertinent to the Committee’s role. There was a particular focus on succession planning, diversity and inclusion, and training and retention. On behalf of the Committee Anne O’Driscoll Chair of the Remuneration and Nomination Committee 26 FINEOS Corporation Holdings plc Remuneration and Nomination Committee Report (continued)for the year ended 30 June 2022 The Directors are responsible for preparing the Annual Report and the Group and Company financial statements in accordance with applicable law and regulations. Irish company law requires the Directors to prepare group and company financial statements for each financial year. Under the law, the Directors have elected to prepare the Group and Company financial statements in accordance with the Companies Act 2014 and IFRS. Under company law, the Directors must not approve the Group and Company financial statements unless they are satisfied that they give a true and fair view of the assets, liabilities and financial position of the Group and Company as at the financial year end date and of the profit or loss of the Group for the financial year. In preparing these financial statements, the Directors are required to: • select suitable accounting policies and then apply them consistently; • make judgements and accounting estimates that are reasonable and prudent; • state whether the financial statements have been prepared in accordance with applicable accounting standards, identify those standards, and note the effect and reasons for any material departure from those standards; and • prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group will continue in business. The Directors are responsible for ensuring that the Company keeps or causes to be kept adequate accounting records, which correctly explain and record the transactions of the Company, enable at any time the assets, liabilities, financial position and profit or loss of the Group and parent Company to be determined with reasonable accuracy, enable them to ensure that the parent Company and Group financial statements comply with the Companies Act 2014 and enable the financial statements to be audited. They are also responsible for safeguarding the assets of the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. The Directors are responsible for the maintenance and integrity of the financial information included on the Company’s website. Legislation in the Republic of Ireland governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. On behalf of the Board Michael Kelly Director Tom Wall Director 23 August 2022 Annual Report 2022 27 Directors’ Responsibilities StatementINDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF FINEOS CORPORATION HOLDINGS PLC Opinion We have audited the financial statements of FINEOS Corporation Holdings Plc (‘the Company’) and Subsidiaries (‘the Group’) for the year ended 30 June 2022, which comprise the Consolidated Statement of Comprehensive Income, the Consolidated and Company Statement of Financial Position, the Consolidated and Company Statement of Changes in Equity, the Consolidated and Company Statement of Cash Flows and the notes to the financial statements, including the summary of significant accounting policies set out in Note 2. The financial reporting framework that has been applied in their preparation is Irish Law and International Financial Reporting Standards (‘IFRS’) as adopted by the European Union. In our opinion the accompanying financial statements: • • • give a true and fair view of the assets, liabilities and financial position of the Group and parent Company as at 30 June 2022 and of the Group’s loss for the year then ended; have been properly prepared in accordance with International Financial Reporting Standards as adopted by the European Union; and have been properly prepared in accordance with the requirements of the Companies Act 2014. Basis of opinion We conducted our audit in accordance with International Standards on Auditing (Ireland) (ISAs (Ireland)) and applicable law. Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the financial statements section of our report. We are independent of the Company in accordance with ethical requirements that are relevant to our audit of financial statements in Ireland, including the Ethical Standard for Auditors (Ireland) issued by the Irish Auditing and Accounting Supervisory Authority (IAASA), and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Conclusions relating to going concern In auditing the financial statements, we have concluded that the Directors’ use of the going concern basis of accounting in the preparation of the financial statements is appropriate. Our evaluation of the Director’s assessment of the entity’s ability to continue to adopt the going concern basis of accounting included the following: • • • • • We obtained the cash flow forecasts prepared for the Group; We tested the clerical accuracy of the cash flow forecasts; We considered the consistency of the forecasts in line with other areas of our audit; We tested and challenged management on the key assumptions underlying the forecasts; and We assessed the adequacy of the disclosures in the financial statements in relation to going concern. 28 FINEOS Corporation Holdings plc Independent Auditor’s Report INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF FINEOS CORPORATION HOLDINGS PLC Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the Company’s or Group’s ability to continue as a going concern for a period of at least twelve months from the date when the financial statements are authorised for issue. Our responsibilities and the responsibilities of the Directors with respect to going concern are described in the relevant sections of this report. Key audit matters Key audit matters are those matters that, in our professional judgement, were of most significance in the audit of the financial statements of the current year and include the most significant assessed risks of material misstatement (whether or not due to fraud) identified by the auditor, including those which had the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the financial statements as a whole and in forming our opinion thereon, and we do not provide a separate opinion on these matters. We summarise below the key audit matters in forming our audit opinion above, together with an overview of the principal audit procedures performed to address each matter and, where relevant, key observations arising from those procedures. Key Audit Matter Revenue recognition (€127.2 million for the year ended 30 June 2022; 2021: €108.3 million) How Our Audit Addressed the Key Audit Matter We performed a number of procedures including the following: • The following are key considerations: • The significance of revenue to understanding the financial results for users of the financial statements. The extent of deferred revenue held by the Group and the assessment of its systematic release in line with relevant revenue recognition principles. The complexity involved in applying IFRS 15. the varied The complexity associated with nature of bespoke contracts in forming new commercial arrangements. • • • • • • • • • developed an understanding of and evaluated the operating effectiveness of relevant key revenue internal controls, including deferred revenue calculation and release controls; use of IT audit to perform data reconciliations; carried out detailed substantive testing; on a sample basis, recalculated the deferred and accrued portions of customer agreements and compared this to the amount deferred and accrued on the balance sheet; assessed associated reconciliations including accounts receivable and deferred revenue for unusual reconciling items; assessed the value of credit notes raised over the year and for a select period post year end; and developed a risk-based approach to perform journal entry testing on a sample basis to determine the appropriateness of manual postings to revenue. Annual Report 2022 29 INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF FINEOS CORPORATION HOLDINGS PLC Key Audit Matter Capitalisation of development expenditure (€25.8 million capitalised in the year ended 30 June 2022; 2021: €28.3 million) The Group capitalises costs the development of its software. These costs are then amortised over the estimated useful life of the software. The costs are mainly comprised of payroll costs. incurred in The Group’s process for calculating the value of internally developed software involves judgement as it includes estimating time which staff spend the value developing software, determining attributable to that time, and determining which projects being developed meet the criteria to be capitalised. • • • • How Our Audit Addressed the Key Audit Matter Our work on capitalised development costs focused on the Group’s process for estimating the time spent by staff on software development that can be capitalised under IAS 38, and the nature of the projects undertaken: • the IAS 38 the procedures applied by assessing the nature of a sample of projects against to requirements of determine if they were capital in nature, and the status of ongoing projects; the assessing Group to review the rates applied to capitalise payroll costs; assessing the effectiveness of controls over the payroll process; assessing capitalised costs with reference to actual payroll information for a sample of employees; and assessing the adequacy of the disclosures related to capitalised development costs in the consolidated financial statements. How Our Audit Addressed the Key Audit Matter We assessed the factors that the Group considered regarding impairment of capitalised development costs and whether any indicators of impairment existed . This included having regard to: • significant changes in the extent or manner in which the associated software is used; potential or actual redundancy or disposal of developed software; amortisation periods applied by the Group to develop software relative to its experience of software lifecycle; significant changes in the market in which the assets are used; and evaluating the Group’s assessment that the useful lives of intangible assets are appropriate at year end. • • • • Key Audit Matter Impairment consideration relating to capitalised development expenditure (€75.0 million at 30 June 2022; 2021: €65.6 million) Intangible assets make up €136.0 million of the Group’s non-current assets (2021: €134.6 million). The most significant of is capitalised software development costs of €75.0 million at 30 June 2022 (2021: €65.6 million). intangibles these IAS 36: Impairment of Assets required that finite life intangible assets be impairment whenever there is an indication that the intangible assets may be impaired and this assessment requires judgement. tested for The assessment as to whether there are any indicators of judgement including consideration of both internal and external sources of information. impairment requires 30 FINEOS Corporation Holdings plc Independent Auditor’s Report (continued)INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF FINEOS CORPORATION HOLDINGS PLC Key Audit Matter Impairment consideration relating to goodwill (€33.7 million at 30 June 2022; 2021: €41.3 million) Goodwill of €33.7 million is recorded in the balance sheet at 30 June 2022 (2021: €41.3 million), after booking an impairment charge of €12.6 million in the year ended 30 June 2022. Under IAS 36: Impairment of assets, the Group is required to review goodwill for impairment at least annually by assessing the recoverable amount of each cash-generating unit, or group of cash- generating units, to which the goodwill relates. This is a key audit matter given • • • the size of the balance relative to the total assets of the group; the judgements involved in allocating goodwill to each Cash Generating Unit; and the forward-looking assumptions applied in the value-in-use model prepared in assessing the carrying value of goodwill (including forecasted cashflows, future growth rates and discount rates applied), which involve estimation and judgement. How Our Audit Addressed the Key Audit Matter We performed a number of procedures including the following: • We obtained a third-party report in respect of impairment an impairment calculations at the year end date, which included forecasts for each relevant cash generating recommended and unit impairment charge; review and a • We evaluated management’s assessment in relation to impairment of goodwill, particularly their methodology for determining value in use; • We completed a detailed assessment of the assumptions underlying the impairment review for and modelling, and evaluated reasonableness based on our knowledge of the business; and these • We assessed management’s forecast accuracy based on historical forecasts and results, and challenged the achievability of growth rates included in the model. Our application of materiality We apply the concept of materiality in planning and performing the audit and in evaluating the impact of misstatements, if any. Materiality is an expression of the relative significance or importance of a matter in the context of the financial statements. Misstatements in the financial statements are material if they, individually or in aggregate, could reasonably be expected to influence the economic decisions of users taken based on the financial statements. The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for materiality. These, together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures on the individual financial statement line items and disclosures and in evaluating the effect of misstatements, both individually and on the financial statements as a whole. Based on our professional judgement, we determined materiality for the consolidated financial statements as a whole as follows: Annual Report 2022 31 INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF FINEOS CORPORATION HOLDINGS PLC Overall materiality €1,908,715 How we determined it 1.5% of Group Revenue Rationale for benchmark applied Reporting threshold This benchmark is considered the most appropriate because Revenue is a key benchmark used by management and shareholders in assessing the performance of the business. We agreed with those charged with governance that we would report to them misstatements identified during our audit above €57,261 as well as misstatements below that amount that, in our view, warranted reporting for qualitative reasons. We determined materiality for the Company to be €1.76 million which is approximately 1% of the net assets of the parent company. Overview of the scope of the audit As part of designing our audit, we assessed the risk of material misstatement in the financial statements, whether due to fraud or error, and then designed and performed audit procedures responsive to those risks. In particular, we looked at where the Directors made subjective judgements such as making assumptions on significant accounting estimates. We tailored the scope of our audit to ensure that we performed sufficient work to be able to give an opinion on the financial statements as a whole. We used the outputs of a risk assessment, our understanding of the Company, its environment, controls and critical business processes, to consider qualitative factors in order to ensure that we obtained sufficient coverage across all financial statement line items. Other information The Directors are responsible for the other information. The other information comprises the information included in the annual report other than the financial statements and our auditor’s report thereon. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement in the financial statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. 32 FINEOS Corporation Holdings plc Independent Auditor’s Report (continued)INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF FINEOS CORPORATION HOLDINGS PLC We have nothing to report in this regard. Opinions on other matters prescribed by the Companies Act 2014 In our opinion, based on the work undertaken in the course of the audit, we report that: • • • • the information given in the Directors’ Report for the financial year for which the financial statements are prepared is consistent with the financial statements; the Directors’ Report has been prepared in accordance with applicable legal requirements; the accounting records of the Group were sufficient to permit the financial statements to be readily and properly audited; and the financial statements are in agreement with the accounting records. We have obtained all the information and explanations which, to the best of our knowledge and belief, are necessary for the purposes of our audit. Matters on which we are required to report by exception Based on the knowledge and understanding of the Group and its environment obtained in the course of the audit, we have not identified any material misstatements in the Directors' Report. The Companies Act 2014 requires us to report to you if, in our opinion, the requirements of any of Sections 305 to 312 of the Act, which relate to disclosures of directors’ remuneration and transactions are not complied with by the Group. We have nothing to report in this regard. Respective Responsibilities Responsibilities of directors for the financial statements As explained more fully in the Directors’ responsibilities statement set out on page 27, the Directors are responsible for the preparation of the financial statements in accordance with the applicable financial reporting framework that they give a true and fair view, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the Directors are responsible for assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Group or parent Company or to cease operations, or has no realistic alternative but to do so. Auditor’s responsibilities for the audit of the financial statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs (Ireland) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. Annual Report 2022 33 INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF FINEOS CORPORATION HOLDINGS PLC A further description of our responsibilities for the audit of the financial statements is located on the Irish Auditing and Accounting Supervisory Authority's website at: http://www.iaasa.ie/getmedia/b2389013-1cf6- 458b-9b8f-a98202dc9c3a/Description_of_auditors_responsibilities_for_audit.pdf. This description forms part of our auditor's report. The purpose of our audit work and to whom we owe our responsibilities Our report is made solely to the Company’s members, as a body, in accordance with Section 391 of the Companies Act 2014. Our audit work has been undertaken so that we might state to the Company’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company’s members, as a body, for our audit work, for this report, or for the opinions we have formed. Lorcan Colclough for and on behalf of Mazars Chartered Accountants and Statutory Audit Firm Harcourt Centre, Block 3, Harcourt Road, Dublin 2 23 August 2022 34 FINEOS Corporation Holdings plc Independent Auditor’s Report (continued)Financial Statements Annual Report 2022 35 Revenue Cost of sales Gross profit Product development and delivery Sales and marketing General and administration Amortisation Depreciation Impairment Other income Operating loss Finance income Finance costs Loss on ordinary activities before taxation Income tax Loss for the financial year Other comprehensive income for the year: Foreign exchange differences on translation of operations of foreign subsidiaries and branches Total comprehensive loss for the year attributable to the equity holders of the parent Note 4 11 12 11 6 7 8 9 2022 € 2021 € 127,247,699 108,338,635 (44,212,991) (36,292,052) 83,034,708 72,046,583 (54,408,871) (44,240,937) (7,013,893) (6,182,731) (17,087,981) (17,788,790) (20,821,952) (16,005,834) (2,294,643) (2,073,064) (12,559,945) – 2,172,577 1,331,818 (28,980,000) (12,912,955) 282 1,814 (1,209,369) (633,975) (30,189,087) (13,545,116) 4,193,014 1,060,054 (25,996,073) (12,485,062) 10,606,709 144,972 (15,389,364) (12,340,090) Basic and diluted (loss) per share (cents) 10 (8.23) (4.20) All results relate to continuing operations. The notes on pages 45 to 83 are an integral part of these financial statements. 36 FINEOS Corporation Holdings plc Consolidated Statement of Comprehensive Incomefor the year ended 30 June 2022ASSETS Non-current assets Intangible assets Property, plant and equipment Current assets Trade and other receivables Cash and cash equivalents Total Assets EQUITY AND LIABILITIES Current liabilities Trade and other payables Non-current liabilities Long-term liabilities Provisions Total liabilities Capital and reserves Called up share capital presented as equity Share premium Foreign exchange reserve Other undenominated capital Share option reserve Reorganisation reserve Retained earnings Total equity TOTAL EQUITY AND LIABILITIES Note 30 June 2022 € 30 June 2021 € 11 12 14 15 16 16 9 17 17 18 18 18 18 18 136,016,927 134,622,056 5,736,171 6,236,202 141,753,098 140,858,258 37,344,419 29,612,596 44,311,366 13,998,945 81,655,785 43,611,541 223,408,883 184,469,799 42,484,985 34,391,576 11,630,246 13,320,872 – 416,773 54,115,231 48,129,221 319,385 301,677 169,717,173 124,239,947 10,485,419 (121,290) 1 1 6,644,064 3,796,560 11,123,985 11,123,985 (28,996,375) (3,000,302) 169,293,652 136,340,578 223,408,883 184,469,799 The notes on pages 45 to 83 are an integral part of these financial statements. On behalf of the Board Michael Kelly Director Tom Wall Director 23 August 2022 Annual Report 2022 37 Consolidated Statement of Financial Positionas at 30 June 2022ASSETS Non-current assets Financial assets Current assets Trade and other receivables Cash and cash equivalents TOTAL ASSETS EQUITY AND LIABILITIES Current liabilities Total liabilities Capital and reserves Called up share capital presented as equity Share premium Other undenominated capital Reorganisation reserve Retained earnings Total equity TOTAL EQUITY AND LIABILITIES 30 June 2022 € Restated 30 June 2021 € Note 13 14 15 16 17 17 18 18 85,507,168 99,404,900 68,873,909 44,489,729 21,657,649 401,664 90,531,558 44,891,393 176,038,726 144,296,293 104,623 104,623 58,324 58,324 319,385 301,677 169,717,173 124,239,947 1 1 22,609,813 22,609,813 (16,712,269) (2,913,469) 175,934,103 144,237,969 176,038,726 144,296,293 The notes on pages 45 to 83 are an integral part of these financial statements. On behalf of the Board Michael Kelly Director Tom Wall Director 23 August 2022 38 FINEOS Corporation Holdings plc Company Statement of Financial Positionas at 30 June 2022Called up share capital presented as equity € Share premium € Foreign exchange reserves arising on translation € 272,030 59,903,254 (266,262) – – – – – – – 144,972 144,972 At 30 June 2020 Loss for the year Other comprehensive income for the year Total comprehensive income for the year Issue of share capital 29,647 63,336,763 Reserves transfer from share options exercised Share-based payment charge Translation adjustment – – – 999,930 – – – – – – At 30 June 2021 301,677 124,239,947 (121,290) Other undenominated capital € Share option reserve € Reorganisation reserve € Retained earnings € Total € 1 – – – – – – – 1 2,664,088 11,123,985 9,484,760 83,181,856 – – – – (999,930) 2,129,018 3,384 – – – – – – – (12,485,062) (12,485,062) – 144,972 (12,485,062) (12,340,090) – – – – 63,366,410 – 2,129,018 3,384 3,796,560 11,123,985 (3,000,302) 136,340,578 All amounts are attributable to the equity holders of the Group. The notes on pages 45 to 83 re an integral part of these financial statements. Annual Report 2022 39 Consolidated Statement of Changes in Equityfor the year ended 30 June 2022Consolidated Statement of Changes in Equity (continued) for the year ended 30 June 2022 Called up share capital presented as equity € Foreign exchange reserves arising on translation € Share premium € At 30 June 2021 301,677 124,239,947 (121,290) Loss for the year Other comprehensive income for the year Total comprehensive income for the year Issue of share capital Reserves transfer from share options exercised Share-based payment charge Translation adjustment – – – – – – – 10,606,709 10,606,709 17,708 45,387,851 – – – 89,375 – – – – – – At 30 June 2022 319,385 169,717,173 10,485,419 Other undenominated capital € Share option reserve € Reorganisation reserve € Retained earnings € Total € 1 – – – – – – – 1 3,796,560 11,123,985 (3,000,302) 136,340,578 – – – – (89,375) 2,741,585 195,294 6,644,064 – (25,996,073) (25,996,073) – – – – – – – 10,606,709 (25,996,073) (15,389,364) – – – – 45,405,559 – 2,741,585 195,294 11,123,985 (28,996,375) 169,293,652 All amounts are attributable to the equity holders of the Group. The notes on pages 45 to 83 are an integral part of these financial statements. 40 FINEOS Corporation Holdings plc Called up share capital presented as equity € Share premium € Other undenominated capital € At 30 June 2020 Loss for the year Other comprehensive income for the year Total comprehensive income for the year 272,030 59,903,254 – – – – – – Issue of share capital 29,647 63,336,763 Reserves transfer from share options exercised – 999,930 At 30 June 2021 301,677 124,239,947 1 – – – – – 1 Reorganisation reserve € Retained earnings € Total € 22,609,813 (240,176) 82,544,922 – – – – – (2,673,293) (2,673,293) – – (2,673,293) (2,673,293) – – 63,366,410 999,930 22,609,813 (2,913,469) 144,237,969 All amounts are attributable to the equity holders of the parent Company. The notes on pages 45 to 83 are an integral part of these financial statements. Annual Report 2022 41 Company Statement of Changes in Equityfor the year ended 30 June 2022Company Statement of Changes in Equity (continued) for the year ended 30 June 2022 Called up share capital presented as equity € Share premium € Other undenominated capital € At 30 June 2021 Loss for the year Other comprehensive income for the year Total comprehensive income for the year 301,677 124,239,947 – – – – – Issue of share capital 17,708 45,387,851 Reserves transfer from share options exercised – 89,375 At 30 June 2022 319,385 169,717,173 1 – – – – 1 Reorganisation reserve € Retained earnings € Total € 22,609,813 (2,913,469) 144,237,969 (13,798,800) (13,798,800) – – – – – – (13,798,800) (13,798,800) – – 45,405,559 89,375 22,609,813 (16,712,269) 175,934,103 All amounts are attributable to the equity holders of the parent Company. The notes on pages 45 to 83 are an integral part of these financial statements. 42 FINEOS Corporation Holdings plc Cash flows from operating activities Group loss after tax Adjusted for: Income tax Finance costs Finance income Other income Depreciation Amortisation Impairment Loss on disposal of fixed assets Lease expense Movement in trade and other receivables Movement in trade and other payables Net tax paid Research and development refund received Effect of movement in exchange rates Share-based payment expense Note 2022 € 2021 € 9 7 6 12 11 11 21 (25,996,073) (12,485,062) (4,193,014) (1,060,054) 1,209,369 633,975 (282) (1,814) (2,172,577) (1,331,818) 2,294,643 2,073,064 20,821,952 16,005,834 12,559,945 – – 15,214 (2,818,210) (2,361,939) (3,792,496) (2,955,358) 8,294,702 1,881,013 (494,485) (917,421) 930,623 1,314,105 2,537,886 572,106 19 2,741,585 2,129,018 Net cash flows generated from operating activities 11,923,568 3,510,863 Cash flows from investing activities Interest received Grant income Payment for acquisition of subsidiary (net of cash acquired) Payment for property, plant and equipment Payment for intangible assets Net cash used in investing activities Cash flows from financing activities Interest paid Proceeds from issue of shares Transaction costs Net cash generated from financing activities Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents at the beginning of the year 12 11 17 17 282 – – 1,814 108,057 (59,353,544) (847,236) (946,292) (25,972,356) (25,296,343) (26,819,310) (85,486,308) (197,396) (73,454) 46,151,132 57,245,894 (745,573) (1,029,430) 45,208,163 56,143,010 30,312,421 (25,832,435) 13,998,945 39,831,380 Cash and cash equivalents at the end of the year 15 44,311,366 13,998,945 Annual Report 2022 43 Consolidated Statement of Cash Flowsfor the year ended 30 June 2022Cash flows from operating activities Company loss after tax Adjusted for: Finance costs Finance income Impairment Movement in trade and other receivables Movement in trade and other payables Effect of movement in exchange rates Net cash flows used in operating activities Cash flows from investing activities Interest received Amounts advanced (to)/from Group companies Payment for acquisition of subsidiary Net cash used in investing activities Cash flows from financing activities Interest paid Issue of shares Transaction costs Net cash generated from financing activities Net increase in cash and cash equivalents Cash and cash equivalents at the beginning of the year Note 2022 € 2021 € 13 14 16 17 17 (13,798,800) (2,673,293) 124,164 3,311 (48) 13,638,550 (189) 39,405 – – (1,846) 58,324 (6,268) 150,201 (3,186) (2,463,303) 48 – (24,029,166) 16,216,551 – (69,570,941) (24,029,118) (53,354,390) (117,270) (3,311) 46,151,132 57,245,894 (745,573) (1,029,430) 45,288,289 56,213,153 21,255,985 395,460 401,664 6,204 Cash and cash equivalents at the end of the year 15 21,657,649 401,664 44 FINEOS Corporation Holdings plc Company Statement of Cash Flowsfor the year ended 30 June 20221. General Information FINEOS Corporation Holdings plc (‘the Company’) is a public limited company incorporated in the Republic of Ireland. The registered office is FINEOS House, Eastpoint Business Park, Dublin 3. The principal activity of the Company and its subsidiaries (‘the Group’) is that of enterprise claims and policy management software for Life, Accident and Health insurers and Employee Benefits providers. Foreign operations are included in accordance with the significant accounting policies set out in Note 2. 2. a) Summary of Significant Accounting Policies Basis of financial statements Compliance with IFRS, new standards and interpretation The financial statements have been prepared in accordance with International Financial Reporting Standards (‘IFRS’) and interpretations issued by the IFRS Interpretations Committee (‘IFRS IC’) applicable to companies reporting under IFRS. The financial statements comply with IFRS as issued by the International Accounting Standards Board and as adopted by the EU, and the Companies Act 2014. A number of new amendments and interpretations to accounting standards became effective for the Group during the financial year including: • Interest Rate Benchmark Reform Phase 2 – amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16. • COVID-19-Related Rent Concessions beyond 30 June 2021 - Amendment to IFRS 16 These amendments and interpretations would not have resulted in the accounting applied by the Group changing and would not have had a material effect on the Group’s financial statements. New standards, interpretations and amendments not yet effective There are a number of standards, amendments to standards and interpretations which have been issued by the IASB that are effective in future accounting periods that the Group has decided not to adopt early. The following amendments are effective for the period beginning 1 January 2022: • Onerous Contracts – Cost of Fulfilling a Contract (Amendments to IAS 37); • Property, Plant and Equipment: Proceeds before Intended Use (Amendments to IAS 16); • Annual Improvements to IFRS Standards 2018-2020 (Amendments to IFRS 1, IFRS 9, IFRS 16 and IAS 41); and • References to Conceptual Framework (Amendments to IFRS 3). The Group does not expect any other standards issued by the IASB, but not yet effective, to have a material impact on the Group. Historical cost, presentation currency and going concern The consolidated financial statements have been prepared on the historical cost basis, except where described otherwise in the policies below. The consolidated financial statements of the Group and the financial statements of the Company are presented in Euro (‘€’) which is also the functional currency of the Group and Company. Management has prepared projections and forecasts for the Group. These include consideration of revenue growth, funding and finance facilities available, and cash reserves held. On this basis, the Directors consider that it is appropriate to prepare the consolidated financial statements on the going concern assumption. Exemption from preparing Company statement of comprehensive income In accordance with Section 304 of the Companies Act 2014 the Company is availing of the exemption from presenting its individual statement of comprehensive income to the Annual General Meeting and from filing it with the Registrar of Companies. The Company’s loss for the year to 30 June 2022 was €13,798,800 (2021: €2,673,293). Annual Report 2022 45 Notes to the Consolidated Financial Statementsb) Basis of consolidation The financial statements of the Group incorporate the financial statements of the Company (the parent) and entities controlled by the Company (its subsidiaries) made up to 30 June each year. Control is achieved when the Company: • has the power over the subsidiary entity; • is exposed, or has rights, to variable returns from its involvement with the subsidiary entity; and • has the ability to use its power to affect those returns. The Group reassesses whether it controls the subsidiaries if facts and circumstance indicate that there are changes to their control. When the Company has less than a majority of the voting rights of an investee, it considers that it has power over the investee when the voting rights are sufficient to give it the practical ability to direct the relevant activities of the investee unilaterally. The Company considers all relevant facts and circumstances in assessing whether or not the Company’s voting rights in an investee are sufficient to give it power, including: • the size of the Company’s holding of voting rights relative to the size and dispersion of holdings of the other vote holders; • potential voting rights held by the Company, other vote holders or other parties; • rights arising from other contractual arrangements; and • any additional facts and circumstances that indicate that the Company has, or does not have, the current ability to direct the relevant activities at the time that decisions need to be made, including voting patterns at previous shareholders’ meetings. Consolidation of a subsidiary begins when the Company obtains control over the subsidiary and ceases when the Company loses control of the subsidiary. Intra-Group assets and liabilities, equity, income, expenses and cash flows relating to intra-Group transactions are eliminated on consolidation. Where necessary, the accounting policies of subsidiaries have been changed to ensure consistency with the policies adopted by the Group. When the Group loses control over a subsidiary, the profit or loss on disposal is calculated as the difference between (i) the aggregate of the fair value of the consideration received and the fair value of any retained interest and (ii) the previous carrying amount of the assets (including goodwill) and liabilities of the subsidiary and any non-controlling interests. Amounts previously recognised in other comprehensive income in relation to the subsidiary are accounted for (i.e. reclassified to profit or loss or transferred directly to retained earnings) in the same manner as would be required if the relevant assets or liabilities were disposed of. The fair value of any investments retained in the former subsidiary at the date when control is lost is regarded as the fair value on initial recognition for subsequent accounting or, when applicable, the cost on initial recognition of an investment in an associate or jointly controlled entity. c) Revenue recognition The Group recognises revenue from the following major sources: • initial product licence fees; • annual subscriptions; and • rendering of services, including professional services and support contracts. Revenue is measured based on the consideration to which the Group expects to be entitled in a contract with a customer and excludes amounts collected on behalf of third parties. The Group recognises revenue at a point in time or over time as contractual performance obligations are fulfilled and control of a product or service transfers to a customer. Initial product licence fees Initial software licence revenue is recognised at a point in time when control is passed to the customer which is upon delivery of the software to the customer, provided that the Group has no significant related obligations or collection uncertainties remaining. 46 FINEOS Corporation Holdings plc Notes to the Consolidated Financial Statements (continued)Licences with related obligations which significantly enhance or modify the IP are considered a single performance obligation. The performance obligation is satisfied over time as the client avails of consistent access to the services enhancing and customising the licenced IP. The satisfaction of the performance obligation is reliably measured primarily on a percentage-of-completion basis. Revenue is recognised over the passage of time using the output method based on pre-agreed milestones between the parties in accordance with the master licence agreement in place. Income arising on customised solutions where the provision of the service has not been completed at the year-end date is deferred and recognised as the service is provided. Annual subscriptions Annual subscriptions include all support, maintenance, software updates and cloud services provided by FINEOS to customers. The promises are considered a single performance obligation which is satisfied over time and the subscription fees, including the third-party fees, are recognised using the output method on a straight-line basis which reflects time lapsed, for the continued right to access the licenced IP and to benefit from the support and maintenance services. Income arising on subscription where the provision of the service has not been completed at the year-end date is deferred creating a contract liability which is subsequently recognised as the service is provided. Rendering of services, including professional services and support contracts Rendering of services are distinct performance obligations for which revenue is recognised in the accounting period in which the services are rendered when the outcome of the contract can be estimated reliably. The performance obligations are satisfied over time and the satisfaction of the promises is measured using the input method, primarily on a time and materials basis for which revenue is recognised in the period that the services are provided. For the services element of fixed price project engagements, the performance obligations are satisfied over time and the satisfaction of the performance obligations is reliably measured primarily on a percentage-of-completion basis over the term of the contract. Revenue is recognised using the output method based on pre-agreed milestones indicating progress to completion. When the outcome of the transaction involving the rendering of services cannot be estimated reliably, an entity shall recognise revenue only to the extent of the expenses recognised that are recoverable. Income arising on rendering of services where the provision of the service has not been completed at the year-end date is deferred creating a contract liability which is subsequently recognised as the service is provided. The Group’s policy for contract costs (associated with revenue contracts) is outlined in Note 2(l). d) Leases At inception of a contract, the Group assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. The Group recognises a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset or to restore the underlying asset or the site on which it is located, less any lease incentives received. The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term. The estimated useful lives of right-of-use assets are determined on the same basis as those of property and equipment. In addition, the right-of-use asset is periodically reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability. The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Group’s incremental borrowing rate. Generally, the Group uses its incremental borrowing rate as the discount rate. Annual Report 2022 47 Lease payments included in the measurement of the lease liability comprise: • fixed payments, including in-substance fixed payments; • variable lease payments that depend on an index or a rate, initially measured using the index or rate as at the commencement date; and • amounts expected to be payable under a residual value guarantee. The lease liability is measured at amortised cost using the effective interest method. It is remeasured when there is a change in future lease payments arising from a change in an index or rate, if there is a change in the Group’s estimate of the amount expected to be payable under a residual value guarantee. When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount of the right-of-use asset or is recorded in the statement of comprehensive income if the carrying amount of the right-of-use asset has been reduced to zero. On the statement of financial position the Group presents the right-of-use asset of office rentals under ‘property, plant and equipment’ and the right-of-use asset of licences under ‘intangible assets’. The movement on the right-of- use assets of the Group is disclosed in Notes 11 and 12. Short-term leases and leases of low-value assets The Group has elected not to recognise right-of-use assets and lease liabilities for short-term leases of offices and licences that have a lease term of 12 months or less and leases of low-value assets. The Group recognises the lease payments associated with these leases as an expense on a straight-line basis over the lease term. Lease modifications The Group as lessee accounts for a lease modification as a separate lease if both: (a) the modification increases the scope of the lease by adding the right to use one or more underlying assets; and (b) the consideration for the lease increases by an amount commensurate with the stand-alone price for the increase in scope and any appropriate adjustments to that stand-alone price to reflect the circumstances of the particular contract. For a lease modification that is not accounted for as a separate lease, at the effective date of the lease modification the Group as lessee: (a) allocates the consideration in the modified contract; (b) determines the lease term of the modified lease; and (c) remeasures the lease liability by discounting the revised lease payments using a revised discount rate. The revised discount rate is determined as the interest rate implicit in the lease for the remainder of the lease term, if that rate can be readily determined; or the Group’s incremental borrowing rate at the effective date of the modification, if the interest rate implicit in the lease cannot be readily determined. For a lease modification that is not accounted for as a separate lease, the Group as lessee accounts for the remeasurement of the lease liability by: (a) decreasing the carrying amount of the right-of-use asset to reflect the partial or full termination of the lease for lease modifications that decrease the scope of the lease. The Group recognises in profit or loss any gain or loss relating to the partial or full termination of the lease; or (b) making a corresponding adjustment to the right-of-use asset for all other lease modifications. e) Foreign currencies Foreign currency transactions are translated into the individual entities’ respective functional currencies at the exchange rates prevailing on the date of the transaction. At the end of each financial year, monetary items denominated in foreign currencies are retranslated at the rates prevailing as of the end of the financial year. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing on the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated. 48 FINEOS Corporation Holdings plc Notes to the Consolidated Financial Statements (continued)Exchange differences arising on the settlement of monetary items, and on retranslation of monetary items, are included in the statement of comprehensive income for the year. Exchange differences arising on the retranslation of non-monetary items carried at fair value are included in the statement of comprehensive income for the year except for differences arising on the retranslation of non-monetary items in respect of which gains and losses are recognised directly in equity. For such non-monetary items, any exchange component of that gain or loss is also recognised directly in other comprehensive income. For the purpose of presenting consolidated financial statements, the assets and liabilities of the Group’s foreign operations (including comparatives) are expressed in Euro using exchange rates prevailing at the end of the financial year. Income and expense items (including comparatives) are translated at the average exchange rates for the period, unless exchange rates fluctuated significantly during that period, in which case the exchange rates at the dates of the transactions are used. Exchange differences arising, if any, are classified as equity and transferred to the Group’s translation reserve. Such translation differences are recognised in the statement of comprehensive income in the period in which the foreign operation is disposed of. On consolidation, exchange differences arising from the translation of the net investment in foreign entities (including monetary items that, in substance, form part of the net investment in foreign entities), and of borrowings and other currency instruments designated as hedges of such investments, are taken to the foreign currency translation reserve. Goodwill and fair value adjustments arising on the acquisition of a foreign operation are treated as assets and liabilities of the foreign operation and translated accordingly. f) Employee benefits The Group provides a range of benefits to employees, including annual bonus arrangements, paid holiday arrangements and defined contribution pension plans. Short-term benefits Short-term benefits, including holiday pay and other similar non-monetary benefits, are recognised as an expense in the period in which the service is received. A provision is made for the estimated liability for annual leave as a result of services rendered by employees up to the end of the financial year. Defined contribution pension plans The Group operates a defined contribution plan for its employees. A defined contribution plan is a pension plan under which the Group pays fixed contributions into a separate entity. Once the contributions have been paid the Group has no further payment obligations. The contributions are recognised as an expense when they are due. Amounts not paid are shown in accruals in the statement of financial position. The assets of the plan are held separately from the Group in independently administered funds. Share-based payments The Group issues equity-settled share-based payments to certain employees. Equity-settled share-based payments are measured at fair value of the equity instruments (excluding the effect of non-market-based vesting conditions) at the date of grant. Details regarding the determination of the fair value of equity-settled share-based transactions are set out in Note 19. The cost of equity-settled transactions with employees is recognised as an expense over the vesting period, which ends on the date on which the relevant employees become fully entitled to the award. Fair value is determined by an external valuer using an appropriate pricing model. No expense is recognised for awards that do not ultimately vest; except for awards where vesting is conditional upon a market condition, which are treated as vesting irrespective of whether or not the market condition is satisfied, provided that all other performance conditions are satisfied. At each year end date before vesting, the cumulative expense is calculated, representing the extent to which the vesting period has expired and management’s best estimate of the achievement or otherwise of non-market conditions, the number of equity instruments that will ultimately vest, or in the case of an instrument subject to a market condition, be treated as vesting as described above. The movement in the cumulative expense since the previous year end date is recognised in the statement of comprehensive income, with a corresponding entry in ‘Share option reserves’. Annual Report 2022 49 Where the terms of an equity-settled award are modified or a new award is designated as replacing a cancelled or settled award, the cost based on the original award terms continues to be recognised over the original vesting period. In addition, an expense is recognised over the remainder of the new vesting period for the incremental fair value of any modification, based on the difference between the fair value of the original award and the fair value of the modified award, both as measured on the date of the modification. No reduction is recognised if this difference is negative. g) Interest income Interest income comprises income on cash held in interest-bearing bank deposits. Interest income is recognised as it occurs in the statement of comprehensive income, using the effective interest rate method. h) Government grants Government grants are not recognised until there is reasonable assurance that the Group will comply with the conditions attaching to them and that the grants will be received. Government grants are recognised in the statement of comprehensive income on a systematic basis over the periods in which the Group recognises as expenses the related costs for which the grants are intended to compensate. Specifically, government grants whose primary condition is that the Group should purchase, construct or otherwise acquire non-current assets are recognised as deferred income in the consolidated statement of financial position and transferred to the statement of comprehensive income on a systematic and rational basis over the useful lives of the related assets. Government grants that are receivable as compensation for expenses or losses already incurred or for the purpose of giving immediate financial support to the Group with no future related costs are recognised in the statement of comprehensive income in the period in which they become receivable. Government grants towards staff re-training costs are recognised as income over the periods necessary to match them with the related costs and are deducted in reporting the related expense. Government grants relating to the acquisition of property, plant and equipment or intangible assets are treated as deferred income and released to the statement of comprehensive income over the expected useful lives of the assets concerned. i) Income tax The taxation expense for the period comprises current and deferred tax recognised in the reporting period. Tax is recognised in the statement of comprehensive income, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case tax is also recognised in other comprehensive income or directly in equity respectively. Current tax The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the statement of comprehensive income because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period. A provision is recognised for those matters for which the tax determination is uncertain but it is considered probable that there will be a future outflow of funds to a tax authority. The provisions are measured at the best estimate of the amount expected to become payable. The assessment is based on the judgement of tax professionals within the Group supported by previous experience in respect of such activities and in certain cases based on specialist independent tax advice. Deferred tax Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit and is accounted for using the liability method. 50 FINEOS Corporation Holdings plc Notes to the Consolidated Financial Statements (continued)Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from the initial recognition of goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit. Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with such investments are only recognised to the extent that it is probable that there will be sufficient taxable profits against which to utilise the benefits of the temporary differences and they are expected to reverse in the foreseeable future. The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled, or the asset is realised, based on tax laws and rates that have been enacted or substantively enacted at the reporting date. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Group expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities. Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis. j) Research and development tax credits Research and development tax credits are recognised as a gain, set against the related expenditure in the year to which they relate. To the extent that the related expenditure is capitalised, the tax credit is deferred on the statement of financial position. k) Business combinations The Group applies the acquisition method in accounting for business combinations. The cost of an acquisition is measured as the aggregate of the consideration transferred (excluding amounts relating to the settlement of pre-existing relationships), the amount of any non-controlling interest in the acquiree and, in a business combination achieved in stages, the acquisition date fair value of the acquirer’s previously-held equity interest in the acquiree. Transaction costs that the Group incurs in connection with a business combination are expensed as incurred. To the extent that settlement of all or any part of consideration for a business combination is deferred, the fair value of the deferred component is determined through discounting the amounts payable to their present value at the date of exchange. The discount component is unwound as an interest charge in the Consolidated Income Statement over the life of the obligation. Any contingent consideration is recognised at fair value at the acquisition date and included in the cost of the acquisition. The fair value of contingent consideration at acquisition date is arrived at through discounting the expected payment to present value. In general, in order for contingent consideration to become payable, pre-defined revenue targets must be exceeded. Subsequent changes to the fair value of the contingent consideration will be recognised in profit or loss unless the contingent consideration is classified as equity, in which case it is not remeasured and settlement is accounted for within equity. The assets and liabilities arising on business combination activity are measured at their acquisition-date fair values. Contingent liabilities assumed in business combination activity are recognised as of the acquisition date, where such contingent liabilities are present obligations arising from past events and their fair value can be measured reliably. In the case of a business combination achieved in stages, the acquisition date fair value of the acquirer’s previously- held equity interest in the acquiree is remeasured to fair value as at the acquisition date through profit or loss. When the initial accounting for a business combination is determined provisionally, any adjustments to the provisional values allocated to the consideration, identifiable assets or liabilities (and contingent liabilities, if relevant) are made within the measurement period, a period of no more than one year from the acquisition date. Annual Report 2022 51 l) Intangible assets Goodwill arising on business combinations Goodwill arising on a business combination is initially measured at cost, being the excess of the cost of the acquisition over the fair value of the net identifiable assets and liabilities assumed at the date of acquisition. It relates to the future economic benefits arising from assets which are not capable of being individually identified and separately recognised. Following initial recognition, goodwill is measured at cost less any accumulated impairment losses. Intangible assets (other than goodwill) arising on business combinations Intangible assets are capitalised separately from goodwill as part of a business combination at cost (fair value at date of acquisition). Subsequent to initial recognition these intangible assets are carried at cost less any accumulated amortisation and any accumulated impairment losses. Intangible assets are amortised on a straight-line basis over periods ranging from seven to 20 years, depending on the nature of the intangible asset. The amortisation expense is disclosed separately on the face of the condensed consolidated statement of comprehensive income. Intangible assets acquired separately Computer software Computer software separately acquired, including computer software which is not an integral part of an item of computer hardware, is stated at cost less any accumulated amortisation and any accumulated impairment losses. Cost comprises purchase price and other directly attributable costs. Computer software is recognised as an asset only if it meets the following criteria: • an asset can be separately identified; • • • it is probable that the asset created will generate future economic benefits; the development cost of the asset can be measured reliably; it is probable that the expected future economic benefits that are attributable to the asset will flow to the entity; and • the cost of the asset can be measured reliably. Costs relating to the development of computer software for internal use are capitalised once the recognition criteria outlined above are met. Computer software is amortised on a straight-line basis over its useful economic life, which is considered to be between three to five years. The amortisation expense is disclosed separately on the face of the consolidated statement of comprehensive income. Internally-generated intangible assets Research and development expenditure Expenditure on research activities is recognised as an expense in the period in which it is incurred. An internally- generated intangible asset arising from development (or from the development phase of an internal project) is recognised if, and only if, all of the following conditions have been demonstrated: • • • the technical feasibility of completing the intangible asset so that it will be available for use or sale; the intention to complete the intangible asset and use or sell it; the ability to use or sell the intangible asset; • how the intangible asset will generate probable future economic benefits; • the availability of adequate technical, financial and other resources to complete the development and to use or sell the intangible asset; and • the ability to measure reliably the expenditure attributable to the intangible asset during its development. The amount initially recognised for internally-generated intangible assets is the sum of the expenditure incurred from the date when the intangible asset first meets the recognition criteria listed above. Where no internally-generated intangible asset can be recognised, development expenditure is recognised in the statement of comprehensive income in the period in which it is incurred. 52 FINEOS Corporation Holdings plc Notes to the Consolidated Financial Statements (continued)Development expenditure is amortised on a straight-line basis over its useful economic life, which commences when the asset is brought into use, and is considered to be between three and 10 years. The amortisation expense is disclosed separately on the face of the consolidated statement of comprehensive income. Contract costs The incremental costs of obtaining a contract are recognised as an asset if the Group expects to recover those costs. However, those incremental costs are limited to the costs that the Group would not have incurred if the contract had not been successfully obtained. Costs incurred to fulfil a contract are recognised as an asset if and only if all of the following criteria are met: • • the costs relate directly to a contract (or a specific anticipated contract); the costs generate or enhance resources of the entity that will be used in satisfying performance obligations in the future; and • the costs are expected to be recovered. These include costs such as direct labour, direct materials, and the allocation of overheads that relate directly to the contract. The asset recognised in respect of the costs to obtain or fulfil a contract is amortised on a systematic basis that is consistent with the associated revenue contract’s pattern of transfer of the services to which the asset relates. The amortisation expense is included within administrative expenses in the consolidated statement of comprehensive income. The incremental costs of obtaining a contract are expensed if the associated amortisation period would be 12 months or less. Subsequent to initial recognition, internally-generated intangible assets are reported at cost less accumulated amortisation and accumulated impairment losses, on the same basis as intangible assets that are acquired separately. Derecognition of intangible assets An intangible asset is derecognised on disposal, or when no future economic benefits are expected from use or disposal. Gains or losses arising from derecognition of an intangible asset, measured as the difference between the net disposal proceeds and the carrying amount of the asset, are recognised in the statement of comprehensive income when the asset is derecognised. m) Property, plant and equipment Property, plant and equipment are stated at cost less accumulated depreciation and accumulated impairment losses. Cost includes the original purchase price, costs directly attributable to bringing the asset to its working condition for its intended use, dismantling and restoration costs, and borrowing costs capitalised. Depreciation Depreciation is calculated using the straight-line method to write off the cost of property, plant and equipment over their expected useful lives as follows: Office equipment Computer equipment Fixtures and fittings Right-of-use assets 20% to 33.33% 33.33% 20% to 33.33% Lower of the useful life of the asset or the lease term The estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis. Subsequent additions Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that economic benefits associated with the item will flow to the Group and the cost can be measured reliably. The carrying amount of any replaced component is derecognised. Major components are treated as a separate asset where they have significantly different patterns of consumption of economic benefits and are depreciated separately over their useful lives. Repairs, maintenance and minor inspection costs are expensed as incurred. Annual Report 2022 53 Derecognition An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. The gain or loss arising on the disposal or retirement of an asset is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in the statement of comprehensive income. n) Financial assets Investments in subsidiary companies Investments in subsidiary companies are reflected in the separate financial statements of the parent Company. Investments in subsidiaries are stated at cost less accumulated impairment losses. o) Impairment of goodwill In the year in which a business combination is effected and where some or all of the goodwill allocated to a particular cash-generating unit (CGU) arose in respect of that combination, the CGU is tested for impairment prior to the end of the relevant annual period. Goodwill is subject to impairment testing on an annual basis and at any time during the year if an indicator of impairment is considered to exist. Where the carrying value exceeds the estimated recoverable amount (being the greater of fair value less costs of disposal and value-in-use), an impairment loss is recognised by writing down goodwill to its recoverable amount. The recoverable amount of goodwill is determined by reference to the CGU to which the goodwill has been allocated. Impairment losses arising in respect of goodwill are not reversed once recognised. p) Impairment of tangible and intangible assets The Group reviews the carrying amounts of its tangible and intangible assets as at each reporting date to assess for any indication of impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. Irrespective of whether there is any indication of impairment, the Group also tests its intangible assets with indefinite useful lives and intangible assets not yet available for use for impairment annually by comparing their respective carrying amounts with their corresponding recoverable amounts. The recoverable amount of an asset or cash-generating unit is the higher of its fair value less costs to sell and its value-in-use. In assessing value-in-use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. An impairment loss for the amount by which the asset’s carrying amount exceeds the recoverable amount is recognised immediately in the statement of comprehensive income; unless the relevant asset is carried at a revalued amount, in which case the impairment loss is first treated as a revaluation decrease. Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in the statement of comprehensive income, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase. 54 FINEOS Corporation Holdings plc Notes to the Consolidated Financial Statements (continued)q) Financial instruments Financial assets and financial liabilities are recognised when the Group becomes a party to the contractual provisions of the instrument. Effective interest method The effective interest method is a method of calculating the amortised cost of a financial instrument and allocating the interest income or expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts or payments (including all fees on points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the financial instrument, or where appropriate, a shorter period, to the net carrying amount of the financial instrument. Income and expense are recognised on an effective interest basis for debt instruments other than those financial instruments at fair value through profit or loss. Financial assets Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognised immediately in the statement of comprehensive income. All financial assets are recognised on a trade date. This is the date on which the Group commits to purchase or sell the asset. They are initially measured at fair value plus transaction costs, except for those financial assets classified as at fair value through profit or loss, which are initially measured at fair value. Financial assets are classified into the following specified categories: financial assets at fair value through profit or loss; held-to-maturity investments; loans and receivables; and available-for-sale financial assets. The classification depends on the nature and purpose for which these financial assets were acquired and is determined at the time of initial recognition. Loans and receivables The Group’s loans and receivables comprise trade and other receivables, amounts due from contract customers, bank balances and fixed deposits. Such loans and receivables are non-derivatives with fixed or determinable payments that are not quoted in an active market. They are measured at amortised cost, using the effective interest method less impairment. Interest is recognised by applying the effective interest rate, except for short-term receivables when the recognition of interest would be immaterial. Impairment of financial assets The Group always recognises lifetime expected credit losses (‘ECL’) for trade receivables. The ECL on these financial assets are estimated using a provision matrix based on the Group’s historical credit loss experience, adjusted for factors that are specific to the receivables, general economic conditions and an assessment of both the current as well as the forecast direction of conditions at the reporting date, including the time value of money where appropriate. When there has not been a significant increase in credit risk since initial recognition, the Group measures the loss allowance for that financial instrument at an amount equal to 12-month ECL which represents the portion of lifetime ECL that is expected to result from default events on a financial instrument that are possible within 12 months after the reporting date; except for assets for which a simplified approach was used. The Group assumes that the credit risk on a financial instrument has not increased significantly since initial recognition if the financial instrument is determined to have low credit risk at the reporting date. Annual Report 2022 55 A financial instrument is determined to have low credit risk if: (a) the financial instrument has a low risk of default; (b) the debtor has a strong capacity to meet its contractual cash flow obligations in the near term; and (c) adverse changes in economic and business conditions in the longer term may, but will not necessarily, reduce the ability of the borrower to fulfil its contractual cash flow obligations. The Group considers a financial asset to have low credit risk when the asset has an external credit rating of ‘investment grade’ in accordance with the globally understood definition; or if an external rating is not available, the asset has an internal rating of ‘performing’. Performing means that the counterparty has a strong financial position and there are no past due amounts. Derecognition of financial assets The Group derecognises a financial asset only when the contractual rights to the cash flows from the asset expire, or it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity. If the Group neither transfers nor retains substantially all the risks and rewards of ownership of the financial asset and continues to control the transferred asset, the Group recognises its retained interest in the asset and an associated liability for amounts it may have to pay. If the Group retains substantially all the risks and rewards of ownership of a transferred financial asset, the Group continues to recognise the financial asset and also recognises a collateralised borrowing for the proceeds receivable. Financial liabilities and equity Classification of debt or equity Debt and equity instruments are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument. Equity instruments An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all of its liabilities. Equity instruments are recorded at the proceeds received, net of direct issue costs. Ordinary share capital Ordinary share capital is classified as equity. Incremental costs directly attributable to the issue of ordinary shares and share options are recognised as a deduction from equity. Financial liabilities Financial liabilities are classified as either financial liabilities at fair value through profit or loss or other financial liabilities. Financial liabilities are classified as at fair value through profit or loss if the financial liability is either held for trading or it is designated as such upon initial recognition. Other financial liabilities Trade and other payables Trade and other payables are initially measured at fair value, net of transaction costs, and are subsequently measured at amortised cost, where applicable, using the effective interest method, with interest expense recognised on an effective yield basis. Borrowings Interest-bearing bank loans and overdrafts are initially measured at fair value, and are subsequently measured at amortised cost, using the effective interest method. Any difference between the proceeds (net of transaction costs) and the settlement or redemption of borrowings is recognised over the term of the borrowings. Derecognition of financial liabilities The Group derecognises financial liabilities when, and only when, the Group’s obligations are discharged, cancelled or they expire. 56 FINEOS Corporation Holdings plc Notes to the Consolidated Financial Statements (continued)Derivative financial instruments In order to manage interest rate and foreign currency risks, the Group has from time to time entered into derivative financial instruments (principally currency swaps and forward foreign exchange contracts). Derivative financial instruments are recognised initially at fair value on the date on which a derivative contract is entered into and are subsequently remeasured at fair value. The carrying value of derivatives is fair value based on discounted future cash flows and adjusted for counterparty risk. Future floating rate cash flows are estimated based on future interest rates (from observable yield curves at the end of the reporting period). Fixed and floating rate cash flows are discounted at future interest rates and translated at period-end foreign exchange rates. At the statement of financial position date, no derivative instruments were recognised on the statement of financial position. r) Provisions and contingencies Provisions Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that the Group will be required to settle that obligation and a reliable estimate can be made of the amount of the obligation. The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the reporting date, taking into account the risks and uncertainties surrounding the obligation. Where a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows (when the effect of the time value of money is material). When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, a receivable is recognised as an asset if it is virtually certain that reimbursement will be received and the amount of the receivable can be measured reliably. Contingencies Contingent liabilities, arising as a result of past events, are not recognised when (i) it is not probable that there will be an outflow of resources or that the amount cannot be reliably measured at the reporting date or (ii) when the existence will be confirmed by the occurrence or non-occurrence of uncertain future events not wholly within the Group’s control. Contingent liabilities are disclosed in the financial statements unless the probability of an outflow of resources is remote. Contingent assets are not recognised. Contingent assets are disclosed in the financial statements when an inflow of economic benefits is probable. s) Cash and cash equivalents Cash and cash equivalents comprise cash on hand and demand deposits and other short-term highly liquid investments which are readily convertible to known amounts of cash and are subject to insignificant risk of changes in value. 3. Significant Accounting Judgements, Estimates and Assumptions In preparing these financial statements, the Group and Company make judgements, estimates and assumptions concerning the future that impact the application of policies and reported amounts of assets, liabilities, income and expenses. The resulting accounting estimates calculated using these judgements and assumptions are based on historical experience and expectations of future events and may not equal the actual results. Estimates and underlying assumptions are reviewed on an ongoing basis, and revisions to estimates are recognised prospectively. Annual Report 2022 57 The judgements and key sources of assumptions and estimation uncertainty that have a significant effect on the amounts recognised in the financial statements are discussed below. Critical judgements made in applying the Group’s and Company’s accounting policies Information about judgements made in applying accounting policies that have the most significant effects on the amounts recognised in these financial statements are set out below: Group: (a) Development expenditure The Group capitalises a proportion of costs related to software development in accordance with its accounting policy. The Group regularly reviews the carrying value of capitalised development costs, which are amortised over three to 10 years, to ensure they are not impaired, and the amortisation period is appropriate. Management makes judgements about the technical feasibility and economic benefit of completed products, as well as the period of time over which the economic benefit will cease. (b) Useful life of intangible assets (excluding goodwill) Intangible assets are amortised over their useful lives. The estimated useful life reflects management’s estimate of the period that the Group intends to derive future economic benefits from the use of intangible assets. Changes in the economic usage and developments could affect the economic useful life of the intangible fixed asset which could then consequently impact future amortisation charges. The carrying amount of the intangible assets of the Group (excluding goodwill) as at 30 June 2022 was €102,366,571 (2021: €93,290,024) (see Note 11). (c) Revenue recognition The Group recognises revenue in line with IFRS 15 Revenue from Contracts with Customers. Management applies judgement in determining the nature, variable considerations and timing of satisfaction of promises in the context of the contract that meet the basis of revenue recognition criteria. Significant judgements include identifying performance obligations, identifying distinct intellectual property licences, and determining the timing of satisfaction and approach in recognising the revenue of those identified performance obligations; whether a point in time or a passage of time approach is to be adopted. See applied revenue recognition criteria for each revenue stream within Note 2(c) for details on the Group’s revenue recognition policies adopted. The amount of the Group’s revenue recognised as at 30 June 2022 was €127,247,699 (2021: €108,338,635) (see Note 4). (d) Impairment of goodwill The impairment testing process requires management to make significant judgements and estimates regarding the future cash flows expected to be generated by CGUs to which goodwill has been allocated. In assessing value-in- use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the future cash flow estimates have not been adjusted. The carrying amount of goodwill as at 30 June 2022 was €33,650,356, net of an impairment adjustment of €13,638,550 (2021: €41,332,032) (see Note 11). Company: (a) Impairment of investment in subsidiaries Investments in subsidiary companies are reflected in the separate financial statements of the parent Company at cost less accumulated impairment losses. At the end of each financial year, an assessment is made on whether there are indicators that the Company’s investments are impaired. The Company’s assessment is based on the performance of the underlying subsidiary companies. The carrying amount of investments in subsidiaries in the Company statement of financial position at 30  June  2022 was €85,507,168, net of an impairment adjustment of €13,638,550 (restated 2021: €99,404,900) (see Note 13). 58 FINEOS Corporation Holdings plc Notes to the Consolidated Financial Statements (continued)4. Revenue Amount of revenue by class of activity: Professional services Annual subscriptions Initial product licence fees Amount of revenue by market: North America APAC EMEA Segment information 2022 € 2021 € 71,369,100 66,443,223 53,832,632 40,128,739 2,045,967 1,766,673 127,247,699 108,338,635 101,023,550 78,845,857 21,231,506 24,131,540 4,992,643 5,361,238 127,247,699 108,338,635 The Group manages its operations as a single business operation and there are no parts of the Group that qualify as operating segments. The Board assesses the financial performance of the Group on an integrated basis only and accordingly, the Group is managed on the basis of a single segment. Major customers In each of 2022 and 2021 financial years there were three customers that each accounted for 10% or more of the Group’s revenue, as follows: Client 1 Percentage of total revenue Client 2 Percentage of total revenue Client 3 Percentage of total revenue Contract assets and contract liabilities Contract assets 2022 € 2021 € 26,399,568 14,032,231 20.7% 12.9% 17,049,033 13,348,455 13.4% 12.3% 13,266,714 10,822,766 10.4% 9.9% Contract assets are disclosed separately as unbilled receivables in Trade and other receivables amounting to €573,242 (2021: €1,247,706) (see Note 14). Contract liabilities Contract liabilities are disclosed separately as deferred revenue in Trade and other payables amounting to €25,809,421 (2021: €17,013,665) (see Note 16). The Group is availing of the practical expedient which exempts the disclosure of unsatisfied performance obligations to date since both of the following criteria are met: • • the performance obligations are part of contracts which have an original expected duration of one year or less; and the Group recognises revenue from the satisfaction of the performance obligations which have been completed to date and to which the Group has a right to invoice. Annual Report 2022 59 Employees 5. The average monthly number of persons employed by the Group (including Directors) during the year was as follows: Product development and delivery Sales and marketing Administration The staff costs comprise: Wages and salaries Social welfare costs Pension costs Share-based payment expense Directors’ remuneration Directors’ remuneration in respect of qualifying services in respect of FINEOS Corporation Limited: Emoluments Pension/superannuation Share-based payment expense Gain on exercise of options 2022 Number 2021 Number 755 30 53 838 2022 € 711 30 53 794 2021 € 85,117,132 75,912,624 7,452,505 4,318,471 2,741,585 6,114,359 3,391,835 2,129,018 99,629,693 87,547,836 2022 € 2021 € 1,213,763 1,169,025 44,827 – – 1,258,590 42,597 25,752 3,319,860 4,557,234 The number of Directors to whom retirement benefits are accruing under defined contribution scheme pension/ superannuation costs noted above is three (2021: three). Other than as shown above any further disclosures in respect of Sections 305 and 306 of the Companies Act 2014 are €Nil for the financial year presented. Staff costs as qualifying development expenditure The qualifying development expenditure generating an asset as shown in Note 11 consists of qualifying staff costs incurred in relation to the development of the Group’s projects. During the current year, qualifying staff costs amounted to €25,772,897 (2021: €24,965,485). 60 FINEOS Corporation Holdings plc Notes to the Consolidated Financial Statements (continued)6. Other Income Research and development tax credit Gain on re-measurement of contingent consideration Grant and other income 2022 € 2021 € 1,279,599 1,305,798 892,978 – – 26,020 2,172,577 1,331,818 The Company avails of research and development tax credits pursuant to Section 33, Finance Act 2004. 7. Finance Costs Bank charges and interest Lease interest Unwinding of discount applicable to contingent consideration 2022 € 206,594 418,446 584,329 2021 € 74,674 476,627 82,674 1,209,369 633,975 8. Loss on Ordinary Activities Before Taxation The loss on ordinary activities before taxation is stated after charging/(crediting): Auditor’s remuneration – Audit of Group companies – Tax advisory services Amortisation (Note 11) Depreciation (Note 12) Impairment (Note 11) Research and development expense Research and development tax credit (Note 6) Share-based payment expense (Note 19) Acquisition-related costs Foreign exchange (gain)/loss 2022 € 2021 € 114,350 10,150 122,150 25,000 20,821,952 16,005,834 2,294,643 2,073,064 12,559,945 – 17,471,091 16,341,001 (1,279,599) (1,305,798) 2,741,585 – (823,664) 2,129,018 2,101,824 289,265 Annual Report 2022 61 9. (a) Tax on Loss on Ordinary Activities Tax on loss on ordinary activities The tax charge is made up as follows: Current tax: Overseas taxation Adjustments in respect of previous years Total current tax Deferred tax: 2022 € 2021 € 388,946 (45,787) 432,596 (78,557) 343,159 354,039 Origination and reversal of timing differences (4,536,173) (1,414,093) Tax on loss on ordinary activities (4,193,014) (1,060,054) Overseas taxation has been provided on the results of overseas subsidiary companies at the appropriate overseas rates of tax. (b) Factors affecting the tax charge for the year The current tax charge for the year differs from the amount computed by applying the standard rate of corporation tax in the Republic of Ireland to the loss on ordinary activities before taxation. The sources and tax effects of the differences are explained below: Loss on ordinary activities before tax 2022 € 2021 € (30,189,087) (13,545,116) Loss on ordinary activities multiplied by the standard rate of tax of 12.5% (3,773,636) (1,693,139) Depreciation greater than capital allowances Short-term timing differences Non-deductible expenses/non-taxable income Higher tax charge on passive income Higher rates of tax on foreign income Research and development tax credits claimed Adjustments in respect of previous years Losses carried forward Deferred tax Total tax charge 143,920 (40,445) 1,408,515 – 389,850 (319,203) (45,787) 73,172 59,092 185,862 28 410,708 (372,431) (78,557) 2,579,945 1,769,304 (4,536,173) (1,414,093) (4,193,014) (1,060,054) 62 FINEOS Corporation Holdings plc Notes to the Consolidated Financial Statements (continued)(c) Deferred tax asset/(liability) Group At beginning of year Released to the statement of comprehensive income (Note 9(a)) Foreign exchange Deferred tax on acquisition At end of year The deferred tax asset is analysed as follows: Timing differences between depreciation and capital allowances Timing differences on holiday leave Timing differences for losses Other timing differences At end of year Being: Deferred tax asset Provision for deferred tax Deferred tax asset 10. Earnings Per Share Basic earnings per share Loss attributed to ordinary shareholders Weighted average number of ordinary shares outstanding 2022 € 546,596 2021 € 10,463 4,536,173 1,414,093 97,570 8,374 – (886,334) 5,180,339 546,596 204,972 511,693 4,305,442 158,232 173,437 450,946 (249,023) 171,236 5,180,339 546,596 5,180,339 – 963,369 (416,773) 5,180,339 546,596 2022 € 2021 € (25,996,073) (12,485,062) 315,974,050 297,122,910 Basic loss per share (cents) (8.23) (4.20) Basic loss per share is calculated by dividing the loss for the year after taxation attributable to ordinary shareholders by the weighted average number of ordinary shares in issue during the year. The 2021 basic loss per share has been restated from a basic loss per share of 4.15 in cents to 4.20 in cents, arising from a calculation error. The prior period calculation used total comprehensive loss attributable to ordinary shareholders rather than loss for the financial period after taxation attributable to ordinary shareholders. Annual Report 2022 63 Diluted earnings per share Loss attributed to ordinary shareholders Weighted average number of ordinary shares outstanding 2022 € 2021 € (25,996,073) (12,485,062) 315,974,050 297,122,910 Diluted loss per share (cents) (8.23) (4.20) The calculation of diluted earnings per share has been based on the loss attributable to ordinary shareholders and weighted average number of ordinary shares outstanding after adjustments for the effects of all dilutive ordinary shares. Potential ordinary shares are treated as dilutive when, and only when, their conversion to ordinary shares would decrease EPS or increase the loss per share from continuing operations. 11. Intangible Assets Right-of- use assets € Development expenditure € Contract costs € Computer Software € Technology € Customer relationships € Goodwill € Total € Group 2022 Cost At 30 June 2021 6,085,458 109,969,639 2,923,068 341,736 7,840,459 17,716,568 41,332,032 186,208,960 Additions Translation adjustment 91,578 25,772,897 199,459 7,865 1,326,205 (499) – – – – – 26,063,934 1,129,987 2,553,355 5,956,874 10,973,787 At 30 June 2022 6,184,901 137,068,741 3,122,028 341,736 8,970,446 20,269,923 47,288,906 223,246,681 Amortisation and impairment At 30 June 2021 3,964,967 44,416,145 1,295,465 341,736 860,248 708,343 Amortisation charged in the year Impairment charged in the year Translation adjustment 1,242,397 16,892,534 646,814 – – – 5,680 775,772 (379) – – – 1,123,230 916,977 – – 51,586,904 20,821,952 – - 12,559,945 12,559,945 220,440 180,835 1,078,605 2,260,953 At 30 June 2022 5,213,044 62,084,451 1,941,900 341,736 2,203,918 1,806,155 13,638,550 87,229,754 Net book amounts At 30 June 2022 971,857 74,984,290 1,180,128 At 30 June 2021 2,120,491 65,553,494 1,627,603 – – 6,766,528 18,463,768 33,650,356 136,016,927 6,980,211 17,008,225 41,332,032 134,622,056 64 FINEOS Corporation Holdings plc Notes to the Consolidated Financial Statements (continued)Right-of-use assets € Development expenditure € Contract costs € Computer Software € Technology € Customer relationships € Goodwill € Total € Group 2021 Cost At 30 June 2020 4,533,218 81,700,092 2,367,741 341,736 Additions Arising on acquisition Written off Translation adjustment 1,552,240 24,965,485 330,858 – – – 3,298,150 341,136 – (111,917) 5,912 (4,750) – – – – – – – – – – 88,942,787 26,848,583 7,866,144 17,778,516 41,441,051 70,724,997 – – – (111,917) (25,685) (61,948) (109,019) (195,490) At 30 June 2021 6,085,458 109,969,639 2,923,068 341,736 7,840,459 17,716,568 41,332,032 186,208,960 Amortisation At 30 June 2020 3,051,119 31,567,254 655,858 311,647 – – Charged in the year Translation adjustment 913,848 12,857,272 641,820 30,089 857,075 705,730 – (8,381) (2,213) – 3,173 2,613 At 30 June 2021 3,964,967 44,416,145 1,295,465 341,736 860,248 708,343 – – – – 35,585,878 16,005,834 (4,808) 51,586,904 Net book amounts At 30 June 2021 2,120,491 65,553,494 1,627,603 – 6,980,211 17,008,225 41,332,032 134,622,056 At 30 June 2020 1,482,099 50,132,838 1,711,883 30,089 – – – 53,356,909 Development expenditure In total, research and development costs for the Group amounted to €43,243,988 in 2022 (2021: €41,306,486), out of which €25,772,897 (2021: €24,965,485) qualifies for capitalisation under IAS 38 Intangible Assets. Qualifying development expenditure is amortised on a straight-line basis over its useful economic life, which is considered to be between three and 10 years. The amortisation expense amounts to €16,892,534 in 2022 (2021: €12,857,272), of which €105,000 (2021: €105,000) relates to the amortisation of previously capitalised borrowing costs. Cash-generating units Goodwill acquired through business combination activity has been allocated to CGUs that are expected to benefit from synergies in that combination. The CGUs represent the lowest level within the Group at which the associated goodwill is monitored for internal management purposes and are not larger than the operating segments determined in accordance with IFRS 8 Operating Segments. A total of three CGUs have been identified. Impairment testing methodology and results Goodwill is subject to impairment testing on an annual basis. A value-in-use discounted cash flow model has been used at 30 June 2022 to value each of the three CGUs. The cash flow forecasts are primarily based on a financial budget for year ending 30 June 2023, formally approved by the Board, and detailed management projections for years ending 30 June 2024 to 30 June 2025. These include projected revenues and operating margins determined with reference to historical Company experience, industry data and management’s expectation for the future. Annual Report 2022 65 These forecasts are projected forward for a further seven years to determine the basis for a terminal value. Projected cash flows beyond the initial evaluation period have been extrapolated using a long-term growth rate of 2%. This is based on the long-term inflation for the US, as forecast by the Economics Intelligence Unit. The value-in-use represents the present value of the future cash flows, including the terminal value, discounted at a rate appropriate to each CGU. The discount rates (post tax) used range from 10.0% to 10.9%; these rates are in line with the Group’s estimated weighted average cost of capital, arrived at using the Capital Asset Pricing Model. The 2022 annual goodwill impairment testing process has resulted in a goodwill adjustment of €13.6 million being recorded in respect of our Limelight CGU due to an increase in the weighted average cost of capital as a result of rising global interest rates and revised revenue forecasts due to continued economic uncertainty in the US market leading to delays and uncertainty on the allocated budgets of existing and prospective customers. The assumptions underlying the 2022 value-in-use model projections resulted in a present value (using a post-tax discount rate of 10.35%) of €55.3 million and a related goodwill adjustment being recorded of €13.6 million, of which included in the operating loss is a goodwill impairment charge of €12.6 million and a further €1.0 million is related to the retranslation of the goodwill impairment charge to closing rates. Significant goodwill amounts The goodwill allocated to the Limelight and Spraoi CGUs accounts for 89.0% and 11.0% of the total carrying amount of goodwill at 30 June 2022. The additional disclosures required for these CGUs are as follows: Goodwill allocated to the CGU as at balance sheet date (thousands) Post-tax discount rate per annum Pre-tax discount rate per annum Long-term growth rate assumption Value-in-use (present value of future cash flows) (thousands) Carrying value (thousands) Headroom/(impairment) (thousands) 2022 Limelight 2021 Limelight 2022 Spraoi 2021 Spraoi €41,884 10.35% 17.0% 2% €55,296 €68,935 (€13,639) €36,608 9.4% 15.9% 2% €192,284 €65,056 €127,228 €5,404 10.35% 16.1% 2% €59,967 €8,005 €51,962 €4,724 13.3% 15.4% 2% €8,859 €7,995 €864 The key assumptions and methodology used in respect of the Limelight and Spraoi CGUs are consistent with those described above. The values applied to each of the key estimates and assumptions are specific to the individual CGUs and were derived from a combination of internal and external factors and took into account the cash flows specifically associated with the business. Sensitivity analysis Given the magnitude of the excess of value-in-use over carrying amount for the FINEOS and Spraoi CGUs, and our belief that the key assumptions are reasonable, management believes that it is not reasonably possible that there would be a change in the key assumptions such that the carrying amount would exceed the value-in-use. Consequently, no further disclosures relating to sensitivity of the value-in-use computations for the FINEOS or Spraoi CGUs are considered to be warranted. 66 FINEOS Corporation Holdings plc Notes to the Consolidated Financial Statements (continued)12. Property, Plant and Equipment Group 2022 Cost At 30 June 2021 Additions Translation adjustment Right-of-use assets € Office equipment € Computer equipment € Fixtures and fittings € Total € 9,250,962 795,605 4,706,901 1,906,467 16,659,935 878,722 69,286 – 616 635,834 117,985 211,402 9,415 1,725,958 197,302 At 30 June 2022 10,198,970 796,221 5,460,720 2,127,284 18,583,195 Depreciation At 30 June 2021 Charged in the year Translation adjustment 4,747,630 1,238,546 49,303 709,645 3,366,642 1,599,816 10,423,733 43,790 (2,985) 882,560 80,949 129,747 1,381 2,294,643 128,648 At 30 June 2022 6,035,479 750,450 4,330,151 1,730,944 12,847,024 Net book amounts At 30 June 2022 4,163,491 45,771 1,130,569 396,340 5,736,171 At 30 June 2021 4,503,332 85,960 1,340,259 306,651 6,236,202 Annual Report 2022 67 Group 2021 Cost At 30 June 2020 Additions Arising on acquisition Disposals Translation adjustment Right-of-use assets € Office equipment € Computer equipment € Fixtures and fittings € Total € 9,403,441 16,675 – (210,394) 41,240 790,673 3,986,725 1,889,880 16,070,719 927 208 – 3,797 756,516 151,174 (192,839) 5,325 188,849 4,156 (180,255) 3,837 962,967 155,538 (583,488) 54,199 At 30 June 2021 9,250,962 795,605 4,706,901 1,906,467 16,659,935 Depreciation At 30 June 2020 Charged in the year Disposals Translation adjustment 3,770,503 1,111,831 (160,300) 25,596 656,928 55,777 – (3,060) 2,740,084 1,668,567 794,352 (181,911) 14,117 111,104 (180,255) 400 8,836,082 2,073,064 (522,466) 37,053 At 30 June 2021 4,747,630 709,645 3,366,642 1,599,816 10,423,733 Net book amounts At 30 June 2021 4,503,332 85,960 1,340,259 306,651 6,236,202 At 30 June 2020 5,632,938 133,745 1,246,641 221,313 7,234,637 13. Financial Assets Company Shares in Group undertakings – unlisted, at cost: At beginning of year Contribution of investment in Limelight to FINEOS Corporation Inc. Return of capital from FINEOS International Impairment of investment in FINEOS Corporation Inc. At end of year 2022 € Restated 2021 € 99,404,900 – (259,182) (13,638,550) 22,834,215 76,570,685 – – 85,507,168 99,404,900 FINEOS International Ltd and FINEOS Europe Unlimited, a wholly owned subsidiary of FINEOS International Ltd, were placed into voluntary liquidation on 6 May 2022. Investments of FINEOS International Ltd were effectively distributed to FINEOS Corporation Holdings plc, and any funds owing to or from FINEOS International Ltd were discharged. A closing cash position of €259,182 was transferred to FINEOS Corporation Holdings plc in advance of this date and was accounted for as a return of capital. DigIn Technologies LLC was officially dissolved with effect from 25 April 2022 and any funds owing to or from DigIn Technologies LLC were assigned to and assumed by FINEOS Corporation Inc. in advance of this date. FINEOS Corporation Inc. owns 100% of the share capital of Limelight Health Inc. The Impairment of the Investment in FINEOS Corporation Inc. is as a result of the impairment of the Limelight Health CGU as detailed in Note 11. Details of subsidiary undertakings are included in Note 27. Details of the restatement of comparative figures are included in Note 29. 68 FINEOS Corporation Holdings plc Notes to the Consolidated Financial Statements (continued)14. Trade and Other Receivables Group Trade receivables Unbilled receivables Other receivables Prepayments Research and development tax credits Value added tax recoverable Corporation tax recoverable Deferred tax asset (Note 9) Company Prepayments Amounts owed by subsidiary undertakings Trade and other receivables 2022 € 2021 € 25,726,450 22,249,112 573,242 141,790 3,063,826 970,267 1,001,832 686,673 5,180,339 1,247,706 148,828 1,984,899 1,492,056 1,084,099 442,527 963,369 37,344,419 29,612,596 2022 € 2,035 Restated 2021 € 1,846 68,871,874 44,487,883 68,873,909 44,489,729 The carrying amounts of trade receivables and other receivables approximate their fair value largely due to the short-term maturities and nature of these instruments. All trade receivables are due within the Group’s and Company’s normal terms, which are 30 days. Trade receivables are shown net of a provision for expected credit losses (see Note 24 (ii)). Unbilled receivables Unbilled receivables refers to work performed/revenue earned but not yet invoiced to the customer due to billing arrangements. Taxes and tax credits Taxes and social welfare costs are subject to the terms of the relevant legislation. 15. Cash and Cash Equivalents Group Cash and cash equivalents Company Cash and cash equivalents There are no restrictions on the cash held. 2022 € 2021 € 44,311,366 13,998,945 2022 € 2021 € 21,657,649 401,664 Annual Report 2022 69 16. Trade and Other Payables Current Group Trade payables Corporation tax Value added tax Employee taxes and levies Accruals Deferred revenue Research and development tax credit Lease liabilities (Note 21) Contingent consideration Company Trade payables Accruals Non-current Group Lease liability (Note 21) Research and development tax credit Contingent consideration Trade and other payables 2022 € 2021 € 1,735,040 3,289,594 234,902 10,478 176,478 32,996 1,312,422 1,209,036 8,471,960 7,490,130 25,809,421 17,013,665 1,126,376 1,269,063 1,424,662 2,151,497 2,359,724 1,759,117 42,484,985 34,391,576 2022 € 25,706 78,917 104,623 2022 € 2021 € 19,824 38,500 58,324 2021 € 4,559,815 5,262,444 4,452,225 5,180,303 2,618,206 2,878,125 11,630,246 13,320,872 The carrying amounts of trade and other payables approximate their fair value largely due to the short-term maturities and nature of these instruments. The repayment terms of trade payables vary between on demand and 30 days. No interest is payable on trade payables. Reservation of title Certain trade payables purport to claim a reservation of title clause for goods supplied. Since the extent to which these payables are secured at any time depends on a number of conditions, the validity of some of which is not readily determinable, it is not possible to indicate how much of the above was effectively secured. Amounts due to Group companies The amounts due to Group and related companies are unsecured, interest free and are repayable on demand. Accruals The terms of the accruals are based on underlying invoices. 70 FINEOS Corporation Holdings plc Notes to the Consolidated Financial Statements (continued)Taxes and social welfare costs Taxes and social welfare costs are subject to the terms of the relevant legislation. Interest accrues on late payments. No interest was due at the financial year end date. Deferred revenue Income arising on support contracts and subscription sales where the provision of the service has not been completed at the year-end date is deferred and recognised as the service is provided. Contingent consideration On an undiscounted basis, the corresponding future payments relating to contingent consideration, for which the Group may be liable, approximate US$5.9 million (€5.6 million). This is based on the expected payment amounts, and underlying performance metrics as set out in the updated letter of agreement dated 12 May 2022. The fair value of contingent consideration is arrived at through discounting the expected payment to present value. The fair value approximates US$4.6 million (€4.3 million) on a discounted basis. The movement in contingent consideration during the year was as follows: At 1 July Arising on acquisition during the year Discount unwinding Translation adjustment Gain on re-evaluation At 30 June 2022 € 4,637,242 2021 € – – 4,447,533 584,329 649,337 (892,978) 82,674 107,035 – 4,977,930 4,637,242 17. Called up Share Capital Authorised share capital (Group and Company) Ordinary shares €0.001 4,500,000 4,500,000 Nominal value (per share) 2022 € 2021 € Issued share capital presented as equity Ordinary shares €0.001 319,385 301,677 Annual Report 2022 71 The movement in issued share capital during the financial year was as follows: Issued share capital At 30 June 2021 Share issue – equity raise Share issue – SPP Share issue – exercise of share options Transaction costs accounted for as a deduction from equity No. of shares Nominal value (per share) Share capital € Share premium € Total € 301,676,608 16,279,069 862,261 566,849 – 319,384,787 €0.001 €0.001 €0.001 €0.001 301,677 124,239,947 124,541,624 16,279 43,660,015 43,676,294 862 567 2,329,134 2,329,996 144,275 144,842 – (745,573) (745,573) 319,385 169,627,798 169,947,183 Transfer from share option reserve – – 89,375 89,375 At 30 June 2022 319,384,787 €0.001 319,385 169,717,173 170,036,558 The equivalent disclosure for the prior year is as follows: No. of shares Nominal value (per share) Share capital € Share premium € Total € Issued share capital At 1 July 2020 Share issue – equity raise Share issue – SPP Share issue – acquisition of Limelight 272,029,851 19,953,052 1,877,520 2,743,315 Share issue – exercise of share options 5,072,870 €0.001 €0.001 €0.001 €0.001 €0.001 272,030 59,903,254 60,175,284 19,953 51,451,527 51,471,480 1,878 2,743 5,073 4,897,982 4,899,860 7,147,203 7,149,946 869,481 874,554 Transaction costs accounted for as a deduction from equity – 301,676,608 – (1,029,430) (1,029,430) 301,677 123,240,017 123,541,694 Transfer from share option reserve – – 999,930 999,930 At 30 June 2021 301,676,608 301,677 124,239,947 124,541,624 FINEOS undertook an equity raising on 2 September 2021 to provide funding towards FINEOS’ opportunity pipeline and provide working capital and balance sheet support for planned R&D investments and organic and inorganic growth opportunities. FINEOS successfully completed a fully underwritten institutional placement, raising approximately AU$70 million through the issue of 16,279,069 new fully paid CHESS Depositary Interests over FCL shares (‘CDIs’). The placement was undertaken at an offer price of AU$4.30 per new CDI. FINEOS Corporation Holdings plc also undertook a non-underwritten Security Purchase Plan (‘SPP’) raising approximately AU$3.7 million through the issue of 862,261 new fully paid CDIs, at an offer price of AU$4.30 per new CDI, which completed on 7 October 2021. Reconciliation of shares issued to proceeds Shares issued at nominal amount Premium arising on shares issued Total value of shares issued Shares issued as consideration for Limelight Proceeds from issue of shares 72 FINEOS Corporation Holdings plc 2022 € 17,708 2021 € 29,647 46,133,424 46,151,132 64,366,193 64,395,840 – (7,149,946) 46,151,132 57,245,894 Notes to the Consolidated Financial Statements (continued)18. Reserves Foreign exchange reserve The foreign exchange reserve represents gains/losses arising on retranslating the net assets of overseas operations into Euro. Retained earnings The retained earnings represent cumulative gains and losses recognised, net of transfers to/from other reserves and dividends paid. Other undenominated capital This reserve records the nominal value of shares repurchased by the Company. Share option reserve The share option reserve represents the movement in share-based payments. The movement in the cumulative expense since the previous year end date is recognised in the statement of comprehensive income, with a corresponding entry in ‘share option reserve’. Re-organisation reserve FINEOS Corporation Holdings plc (‘FINEOS’) was incorporated on 12 December 2018 and the Directors elected at that date to account for the restructure of the Group as a capital re-organisation rather than a business combination. The reorganisation reserve represents the difference between the fair value of the shares issued to effect the reorganisation and the nominal value of the shares acquired. See Note 2(a) on page 35 of the Group’s Annual Report for the year ended 30 June 2020 for further detail. 19. Share-Based Payment Expense The total share-based payment expense for the Group’s equity incentive schemes charged to general and administration costs in the consolidated statement of comprehensive income is as follows: Share-based payment expense Details of the schemes operated by the Group are set out below. 2019 Equity Incentive Plan 2022 € 2021 € 2,741,585 2,129,018 The ‘2019 Equity Incentive Plan’ was adopted by the Board on 24 June 2019 and approved by the shareholders of the Company on 9 July 2019. It became effective on Listing. The 2019 Equity Incentive Plan, administered by the Remuneration and Nomination Committee, allows for the grant of the following awards to employees and contractors: options, restricted share awards, RSU awards and performance awards. Total awards under the 2019 Equity Incentive Plan are subject to a limit of 5% of the ordinary issued share capital of the Company at any time and subject to annual rationalisation. The exercise of awards may be conditional upon the satisfaction of performance factors during a performance period as determined by the Remuneration and Nomination Committee and set out in each award agreement. Annual Report 2022 73 See the table below for further detail on the terms of options issued under the 2019 Equity Incentive Plan in the year to 30 June 2022. Grant Date No. of Share Options Exercise price per option Vesting conditions by shareholders Contractual life of Options Various grant dates 6,809,000 Range of AU$1.49 to AU$4.35 Three-year service period. Expire seven years after date of grant 3 November 2021 180,518 AU$4.12 Expire seven years after date of grant Options shall fully vest in three equal tranches on the 1st year, 2nd year and 3rd year anniversary from the date of grant of the options. 6,989,518 An expense of €2,741,585 was recognised during the financial year (2021: €2,129,018) relating to the award of options under the 2019 Equity Incentive Plan in the current year and prior years. 2012 Share Option Plan, 2015 Share Option Plan and 2019 Share Option and Retention Plan Prior to listing, FINEOS International Limited, the previous ultimate parent undertaking of the Group, operated a 2012 Share Option Plan and a 2015 Share Option Plan. The options awarded were subject to a three-year service period and the occurrence of a ‘triggering event’, being the acquisition by any person, or group of persons acting in concert (excluding any persons connected or related to the existing shareholders), of control of the Company as a result of purchasing and/or subscribing for shares under a trade sale or IPO. In February 2019, the Group modified the terms and conditions of the share options granted under its 2015 Share Option Plan and granted new options under a 2019 Share Option and Retention Plan. The options granted under the 2019 Share Option and Retention Plan were issued as replacements for options granted under the Company’s 2012 Share Option Plan, which lapsed on 1 February 2019 without having vested. On 24 June 2019, as part of the restructure, all options were exchanged for options in the new parent Company, FINEOS Corporation Holdings Limited, on a one-for-one basis. The awards were to vest six months after listing. These 2015 and 2019 share option plans have now closed, and no further awards were issued under these plans in the current or prior financial year. An expense of €Nil was recognised during the financial year (2021: €Nil) relating to the February 2019 modification of options under the 2015 Share Option Plan and the grant of options under the 2019 Share Option Plan. Details of movement and options outstanding under the Group’s Equity Incentive Plans The following table illustrates the number and weighted average exercise prices (WAEP) of, and movements in, share options granted under the schemes to Group employees during the year. Outstanding at 1 July at €0.001 per share Options granted Options exercised Options forfeited 2022 Number 16,215,222 6,989,518 (566,849) (1,207,752) 2022 WAEP 2021 Number 2021 WAEP 1.17 1.68 0.26 2.34 17,217,500 5,292,300 (5,072,870) (1,221,708) Outstanding at 30 June at €0.001 per share 21,430,139 1.32 16,215,222 Exercisable at 30 June at €0.001 per share 7,500,212 0.26 7,832,989 74 FINEOS Corporation Holdings plc 0.53 2.48 0.17 2.38 1.17 0.20 Notes to the Consolidated Financial Statements (continued)For the share options not yet exercisable as at 30 June 2022 the weighted average remaining contractual life is 1.7 years (30 June 2021: 1.75 years). The fair value of equity-settled share options granted is estimated as at the date of grant using a Black-Scholes model, taking into account the terms and conditions upon which the options were granted. The Black-Scholes model is internationally recognised as being appropriate to value employee share schemes. The Company has used expected share price volatilities of comparable listed companies. The following table lists the inputs to the model used for the year ended 30 June 2022 (weighted average in each case): Dividend yield Expected volatility Risk free interest rate Average expected life remaining in years 2022 % 0 45.49 1.34 4.7 2021 % 0 45.10 0.60 4.4 20. Commitments and Contingencies (a) Capital commitments At the year end the Group had no capital commitments. (b) Contingent liabilities At the year end the Group had no contingent liabilities. (c) Lease commitments The Group has total future minimum lease payments under non-cancellable lease commitments as follows: At 30 June 2022 Due within one year Due within two to five years Due after five years At 30 June 2021 Due within one year Due within two to five years Due after five years Land and buildings € 1,238,848 3,708,012 1,559,312 6,506,172 Software licenses € 526,301 214,987 Total € 1,765,149 3,922,999 – 1,559,312 741,288 7,247,460 Land and buildings € Software licenses € Total € 1,204,860 1,330,194 2,535,054 3,390,532 2,338,968 741,288 4,131,820 – 2,338,968 6,934,360 2,071,482 9,005,842 Annual Report 2022 75 21. Lease Liabilities Group Current lease liabilities Non-current lease liabilities Total lease liabilities The Group’s total lease liability over the years is as follows: Opening liability Additions for the year Disposals for the year Interest for the year Lease expense for the year Closing lease liability 2022 € 2021 € 1,424,662 2,151,497 4,559,815 5,262,444 5,984,477 7,413,941 2022 € 2021 € (7,413,941) (7,776,146) (970,300) (1,568,915) – 45,808 (418,446) (476,627) 2,818,210 2,361,939 (5,984,477) (7,413,941) Short-term lease expenses in the statement of comprehensive income – – The Group’s leases include rental of office spaces for business use and right-of-use licenses. All leases are on a fixed repayment basis and no arrangements have been entered into for contingent rental repayments. The lease terms range from two to 15 years depending on the term set in the contract. The effective interest rate charged during the financial year ranged from 3.2% to 7% (2021: 3.2% to 7%) per annum. The lower rate of 3.2% reflects the Group’s overdraft facility rate and the higher rate of 7% reflects the borrowing rate on the loan drawn by the Group in 2017 and repaid in September 2019. The right-of-use asset of licenses is classified as ‘intangible assets’, while the right-of-use asset of office rentals is classified as ‘property, plant and equipment’. The movement in the carrying amount of the right-of-use assets of the Group at the start and end of each reporting period is disclosed in Notes 11 and 12. 22. Controlling Party Michael Kelly is the ultimate controlling party of the FINEOS Group. 23. Pension Commitments The Group operates defined contribution pension schemes. The Group’s contributions are charged to the statement of comprehensive income in the year to which they relate and amounted to €4,318,471 (2021: €3,391,835). An amount of €552,674 was payable at the year end (2021: €538,444). 76 FINEOS Corporation Holdings plc Notes to the Consolidated Financial Statements (continued)24. (i) Financial Instruments Liquidity risk Liquidity risk refers to the risk that the Group encounters difficulties in meeting its short-term obligations. Liquidity risk is managed by matching the payment and receipt cycle. The following table details the Group’s remaining contractual maturity for its liabilities. The table has been drawn up based on contractual undiscounted cash flows of financial instruments based on the earlier of the contractual date or when the Group is expected to receive or (pay). The table includes both interest and principal cash flows. 30 June 2022 Group Financial liabilities Finance lease Total € Within 1 year € Between 1 – 5 years € Over 5 years € 37,574,223 37,574,223 – – 5,984,477 1,424,662 3,116,454 1,443,361 Research and development tax credit 5,578,601 1,126,376 3,121,294 1,330,931 Contingent consideration 4,977,930 2,359,724 2,618,206 – 54,115,231 42,484,985 8,855,954 2,774,292 30 June 2021 Group Financial liabilities Finance lease Total € Within 1 year € Between 1 – 5 years € Over 5 years € 29,211,899 29,211,899 – – 7,413,941 2,151,497 3,169,144 2,093,300 Research and development tax credit 6,449,366 1,269,063 3,382,583 1,797,720 Contingent consideration 4,637,242 1,759,117 2,878,125 – 47,712,448 34,391,576 9,429,852 3,891,020 Fair values The fair value of a financial instrument is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Financial instruments whose carrying amounts approximate fair value Management has determined that the carrying amounts of cash and bank balances, trade and other receivables and trade and other payables reasonably approximate their fair values because these are mostly short-term in nature. The fair values of other classes of financial assets and liabilities are disclosed in their respective notes to these financial statements. Annual Report 2022 77 The analysis of the carrying amounts of the financial instruments of the Group required under IFRS 9 Financial Instruments is as set out below: Financial assets that are debt instruments measured at amortised cost Trade receivables Cash and cash equivalents Financial liabilities at amortised cost Trade payables Lease liabilities Group 2022 € Group 2021 € 25,726,450 22,249,112 44,311,366 13,998,945 1,735,040 3,289,594 5,984,477 7,413,941 The main risks arising from the Group’s financial instruments are credit risk, market risk, foreign currency risk, interest rate risk and liquidity risk. The Board reviews and agrees policies for managing each of these risks and they are summarised below: (ii) Credit risk Credit risk is the potential financial loss resulting from the failure of a customer or counterparty to settle its financial and contractual obligations to the Group, as and when they fall due. The Group’s exposure to credit risk is mainly influenced by the individual characteristics of each customer. The Group has established credit limits for each customer under which these customers are analysed for credit-worthiness before the Group’s standard payment and delivery terms are offered. Most of the customers have been with the Group for many years and losses have occurred infrequently. In most cases, the Group does not require collateral in respect of trade and other receivables. The Group monitors their balances regularly. Management has a credit policy in place and the exposure to credit risk is monitored on an ongoing basis. The Group always recognises lifetime expected credit losses (‘ECL’) for trade receivables. The ECL on these financial assets are estimated using a provision matrix as shown below, based on the Group’s historical credit loss experience, adjusted for factors that are specific to the receivables, general economic conditions and an assessment of both the current as well as the forecast direction of conditions at the reporting date, including time value of money where appropriate. Expected credit losses analysis: At 30 June 2022 Current 1 month 2 months 3 months 4+ months Balance Trade receivables as at 30 June 2022 Expected credit losses % Loss allowance 16,105,932 6,883,296 1,524,789 1,292,026 285 25,806,328 0% – 0% – 1% 5% 15,248 64,601 10% 29 79,878 At 30 June 2021 Current 1 month 2 months 3 months 4+ months Balance Trade receivables as at 30 June 2021 Expected credit losses % Loss allowance 12,728,346 4,353,461 3,573,807 1,715,669 (722) 22,370,561 0% – 0% – 1% 5% 10% 35,738 85,783 (72) 121,449 78 FINEOS Corporation Holdings plc Notes to the Consolidated Financial Statements (continued)(iii) Market risk Market risk is the risk that changes in market prices, such as interest rates and foreign exchange rates, will affect the Group’s income. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return on risk. (a) Foreign currency risk The Group’s foreign currency risk arises from sales and purchases denominated in foreign currencies, primarily the United States dollar, Australian dollar and New Zealand dollar. During the year, the Group used foreign currency forward exchange contracts to hedge its exposure. However, at the year end the Group had no outstanding contracts in place. Sensitivity analysis At 30 June 2022, if the foreign currencies strengthen or weaken 5% against the functional currencies, with all variables held constant, the maximum adjustment to the pre-tax profit/loss of the Group, respectively, for the financial years presented would have been as set out below: NZ $ AU $ US $ CAN $ GBP £ PLN INR 2022 € 201,825 (88,187) 2021 € 147,767 97,939 1,602,394 2,166,724 278,579 60,451 (87,836) (23,963) 266,401 78,380 (88,248) – 1,943,263 2,668,963 5% is the sensitivity rate used when reporting foreign currency risk internally to key management personnel and represents management’s assessment of the possible changes in foreign exchange rate. (b) Interest rate risk There are no variable rate instruments on the statement of financial position at 30 June 2022. The Group does not account for any fixed rate financial liabilities at FVTPL, therefore a change in interest rates at the reporting date would not affect profit or loss. Fixed rate instruments – nominal amount Financial liabilities 2022 € – 2021 € – Annual Report 2022 79 Related Party Transactions 25. A Group subsidiary, FINEOS Corporation Limited (Ireland), is party to a lease arrangement with a company controlled by Michael Kelly. Its term extends until 13 June 2029 with no express options for renewal in favour of either party. The lease provides for a rent review on 13 June 2024 at market rates. Rent payable by FINEOS is currently €779,656 per annum (excluding taxes). The rental expense for the year was €779,656 (2021: €779,656). The total rent due at 30 June 2022 was €Nil (2021: €Nil). Consulting fees invoiced by Non-executive Directors during the year amounted to €Nil (2021: €Nil). In common with other companies, which are members of a group of companies, the financial statements reflect the effect of such membership. Key management personnel All Directors of the FINEOS Group are considered key management personnel. The current Directors are set out on page 14 of the Annual Report. Total remuneration in respect of these individuals is split as follows: Wages and salaries Employer’s PRSI Pension Share-based payment expense Share awards gain on exercise 2022 € 2021 € 1,213,763 1,169,025 39,189 44,827 – – 40,690 42,597 25,752 3,319,860 1,297,779 4,597,924 During the financial year ended 30 June 2022, there were no material changes to, or material transactions between, the Company and its key management personnel or members of their close family, other than in respect of remuneration. 26. Capital Management Policies and Objectives Capital management The Group’s and Company’s objectives when managing capital are to safeguard the Group’s and Company’s ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. The capital structure of the Group consists of debts, which includes any borrowings, and equity attributable to owners of the Company, comprising issued capital and reserves. There were no changes in the Group’s and Company’s approach to capital management during the year. The Group and Company monitor capital on the basis of the gearing ratio. This ratio is calculated as net debt divided by total equity. Net debt is calculated as total borrowings (including bank borrowings and excluding trade and other payables, provisions for income tax and deferred tax liabilities as shown in the statement of financial position) less cash. Given that the Group has no external borrowings, the gearing ratio has been reflected as Nil. 80 FINEOS Corporation Holdings plc Notes to the Consolidated Financial Statements (continued)The gearing ratio of the Group at 30 June 2022 was as follows: Total borrowings Less: cash and cash equivalents Net funds Total equity Total capital Gearing ratio Group 2022 € - Group 2021 € - (44,311,366) (13,998,945) (44,311,366) (13,998,945) 169,293,652 136,340,578 169,293,652 136,340,578 Nil Nil 27. Subsidiary Undertakings The Company has the following subsidiary undertakings. All subsidiaries are wholly owned unless otherwise indicated: Subsidiary Undertaking FINEOS Corporation Limited (previously FINEOS Corporation U.C.) FINEOS UK Limited (previously FINEOS Corporation Limited) FINEOS Corporation Inc. Country of Incorporation Republic of Ireland United Kingdom United States of America FINEOS Australia Pty Limited Australia FINEOS New Zealand Limited New Zealand FINEOS Polska S.p Z.o.o FINEOS Canada Limited Poland Canada FINEOS Hong Kong Limited Hong Kong FINEOS Esp Entity, S.L.U Spain Limelight Health Inc. United States of America FINEOS India Private Limited (previously Spraoi Software Development Services Private Limited) India Principal Activity Innovator of enterprise claims management and policy administration software Provision of professional services to its parent undertaking Provision of professional services and sales and marketing services to its parent undertaking Provision of professional services and sales and marketing services to its parent undertaking Provision of professional services to its parent undertaking Provision of product engineering services to its parent undertaking Provision of professional services to its parent undertaking Provision of sales and marketing services to its parent undertaking Provision of product engineering services to its parent undertaking Provision of professional services and sales and marketing services to its parent undertaking Provision of product engineering services to its parent undertaking Annual Report 2022 81 Details of registered offices are listed below: Incorporated in Ireland FINEOS Corporation Limited Registered Address FINEOS House, East Point Business Park, Dublin 3, D03 FT97 Incorporated in the United Kingdom Registered Address FINEOS UK Limited 5 Clapham Chase, Bedford, Bedfordshire, MK41 6FA Incorporated in the United States of America Registered Address FINEOS Corporation Inc. Limelight Health Inc. Incorporated in Australia FINEOS Australia Pty Limited Incorporated in New Zealand FINEOS New Zealand Limited Incorporated in Poland FINEOS Polska S.p Z.o.o Incorporated in Canada FINEOS Canada Limited Incorporated in Hong Kong FINEOS Hong Kong Limited Incorporated in Spain FINEOS Esp Entity, S.L.U Incorporated in India 75 State Street, Suite 100, Boston, MA 02109 26 O’Farrell Street, Suite 410, San Francisco, CA 94108 Registered Address North Tower Level 22, 459 Collins Street, Melbourne, VIC 3000 Registered Address Offices of DLA Phillips Fox, Level 22, DLA Phillips Fox Tower, 209 Queen Street, Auckland 1010 Registered Address ul. Cypriana Kamila Norwida 2, 80-280 Gdansk Registered Address 900-1959 Upper Water Street, Halifax, NS, B3J 3N2 Registered Address 16th floor, Wing On Centre, 111 Connaught Road Central Registered Address Calle Principe de Vergara 112, 28002 Madrid Registered Address FINEOS India Private Limited (previously Spraoi Software Development Services Private Limited) 23, Siva Archade, 29th Main, BTM Layout 1st Stage, Bangalore KA 560068 82 FINEOS Corporation Holdings plc Notes to the Consolidated Financial Statements (continued) 28. Events Subsequent to the Year End There are no events subsequent to the year end that would require disclosure in or adjustment to the consolidated financial statements. 29. Prior Year Company Financial Statement Comparatives A capital contribution from FINEOS Corporation Holdings plc of €76.6 million to a Group company was included within current assets in the 2021 Company statement of final position. This balance is included in financial assets in the 2022 Company statement of financial position and the prior year financial asset and current asset figures have been reclassified in respect of same. This reclassification has no impact on the Company’s prior year results or total assets. Company Statement of Financial Position Financial assets Trade and other receivables Cash and cash equivalents Total assets 30 June 2021 (previously reported) € Restatement € 30 June 2021 (restated) € 22,834,215 76,570,685 99,404,900 121,060,414 (76,570,685) 44,489,729 401,664 144,296,293 – – 401,664 144,296,293 30. Approval of Consolidated Financial Statements The consolidated financial statements and Company statement of financial position in respect of the year ended 30 June 2022 were approved and authorised for issue by the Directors on 23 August 2022. Annual Report 2022 83 Information required by ASX Listing Rules and not disclosed elsewhere in this document is set out below. The information is correct as at 17 August 2022 unless otherwise indicated. FINEOS is incorporated in Dublin, Ireland. Its securities, in the form of Chess Depositary Interests (CDIs) in FINEOS shares, are listed on ASX and are not listed on any other securities exchange. Since Chess Deposit Nominees Pty Limited (CDN) is the legal holder of applicable shares but the holders of CDIs are not themselves the legal holders of their applicable shares, the holders of CDIs do not have any directly enforceable right to vote under the FINEOS constitution. In order to vote at general meetings, CDI holders have the following options: (a) instructing CDN, as the legal owner of the underlying shares, to vote the shares underlying their CDIs in a particular manner; (b) informing FINEOS that they wish to nominate themselves or another person to be appointed as CDN’s proxy with respect to the shares underlying their CDIs for the purposes of attending and voting at the general meeting; or (c) converting their CDIs into a holding of shares and voting these at the meeting (however, if thereafter the former CDI holder wishes to sell their investment on ASX it would be necessary to convert the shares back to CDIs). Option holders are not afforded any voting rights by the options held by them. Securities on issue There are 319,384,787 CDIs on issue held by 3,525 registered holders. The number of securities held by substantial security holders are set out below: JACQUEL INVESTMENTS LIMITED There are no securities subject to voluntary escrow. There are 21,542,139 unlisted options issued and held by 839 option holders. Distribution spread of security holdings Balance 168,336,360 % 52.7% Holding Ranges 1-1,000 1,001-5,000 5,001-10,000 10,001-100,000 100,001-9,999,999,999 Totals Holders Total Units 1,783 1,089 313 300 40 776,951 2,707,316 2,341,753 7,523,839 306,034,928 3,525 319,384,787 % 0.24 0.85 0.73 2.36 95.82 100.00 84 FINEOS Corporation Holdings plc Additional Security Holder InformationTop 20 Security Holders JACQUEL INVESTMENTS LIMITED J P MORGAN NOMINEES AUSTRALIA PTY LIMITED HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED CITICORP NOMINEES PTY LIMITED BNP PARIBAS NOMINEES PTY LTD AUSTRALIAN FOUNDATION INVESTMENT COMPANY LIMITED BNP PARIBAS NOMS PTY LTD HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED - A/C 2 MIRRABOOKA INVESTMENTS LIMITED AMCIL LIMITED BUTTONWOOD NOMINEES PTY LTD DJERRIWARRH INVESTMENTS LIMITED NEWECONOMY COM AU NOMINEES PTY LIMITED <900 ACCOUNT> JASON ANDREW & WENDY ANDREW POWERWRAP LIMITED CS FOURTH NOMINEES PTY LIMITED NATIONAL NOMINEES LIMITED TRUEBELL CAPITAL PTY LTD GARRETT VIGGERS ALAN LEARD Balance 168,336,360 44,700,554 22,971,645 20,201,104 9,344,692 9,252,729 6,177,226 4,380,049 4,168,501 2,619,232 2,481,973 1,398,891 1,091,610 986,825 826,448 724,590 691,024 659,649 609,509 435,364 % 52.7% 14.0% 7.2% 6.3% 2.9% 2.9% 1.9% 1.4% 1.3% 0.8% 0.8% 0.4% 0.3% 0.3% 0.3% 0.2% 0.2% 0.2% 0.2% 0.1% Total Securities of Top 20 Holdings 302,057,975 94.4% Total of Securities 319,384,787 Unmarketable Parcels (UMP) (based on a share price of $1.81) Total Securities/Issued Capital UMP Securities UMP Holders UMP Percent 319,384,787 117387 729 0.03675 Annual Report 2022 85 This page has been intentionally left blank. 86 FINEOS Corporation Holdings plc Company Information Directors Anne O’Driscoll (Chairman) Michael Kelly Gilles Biscay Martin Fahy David Hollander Tom Wall Company Secretary - Joint Tom Wall Company Secretary - Joint Natalie Climo Registered Office FINEOS House, East Point Business Park, Dublin 3, Ireland Ph: +353 1 639 9700 Solicitors William Fry 2 Grand Canal Square, Dublin 2, Ireland Bankers Bank of Ireland Lower Baggot Street, Dublin 2, Ireland HSBC Bank 1 Grand Canal Square, Dublin 2, Ireland Auditors Mazars Chartered Accountants and Statutory Audit Firm Harcourt Centre, Block 3, Harcourt Road, Dublin 2, Ireland North Tower Level 22, 459 Collins Street, Melbourne, VIC 3000 Australia Ph: +61 3 9018 3400 Registered Number 639640 Share Registry Boardroom Pty Ltd GPO Box 3993, Sydney, NSW 2001 Australia Ph: +61 2 9290 9600 Annual Report 2022 87 

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