FINEOS Corporation Holdings plc
Annual Report 2023

Plain-text annual report

Annual Report for the six-month period ended 31 December 2023 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 14 16 23 30 31 40 41 42 43 45 47 48 49 88 91 ii FINEOS Corporation Holdings plc Chairman and CEO’s Report Dear Security Holder, We are pleased to update you on the performance of our business for the transitional six-month period ending 31 December 2023, as we move to using calendar year as our financial year from 1 January 2024. Over the period, FINEOS achieved improved gross profit and EBITDA* margins, continued to grow its higher margin recurring subscriptions revenue, and accomplished several significant strategic milestones for our clients. * (defined as earnings before interest, taxes, depreciation and amortisation). Annual Report 2023X Annual Report 2023 1 1 Chairman and CEO’s Report Improved margins and continued subscription revenue growth The impact of the market environment on our clients during this financial year has been relatively positive. We began to witness recovery from the global pandemic, and we also witnessed rising interest rates as a result of increased inflation in most of the developed world. The impact of higher interest rates is good news for our insurer clients as it means a positive return on their reserves. In addition, our markets continue to experience solid employment rates, which again has been good news for our employee benefits carriers. Total revenue for the period was €61.1 million, which was essentially flat on the prior corresponding period (pcp) of €61.5 million. This result was due to lower services revenue than previously anticipated as project start dates pushed out and new name deal closures lengthened. However, subscription revenue continued to grow on both prior period and pcp, and remains our key focus as a SaaS company. We intend to continue driving this higher margin revenue which yields better results to the bottom line and better returns to our security holders. Subscription revenue for the six-month period was €33.0 million, up 10.5% on pcp. The growth was attributable to successful and speedy client implementations and cloud upgrades, despite absorbing the loss of a Limelight Health client. In North America, we had some great wins in delivery of our product suite. For Securian Canada, we were able to complete the necessary work for the FINEOS Platform for claims management to go live in a record five months. With Guardian, the initial product work and implementation process is going very well and we remain sharply focussed on the success of this full end- to-end administration implementation. In Europe, we completed the groundwork for our most recent new name client in the region, New Ireland, to go live in January 2024 and are pleased to confirm this has since been achieved. A number of our clients in the APAC region specifically have seen the benefits of upgrading to the cloud and we believe more of our clients in that region will be investing to extend their use of the FINEOS Platform to modernise and enhance their customer experience while adhering to global and local industry standards in security, privacy, and compliance regulation. Both our cost of sales and all operating expense lines have decreased versus pcp as we are starting to realise the results of our cost-saving initiatives. One of the main strategies that we deployed was focusing on hiring in lower-cost regions such as India, Poland and Spain. We were positively impacted by gains of €0.4 million incurred from foreign exchange movements, and remain most largely exposed to fluctuations in the EUR to USD rate as 77% of revenue is derived from the North America region. The gross profit margin achieved was a strong 71.5%, up from 66.9% in pcp. Our EBITDA (defined as earnings before interest, taxes, depreciation and amortisation) for the period was €4.9 million, up from a loss of €2.6 million in the pcp, achieving a margin of 8.1%, up from a negative 4.2%. These two strong margin improvements reflect the efforts of our cost-reduction program as well as the increased proportion of subscriptions in our revenue. Strengthened balance sheet In December, following the approval of security holders at the Annual General Meeting, a further AU$5 million was invested by CEO Michael Kelly into the Company via a placement of 2.2 million Chess Depository Interests (CDIs). This came after, but in conjunction with, a AU$35 million placement to new and existing security holders in August and a Security Purchase Plan that raised AU$0.2 million. All placements were at the same offer price of AU$2.25 per CDI. Raising just over AU$40 million (before costs) has put FINEOS in the advantageous position of having a strong balance sheet with €28.1 million in cash at the end of the year, remaining debt-free and having the flexibility for managing required investments in the business as we work toward generating free cash flows in the first half of 2024. 2 FINEOS Corporation Holdings plc On behalf of the Board, we would like to thank all FINEOS employees for their continued best efforts and commitment over the past six months. We also want to thank our existing security holders and welcome our new ones, following the capital raise in August. We look forward to a successful year of delivery and subscription revenue growth in 2024. Your sincerely, Anne O’Driscoll Chairman Michael Kelly Founder and CEO Board appointment Following security holder approval at the AGM on 5  December 2023, we were delighted to appoint US-based Terri Rhodes to the Board as an Independent Non-executive Director, effective 1 January 2024. We welcome Terri as an excellent addition to the Board. Her wealth of industry experience in the absence, workers’ compensation and disability market as well as insights from her time as CEO of DMEC will be of great value as we continue to expand our footprint in North America and develop the FINEOS Platform for Absence, Integrated Disability and Absence Management (IDAM) and employee benefits. Outlook We expect total revenue for FY24 to be in the range of €130 million to €135 million. The growth rate for subscription revenue is expected to be in the low to mid teens (versus CY23) while services revenue is expected to remain flat (versus CY23). Guidance reflects both the continued lengthening in sales cycles and Limelight Health client churn. We are on track for the successful delivery of a number of key projects to replace legacy systems with several large carriers to maximise product subscriptions. We will continue our strategy of cost savings through operational efficiencies and as a result FY24 total costs are expected to decrease (versus CY23). We continue to expect positive free cash flow in the six months to 30 June 2024 and for the following 12 months in aggregate, and continuing to be self-funding thereafter. Whilst pipeline has moved out it remains strong. Annual Report 2023X 3   Message from CEO Michael Kelly At FINEOS, our playbook continues to serve as our business and moral compass – it is the cornerstone guiding our behaviours and decisions, uniting us with our clients and partners, and enabling our collective collaborative achievements. FINEOS continues to improve the lives of people by supporting insurers around the world in their mission to provide protection and care to the customers they serve. This report chronicles our ongoing Environmental, Social and Governance journey, highlighting significant milestones, charting our precise objectives, and outlining our next steps. We eagerly anticipate making a tangible difference as a company through our focus on ESG. ESG is integrated into FINEOS, aligning seamlessly with our culture, overarching business approach and the ethos of our FINEOS Playbook. Despite the global challenges faced in recent times, we take immense pride in our team’s unwavering dedication to upholding these elevated standards. We have risen admirably to the challenge of serving our clients where protection from illness, injury and loss has been a crucial necessity worldwide. Michael Kelly Founder and CEO 4 FINEOS Corporation Holdings plc Environmental, Social and Governance ReportFINEOS 2023 ESG Annual Report This ESG report provides an overview of our key performance indicators (KPIs), highlighting our progress and achievements in our sustainability journey. This presents an outline of the ESG Council and looks forward to our future focus as we continue to strengthen our commitment to sustainability. While the statutory financial reports that follow cover a six-month period to 31 December 2023, the ESG report has been presented for the whole of calendar 2023 to form a better basis for future comparisons. FINEOS ESG Council To uphold strong governance and accountability for our ESG strategy, FINEOS has implemented a comprehensive framework overseen by our Chief People Officer (CPO) and Chief Financial Officer (CFO). Reporting directly to the Board, our CPO tracks our progress against KPIs at regular intervals throughout the year, ensuring we stay on course to achieve our objectives. Annually, we provide a performance update on our strategy allowing us to review and refine our actions while holding ourselves accountable to our commitments. We have established an ESG Council that includes key stakeholders from various departments — Finance, Facilities, HR, Security and Compliance, IT, and Legal — who work collaboratively to ensure effective implementation. Through the work of our ESG Council and the dedication of our team, FINEOS remains firmly committed to environmental sustainability, striving to make a positive impact within our organisation and the broader communities we serve. Joanne McMullan Chief People Officer Ian Lynagh Chief Financial Officer Dermot Hughes Group Financial Controller Niamh Hewitt Senior HR Business Partner Breda Donlon Head of Learning and Development Paula McGrath Security and Compliance Manager Paul McGuinness Head of IT Operations John McKnight Legal Adviser and Joint Company Secretary Niall Hannon Head of Information Systems Trish Hogan Facilities Manager Keith O’Leary VP Cloud Service Annual Report 2023X 5 FINEOS ESG Strategy ESG Program Driving Factors There are three key forces, or driving factors, that FINEOS has considered in developing an ESG strategy: (1) Compliance – meeting regulatory reporting requirements such as CSRD*, TCFD**, IFRS***; (2) Client alignment – supporting clients’ ESG commitments and fulfillment of our clients’ supply chain regulatory requirements; and (3) Triple bottom line – balancing the environmental and social obligations while maintaining profitability. *CSRD – Corporate Sustainability Reporting Directive (EU) **TCFD – Taskforce on Climate-related Financial Disclosures ***IFRS – International Financial Reporting Standards Alignment with client requirements For example, clients frequently require information on scope 1, 2 and 3 emissions, and increasingly product environmental performance information e.g., code efficiency. Triple Bottom line People, planet and profit Alignment Client requirements ... Client advantage Compliance Mandatory ... efficient Figure 1: ESG Program Driving Factors in detail Triple bottom line Achieving balance between people, planet and profit to ensure business model is sustainable and does not threaten going concern status of the business. Compliance with mandatory regulatory requirements For example, stress testing, scenario analysis, market impact assessments, green finance, sustainable sourcing, etc. 6 FINEOS Corporation Holdings plc Environmental, Social and Governance Report (continued)At FINEOS, ESG is embodied within our FINEOS Growth Strategy. The key areas of focus are to: • Maintain a low carbon footprint and support initiatives to further reduce our carbon footprint; • Support our people through diversity, equity and inclusion (DEI), community initiatives and professional development; and • Have clear and visible governance companywide from the Board and leadership team through our policies and procedures, with a critical focus on information security and data privacy. ESG Pillars ENVIRONMENTAL SOCIAL GOVERNANCE Alignment with investor, client, supplier, business partner and regulatory ESG requirements Optimising impacts on profitability, product and operating model Diversity, Equity and Inclusion Community Employee Engagement and Wellness Board Independence, Structure and Tenure Data Security and Privacy Audit Risk and Oversight CSRD Reporting FINEOS Business Case for Addressing ESG ESG represents a dynamic landscape of opportunities and challenges for FINEOS. Our primary goal is to proactively manage ESG factors, partaking in opportunities while ensuring they do not adversely affect our revenues and costs. The FINEOS ESG business case encompasses the following key objectives, guiding our strategic approach toward sustainability and responsible business practices: • Investor – Maintain investor confidence; and – Meet investor ESG objectives including compliance requirements. • Client – Satisfy qualification requirements for new business; – Maintain client business; and – Assist clients in meeting their compliance and business requirements. • Profitability – Minimise transition and operational cost implications; and – Optimise impact on revenue. • Compliance – Maintain client business; – Avoid fines and penalties; and – Satisfy corporate governance requirements. • Maintain/enhance reputation. By addressing these objectives, we aim to strengthen our resilience, enhance performance, and align our business with the principles of sustainability, ensuring a positive and enduring impact on our stakeholders and the broader society. Annual Report 2023X 7 Enterprise Ireland Funding and Partnership Under Ireland’s National Recovery and Resilience Plan (NRRP 2021-2026), FINEOS is strategically leveraging grants that support the digital and climate transition of enterprises. These initiatives are funded through the EU’s Recovery and Resilience Facility, with a particular focus on facilitating emissions reductions as part of a comprehensive decarbonisation plan. Working with the consultancy firm Centigo, FINEOS is undergoing benchmarking and materiality assessments. By harnessing these funding opportunities, FINEOS can fortify its commitment to sustainability and resilience, positioning itself as a leader in the pursuit of environmental stewardship while fostering continued growth and innovation in line with national and EU recovery goals. Environmental Pillar Environmental Pillar and KPIs In this report, we acknowledge that FINEOS is in the initial stages of its environmental journey, and we present the essential KPIs to lay the foundation for measuring progress. Our current focus for CO2 measures is primarily on scope 1 emissions at the FINEOS headquarters in Dublin as we proceed with our commitment to ESG. KPI Build continued environmental awareness and education among leadership Establish an active environmental forum (Employee Resource Group) Develop environmental strategy and roadmap Measures Hold senior executive briefings Involve ESG Council in assessing environmental development requirements and risks Progress in 2023 Briefings held Leadership supported the establishment of ESG Council and the further development of the ESG strategy Group is live with active participation 37 active members in the Employee Resource Group Draw down various Enterprise Ireland funding support Develop/update policies to reflect environmental requirements Additional Enterprise Ireland funding drawn down Defined initial ESG roadmap Developed skills and capabilities of the ESG program leads Identified policies required to be established Measured annual production of CO2 as 142.58 tonnes for calendar year 2023 In-house initiatives in place: • Reorganised office space so one floor used less often, saving power in terms of heating and lighting • Change in energy provider for head office means 100% of the energy provided is now categorised as renewable • Continued low paper usage (see DocuSign measure below) Track and measure CO2 emissions Optimise the performance of our buildings Complete the Climate Toolkit4Business carbon footprint analysis tool 8 FINEOS Corporation Holdings plc Environmental, Social and Governance Report (continued)KPI Measures Progress in 2023 Minimise waste and energy consumption Track IT storage measures (servers) Track cloud vs on-premise Measure of recycling hardware Measure of DocuSign Server usage is being tracked via vCentre and Centreon (centralised monitoring and alert system for FINEOS internal critical infrastructure) as a data-gathering exercise to allow us to analyse and plan for the minimisation of waste and energy consumption within IT Implemented a tracking mechanism to analyse the split between cloud and on-premise usage to make informed decisions on future IT Operations global strategy Recycled/re-tasked laptops used for FINEOS staff upgrade activity: 75% of laptops for staff upgrades are (previously used) re-tasked laptops Recycled/re-tasked laptops used for FINEOS new hire activity: 50% of laptops to new hires requiring a laptop are (previously used) re-tasked laptops No third-party contractors use FINEOS supplied hardware – all operate off secured virtual infrastructure Environmental statistics from DocuSign for the year 2023 • 992 kilograms of carbon emissions reduced • 10,387.17 litres of water conserved • 422.748 kilograms of wood saved • 69 kilograms of waste eliminated Optimise and track travel data to minimise carbon footprint Measure travel data globally across all travel providers Monthly tracker in place to measure CO2 emissions where data is available globally Annual Report 2023X 9 Social Pillar Social Pillar KPIs and measures The Social Pillar KPIs in 2023 reflect the FINEOS commitment to fostering a positive and inclusive workplace culture, nurturing our employees’ well-being, and contributing meaningfully to our communities. These KPIs showcase our progress in DEI initiatives, employee engagement and wellness programs, and our high-impact community involvement. As we strive to create a thriving and socially responsible organisation, this section highlights the measurable outcomes and positive effects of our efforts under the Social Pillar. KPI Measures Progress in 2023 Gender diversity Total employees – gender split 69.5% male; 30.5% female Total leaders – gender split Gender pay ratio Gender Pay Report – Ireland 76.3% male leaders; 23.7% female leaders FINEOSi median gender pay gap: 10.5% FINEOS mean gender pay gap: 16.9% Employee turnover Attrition – regional and global Voluntary attrition: 4.9% DEI program – measure through culture and engagement survey CSR – measure the CSR initiatives and financial contributions FINEOS makes Employee engagement – measure through culture and engagement survey Attrition – regrettable leavers 25% of those were regrettable leavers DEI survey Culture survey planned for 2024 Track employee-led, company and volunteer sponsorship Multiple employee-led activities Employee volunteer mentorship programs RAP – Reconciliation Australia Reflect phase on track Culture survey Culture survey planned for 2024 Flexible working % hybrid Number of workers outside of country of hire Data on flex ways of working Hybrid work percentage: 100% of employees follow a hybrid or remote- first approach Number of employees working outside country of hire: 13.3% of the total workforce Part-time employees: 2.1% of the total workforce Parental leave: 5.6% of the workforce Long service leave (Australia): 4.6% of the local workforce (four employees) i Refer to FINEOS Ireland Gender Pay Gap Report 2023 for further detail at https://www.fineos.com/document/gender-pay-gap-report-2023/ 10 FINEOS Corporation Holdings plc Environmental, Social and Governance Report (continued) 2023 Social Pillar Programs During 2023, FINEOS demonstrated a strong commitment to social responsibility and employee well-being through meaningful programs under the Social Pillar. This section highlights initiatives promoting DEI, community engagement, and employee wellness, showcasing our dedication to creating a positive impact on our workforce and society. Program DEI, Employee Engagement and Well-being, CSR Campaigns of Note Gender Pay reporting Reconciliation Australia Disability Inclusion program International Men’s Day B!g Idea Mentor™ program Awareness Days – • World Mental Health Day • International Day of Persons with Disabilities • RUOK? Day • Movember • Digital Detox Virtual social events Flu vaccinations Governance Pillar FINEOS Governance Structure Governance continues to play a crucial role in shaping our approach to ESG matters, and this section outlines our previously established strategic initiatives and practices in ensuring transparent, responsible, and accountable governance. Audit and Risk Management Committee Remuneration and Nomination Committee Board Oversight Executive Responsibility Chief Executive Officer, Chief Operating Officer, Chief Financial Officer, Chief People Officer, Chief Product Officer, Chief Technology Officer, Legal Adviser Business Functions Security and Compliance  Human Resources Legal IT Operations Finance • Anti-bribery and anti-corruption policy  • Continuous disclosure policy • Anti-slavery and human trafficking policy • Corporate governance statement Policies • Code of conduct policy • Communications policy • Securities trading policy • DEI policy • Remuneration policy • Risk management policy • Whistleblower policy Annual Report 2023X 11 Mandatory Reporting for ESG With the introduction of the EU Corporate Sustainability Reporting Directive (CSRD), a new regime has emerged, elevating sustainability reporting to the same level as financial reporting. FINEOS is taking proactive steps to comply with this directive, ensuring transparent and standardised disclosures of our sustainability-related performance. FINEOS is working with our consultancy partner, Centigo, to establish the foundations for the CSRD as reporting will be required in 2025 based on 2024 financial data. Governance Pillar KPIs and Measures In this report, we present the Governance KPIs for FINEOS. These KPIs reflect our commitment to upholding transparent, responsible, and accountable governance practices in our pursuit of ESG excellence. KPI Measures Progress in 2023 Board independence, structure and rotation Data privacy and security – Security Council tracks and measures personal data breaches SOC2 Audit – undergo periodic audits Audit risk and oversight – track and measure the audit risk and oversight outputs Remuneration and Nomination Committee oversight Ensure Board requirements as per the Company Board charter (FINEOS Governance site) Demonstrate processes are in place to avoid personal data breaches Audit takes place annually Risk management policy and process in place, reporting as per the policy to track and measure. Audit and Risk Management Committee meets a minimum of three times per year (per Board charter) Remuneration and Nomination Committee meets a minimum of three times per year and ensures adherence to policy per Board charter Board composition complies with the Board charter Security Council tracking process in place to measure breaches SOC2 Type 2 report was published in December 2023 Audit and Risk Management Committee met and considered risk matters as per their charter Remuneration and Nomination Committee meetings took place, policy adhered to Governing policies – track and measure breaches Ensure full suite of governing policies are in place, maintained appropriately by relevant area No new governing policies, no breaches reported. Corporate Governance | Investor Centre | FINEOS ESG reporting – deliver annual ESG Report and quarterly Board report ESG vendor process Breaches reported to the Board Complete ESG report as required by Board Annual ESG report completed Quarterly Board report completed Establish ESG vendor policy and process to understand vendor ESG preparation status Updated the FINEOS Third Party Policy to meet ESG requirements 12 FINEOS Corporation Holdings plc Environmental, Social and Governance Report (continued)2023 ESG Achievements and 2024 Focus In 2023, FINEOS continued to make substantial progress in advancing our ESG initiatives. FINEOS is committed to continued progress to shape a more sustainable and responsible future for our Company and the communities we serve. 2024 Focus The next five key stages for FINEOS to address in its ESG journey are: (1) Governance and change. Our ESG Council will continue to provide assurance that the FINEOS transition strategies, policies, processes, and operating model are appropriate, timely, and cost and operationally effective. (2) Carbon emission reduction. We intend to commence a project, which includes policy development, baseline measurement, process and systems readiness, supplier communications, and supply chain improvements. (3) CSRD mandatory reporting strategy and roadmap. FINEOS will collect the 2024 data necessary to support the start of mandatory reporting in 2025. (4) Financial reporting standards. FINEOS will be required to comply with the following standards and amendments which are effective for the period beginning 1 January 2024: – – IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information IFRS S2 Climate-related Disclosures (5) Data Centre strategy and roadmap. Significant assessment and analysis to take place with regard to budget and development requirements to form a roadmap. Conclusion In conclusion, we are dedicated to integrating ESG principles into our growth strategy. While our progress is in its early stages, we are committed to learning, improving, and embracing the opportunities that lie ahead. With a steadfast focus on sustainability and responsible practices, we are eager to create a positive impact on FINEOS, our stakeholders, and the world at large. Our commitment to ESG sets the foundation for a more responsible and sustainable future, and we look forward to sharing our continued progress in the years to come. Annual Report 2023X 13 Anne O’Driscoll joined the Board in 2019. She has over 35 years of business experience across a broad spectrum of the insurance industry. Anne is also on the board of MDA National Insurance Pty Limited (appointed 2015). In the past year she has retired from the boards of ASX-listed companies, Steadfast Group Limited (appointed 2013) and Infomedia Limited (appointed 2014). From 2014 to 2022, she was also on the boards of CommBank’s Australian insurance businesses. Anne chaired 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 Fellow of the Australian Institute of Company Directors, the Australian and New Zealand Institute of Insurance and Finance, Chartered Accountants Ireland and Chartered Accountants Australia and New Zealand. Michael Kelly is the Chief Executive Officer and founder of FINEOS. Michael has more than three decades of executive leadership experience in global life, accident and health insurance. 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 Europe, which was later acquired by CSC. Michael founded FINEOS in 1993. He is a previous winner of the EY Ireland Technology Entrepreneur of the Year, and one of Ireland’s most influential executives in the international fintech sector. Michael attended Dublin City University where he graduated with a BSc in Computer Science. Anne O’Driscoll Chairman Non-executive Director Michael Kelly Executive Director Chief Executive Officer 14 FINEOS Corporation Holdings plc Board of DirectorsDavid Hollander joined the Board in 2019 and has over 35 years of experience in the insurance, technology and professional services industries. David currently sits on the board of directors at Northwestern Mutual and Westfield Insurance, both based in the US. Previously, David served as the CEO of UNIRISX, a SaaS-based policy administration insurtech solution based in the UK and US. From 2011 to 2019, David 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 began his career with Accenture, where he served in a variety of leadership and client service roles including CEO of the Financial Services Solutions Group (FSG). The FSG was a commercial software enterprise that David founded to build and deploy software to life and non-life carriers globally, driving more than US$1 billion in consulting and outsourcing pull-through revenues. David is a graduate of the Wharton School of Business at the University of Pennsylvania. William “Bill” Mullaney joined the Board in 2023 and has more than 40 years of experience in insurance, financial, and professional services. Bill recently joined the board of directors of the Automobile Association of America Northeast Club (appointed 1 January 2024). Bill has served as a managing director at Deloitte Consulting, advising on a wide range of business, insurance, and retirement issues. He led the Group Insurance Practice, providing consulting services to more than 20 group insurance carriers. Bill also worked with startup insurtech and fintech companies to accelerate their growth and tailor solutions to market needs. Bill has also served as the president of US Business at MetLife, where he oversaw the reorganisation of institutional, individual, auto and home business, constituting over 60% of the company’s revenue and earnings. This followed his leadership of institutional business at MetLife, servicing the employee benefit programs for more than 90 of the Fortune 100 companies and 60,000 institutional customers. Bill brings an extensive background in claims, voluntary benefits, customer service and technology replacement to the FINEOS Board. Terri Rhodes joined the Board in 2024. She is an experienced global leader and board member with a career spanning over 40 years in strategic absence management. Terri is the former Chief Executive Officer of the Disability Management Employer Coalition (DMEC), which provides education, training and resources to employers and insurance professionals focusing on absence management compliance and business strategies. Her innovative and visionary leadership produced an increase in membership and revenue which propelled DMEC to become the only association serving absence management professionals in the US. Prior to DMEC, Terri worked at nonprofit, for profit and several Fortune 100 companies where she designed, implemented, and provided strategic, consultative leadership to corporate absence programs. David Hollander Non-executive Director Chair, Audit and Risk Management Committee William Mullaney Non-executive Director Chair, Remuneration and Nomination Committee Terri Rhodes Non-executive Director Annual Report 2023X 15 The Directors present herewith their report and audited consolidated financial statements for the six-month period ended 31 December 2023. These financial statements reflect the performance of FINEOS Corporation Holdings plc and its subsidiaries (the Group) for the fiscal period ended 31 December 2023. 1. Directors and Secretaries The Directors of the Company during, or since the end of, the period are as follows. Directors were in office for the whole of the period unless otherwise stated. Chairman Anne O’Driscoll Chief Executive Officer Michael Kelly Other Directors David Hollander William Mullaney Terri Rhodes Date of appointment 25 July 2019 12 December 2018 15 October 2019 1 January 2023 1 January 2024 Natalie Climo and John McKnight served as Joint Company Secretaries for the period and have continued to serve as Joint Company Secretaries since the period end. The Directors’ qualifications and experience as well as their directorships of other listed companies are set out under Board of Directors on pages 14 to 15. 2. Directors’ Meetings The number of meetings of the Company’s Board of Directors (the Board) and of each Board Committee held during the period ended 31 December 2023, and the number of meetings attended by each Director, were as follows: Anne O’Driscoll Michael Kelly David Hollander William Mullaney Board Audit and Risk Management Committee Remuneration and Nomination Committee A 3 3 3 3 B 3 3 3 3 A 1 – 1 1 B 1 – 1 1 A 1 – 1 1 B 1 – 1 1 A: Meetings eligible to attend B: Meetings attended as a member 16 FINEOS Corporation Holdings plc Directors’ Reportfor the period ended 31 December 2023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 Period The principal activity of the Group is the development and sale of software. FINEOS is a global software vendor providing modern cloud-based software products (FINEOS Platform) for core system administration functions within Life, Accident and Health insurers and employee benefits providers. The FINEOS Platform is a purpose-built, customer-centric, end-to-end 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 also include machine learning and data insights through artificial intelligence. The Group helps its clients move from outdated legacy core systems to the modern Software-as-a-Service (SaaS) FINEOS Platform for new business, policy administration, billing, absence, and claims management, enabling improved operational efficiency, increased effectiveness and excellent customer care. Services revenues are generated when assisting clients migrating to the FINEOS Platform and are dependent on the migration model chosen (clients may use internal or other external resources as well as FINEOS resources). Annual subscription fees are payable and fee amounts depend on the FINEOS products being used and the extent of the clients’ operations on the FINEOS Platform. Business summary and key performance indicators It should be noted that in the consolidated statement of comprehensive income, the performance of the six-month period to 31 December 2023 is compared with that of the year to 30 June 2023 and therefore it can be expected that revenues and costs would all be lower than the 12-month comparative period. In the commentary below, we refer also to the six-month period to 31 December 2022 (1H23). The key performance indicators of the financial results for the six-month period to 31 December 2023 compared with the year to 30 June 2023 are as follows: • An overall decrease in revenue to €61.1 million from €125.0 million, which is a 51.1% drop in revenue (down 0.6% on 1H23). • Subscription revenue is down 47.1% to €33.0 million (up 10.5% on 1H23) driven by indexation, expansion of footprint within existing clients (including two upgrades to cloud), and one new name deal. • Services revenue is down 53.8% to €28.1 million (down 6.9% on 1H23) due to a planned strategic partnership with a large client to build product features in place of services. • Product development and delivery costs are down €32.8 million or 53.4% to €28.6 million (down €2.6 million or 8.3% on 1H23) due to lower staff costs enabled by the redistribution of certain role types to more cost-effective countries. • General and administrative expenses are down €10.0 million or 54.3% to €8.4 million (down €0.7 million or 7.8% on 1H23) due to a reduction in the share-based payment expense and a reduction in staff costs. • The loss after tax for the six-month period ended 31 December 2023 is €6.9 million, a €14.5 million (67.8%) improvement on the loss after tax of €21.4 million for the prior year (down €7.7 million or 52.7% on the loss after tax of €14.6 million for 1H23). These amounts are stated net of tax credits arising on the losses of €1.0 million (year to 30 June 2023: €2.3 million; 1H23: €0.9 million). • Basic loss per share of 2.07 cents (euro) for the six-month period ended 31 December 2023 compared to a basic loss per share of 6.69 cents (euro) for the year ended 30 June 2023 (1H23: basic loss per share of 4.56 cents (euro)). Annual Report 2023X 17 4. Principal Activities and Review of the Development and Performance of the Business during the Financial Period (continued) Business summary and key performance indicators (continued) A very busy FY23X saw FINEOS enter our new FY24 with 53 active project streams (35 North America, 4 Europe, 14 APAC) with some clients having several parallel project phases including multiyear implementations. More clients are expected to commence their move from on-premise deployments to the cloud in FY24. The focus in FY24 will be ensuring that budgets are set aside to complete the upgrades to cloud for those clients by FY25. The consolidated statement of comprehensive income for the period ended 31 December 2023 and the consolidated statement of financial position as at that date are set out on pages 40 and 41. Non-financial measures are also important to the Group, and the Group’s Environmental, Social and Governance (ESG) Report is set out on pages 4 to 13. 5. Changes in the State of Affairs The cash reserves closed at €28.1 million as at 31 December 2023 compared to €25.5 million as at 30 June 2023. The Group had no external debt as at 31 December 2023. FINEOS undertook an equity raising on 15 August 2023 to provide general working capital, strengthen the FINEOS balance sheet position and maintain flexibility for timing of cash flows. FINEOS successfully completed a fully underwritten institutional placement, raising approximately AU$35 million through the issue of approximately 15.5 million new fully paid CHESS Depositary Interests (CDIs) over FCL shares. The placement was undertaken at an offer price of AU$2.25 per new CDI. A further AU$5.0 million conditional placement was made to Michael Kelly, Director and CEO of FINEOS, also at an offer price of AU$2.25 per new CDI, and was subject to security holder approval. This was obtained at the Company’s Annual General Meeting (AGM) on 5 December 2023. Shortly thereafter, the Company received AU$5.0 million from Michael Kelly and issued approximately 2.2 million new, fully paid CDIs over FCL shares. FINEOS also undertook a non-underwritten Security Purchase Plan (SPP) raising approximately AU$0.2 million through the issue of 96,212 new, fully paid CDIs, at an offer price of AU$2.25 per new CDI, which completed on 20 September 2023. Equity increased by €16.2 million from €147.1 million to €163.3 million during the period with the significant movements being: • Net proceeds of €23.6 million from the new share capital • Increase in share option reserve of €0.7 million • Debit of €1.3 million to foreign exchange reserve • Loss for the period of €6.9 million. Apart from the increase in cash reserves of €2.6 million noted above, other key movements in assets contributing to a drop in total assets of €4.9 million to €196.3 million were: • A net increase of €0.6 million in intangible assets reflecting amortisation of €11.9 million largely offsetting capitalised internal development expenditure of €13.4 million, and capitalised contract costs of €0.1 million. The movement also reflects a modification of €0.1 million to right-of-use software and a €0.9 million decrease arising from the exchange rate movements on US denominated intangible assets. • A decrease of €9.1 million in trade receivables due to the issue of some significant annual licence fee and product consulting invoices in June 2023. • A decrease of €1.0 million in unbilled receivables due to the issue of invoices in December 2023 on achievement of milestones as set out in client contracts. 18 FINEOS Corporation Holdings plc Directors’ Report (continued)for the period ended 31 December 20235. Changes in the State of Affairs (continued) • An increase in prepayments of €1.2 million influenced by the timing of contract renewals for both insurance and software licensing/maintenance. • An increase of €1.2 million in the deferred tax asset predominantly due to the increased provision for offset of tax losses against future taxable profits. Total liabilities decreased by €21.0 million from €54.0 million to €33.0 million during the period with the significant movements being: • A decrease of €17.9 million in deferred revenue due to the timing of issue of subscription invoices (predominantly January). • A decrease of €2.0 million in accruals influenced by the timing of holiday leave take-up by employees and bonus payments. • A decrease in the research and development tax credit of €0.5 million due to a reduction in research and development costs qualifying for tax credit on account of the transition of products to market and a change in qualifying criteria. 6. Likely Developments and Outlook Total revenue for FY24 is expected to be in the range of €130 million to €135 million. The growth rate for subscription revenue is expected to be in the low to mid teens (versus CY23) while services revenue is expected to remain flat (versus CY23). Guidance reflects both the continued lengthening in sales cycles and Limelight Health client churn. FINEOS remains on track for the successful delivery of a number of key projects to replace legacy systems with several large carriers to maximise product subscriptions. Cost saving strategies will continue through operational efficiencies and as a result FY24 total costs are expected to decrease (versus CY23). FINEOS continues to expect to achieve positive free cash flow in the six months to 30 June 2024 and for the following 12 months in aggregate, and continuing to be self-funding thereafter. Whilst pipeline has moved out it remains strong. 7. Dividends During the period the Company made no dividend payments to ordinary shareholders. The Directors do not propose the payment of a final dividend for the period. 8. Political Donations There were no political donations made during the period ended 31 December 2023. Annual Report 2023X 19 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 clients; • 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 for these products; • Major changes in technology could have an impact on FINEOS and its trading model unless it continues to invest in research and development and remains competitive and current; • FINEOS sells products and services in the US, Canada, Australia, New Zealand, and EMEA, 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 client 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 Period End There are no events subsequent to the period 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/. 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 period ended 31 December 2023, other than as disclosed in Note 25. 13. Controlling Party Michael Kelly is the ultimate controlling party of the FINEOS Group. 20 FINEOS Corporation Holdings plc Directors’ Report (continued)for the period ended 31 December 202314. Directors’ and Company Secretaries’ Interests The Directors’ and Company Secretaries’ interests in shares and share options as at 31 December 2023 are set out on page 28 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; and the Company has conducted a review during the financial period, 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. 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. Annual Report 2023X 21 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 David Hollander Director 20 February 2024 22 FINEOS Corporation Holdings plc Directors’ Report (continued)for the period ended 31 December 2023 As Chair of the Remuneration and Nomination Committee (the Committee), I am pleased to present the report for the Committee for the six-month period ended 31 December 2023. The objective of this report is to provide shareholders with information 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 period ended 31 December 2023. Membership and Meetings of the Committee The members of the Committee during the period ended 31 December 2023 are set out in the table below. The members of the Committee were in place for the whole of the period unless otherwise stated. All members of the Committee are independent Non-executive Directors. Committee Member Position William Mullaney Anne O’Driscoll David Hollander Chair (from 1 September 2023) Chair (until 1 September 2023) Member Member Appointed 1 January 2023 25 July 2019 15 October 2019 Attendance details for the one meeting held during the period are outlined on page 16 in the Annual Report. The Committee members’ biographies are set out on pages 14 to 15. 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 reelection 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, 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 2023X 23 Remuneration and Nomination Committee Reportfor the period ended 31 December 2023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 was one Executive Director during the period: the Chief Executive Officer, Michael Kelly. 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 period ended 31 December 2023. A similar structure is expected to apply during the year ended 31 December 2024. 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. The CEO does not utilise this benefit. Other benefits Benefits currently provided are health care cover, life insurance and permanent health insurance cover. Premiums payable are included in the remuneration disclosed in this report. 24 FINEOS Corporation Holdings plc Remuneration and Nomination Committee Report (continued)for the period ended 31 December 2023Incentive Basis of incentive Maximum opportunity Achieved for FY2023X CEO: Bonus payment of €Nil. There were no awards to the CEO under The Plan during the period. CEO: Drives the growth of the Company and leads Company strategy, key customer relationships, and sales strategic acquisitions. No more than 5% of the issued share capital (measured over rolling three-year cycles) of the Company may be issued or reserved under The Plan at any time. Short-term incentives (bonus) Long-term incentives (equity-based remuneration) The CEO is entitled to receive an annual cash bonus in recognition of his contribution towards growth. long-term A incentive plan was established on admission to the ASX (the 2019 Equity Incentive Plan (The Plan)). Awards from this scheme may in the form be made of options, restricted shares, restricted stock units, and performance shares. See Note 19 for more details. The terms and conditions of any awards made to Executive Directors under The Plan, including those relating to targets, vesting and/or exercise (as the case may be), are determined by the Committee and to the extent required, subject to CDI holder approval. The Committee reviews the performance of the Executive Director for the purposes of determining short-term incentives and makes recommendations to the Board as to the pay-out level. Annual Report 2023X 25 Disclosure of Executive Remuneration Even though the Company is listed on the ASX, being an Irish incorporated entity, the Company is not subject to the obligation to produce a remuneration report under the Australian Corporations Act. Accordingly, there is no legal obligation to disclose the remuneration and employment terms of individual executives who are not Directors but who would, under Australian law, be regarded as Key Management Personnel. Accordingly, any such disclosure would be considered a breach of those executives’ privacy. To assist investors, the Committee notes the following: • Salaries of senior leaders, along with other employees, are reviewed regularly in line with the local markets in which they operate; • Cash bonuses of up to 25% of base pay are payable based on Company and individual objectives being met; and • There is no fixed entitlement to options. A salary freeze remained in place for FY23X, with exceptions made only for employees who were promoted or enlarged the scope of their role. This was aligned with current market conditions and the Company’s overall performance. For FY23X, commission payments were distributed to qualifying senior leadership/key personnel as a one-off discretionary bonus to reward them for their extraordinary efforts to secure a large sales deal. 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 security holders in general meeting. This amount is currently fixed at AU$800,000 (€482,3931) per annum. The annual fees set by the Committee for Non-executive Directors are set out below in the currency applicable to the location of the relevant Directors. No additional fees are paid for Committee membership. The fees are exclusive of pension/superannuation contributions where required by law to be made by FINEOS. The annual fees for the US-based Non-executive Directors were adjusted during the period to a base of US$100,000 plus US$10,000 where the Director is chair of a Board Committee. Director Anne O’Driscoll David Hollander Annual fee during year to 30 June 2023 Annual fee during six-month period to 31 December 2023 AU$163,620 US$170,000 AU$164,800 US$170,000 (up to 30 September 2023) US$110,000 (from 1 October 2023) William Mullaney US$100,000 US$110,000 The table of Directors’ Remuneration set out on page 27 includes the actual amounts paid to each Director, including all post-employment benefits in euro, the Company’s reporting currency. Under their letters of appointment, the Non-executive Directors are not entitled to participate in any share, bonus, retirement benefit, or other scheme operated by the Company or any Group company. All reasonable and documented expenses incurred in the performance of the Non-executive Directors’ duties are reimbursed. 1 Translated into euro at a rate of AU$/EUR 1.6584, being the average rate for the six-month period to 31 December 2023. 26 FINEOS Corporation Holdings plc Remuneration and Nomination Committee Report (continued)for the period ended 31 December 2023Service Contracts/Letters of Appointment Details of the service contract for the Executive Director 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 Each of the Non-executive Directors has received an appointment letter from FINEOS, confirming their respective roles and responsibilities as Directors, and the 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 their appointment (for those appointed in 2019, it was within 36 months of the Company’s IPO in 2019). Dates of appointment for the Non-executive Directors are set out below: Name Anne O’Driscoll David Hollander William Mullaney Date of appointment 25 July 2019 15 October 2019 1 January 2023 Annual Report on Remuneration The following table sets out the total remuneration for Directors for the period ended 31 December 2023. Salary/fees € Short-term incentives € Post- employment benefits € Other benefits € Shares allotted € Share awards gain on exercise € LTIP € Total 2023X € Director Executive Director Michael Kelly 195,296 Non-executive Directors Anne O’Driscoll David Hollander William Mullaney Total 53,506 65,542 49,339 363,683 – – – – – – 1,773 5,544 – – – – – 5,544 1,773 – – – – – – – – – – – – – – – 197,069 59,050 65,542 49,339 371,000 Annual Report 2023X 27 The equivalent table of total remuneration for Directors for the year ending 30 June 2023 is as follows: Salary/fees € Short-term incentives € Post- employment benefits € Other benefits € Shares allotted € Share awards gain on exercise € LTIP € Total 2023 € Director Executive Directors Michael Kelly Tom Wall 390,800 113,509 Non-executive Directors Anne O’Driscoll 107,078 Gilles Biscay Martin Fahy 28,325 30,150 David Hollander 155,738 William Mullaney 46,296 60,040 – – – – – – – 11,351 3,546 2,644 11,045 – 3,106 – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – 454,386 127,504 118,123 28,325 33,256 155,738 46,296 963,628 Total 871,896 60,040 25,502 6,190 Directors’ and Company Secretaries’ Interests in Company Shares Total CDIs held at 1 July 2023 Purchases/ Increase in indirect holdings Acquired on exercise of options Sales/ Reductions Anne O’Driscoll 107,399 16,601 Michael Kelly Natalie Climo David Hollander John McKnight 169,904,046 2,464,642 – 41,224 – – – – William Mullaney 10,000 25,000 – – – – – – – – – – – – Total shares/ CDIs held at 31 December 2023(a) CDIs held nominally at 31 December 2023(b) 124,000 64,000 172,368,688 1,544,565 – – 41,224 41,224 – – 35,000 35,000 (a) Total CDIs at 31 December 2023 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. 28 FINEOS Corporation Holdings plc Remuneration and Nomination Committee Report (continued)for the period ended 31 December 2023Directors’ Interests in Options The were no options on issue that were held by Directors during the period. See Note 19 for further detail on the Company’s equity incentive schemes. Committee Activities During the period ended 31 December 2023 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, reorganisation of roles and responsibilities among senior management to better align with the Company’s needs and objectives, and diversity, equity and inclusion (DEI). Progress on DEI is included in the ESG Report starting on page 4. The Committee undertook a review of the Board’s performance and has made some minor changes to the Board’s operations. During the period, the Committee was also involved in selection of an additional Director. Following security holder approval, Terri Rhodes has been appointed as an Independent Non-executive Director effective 1 January 2024. On behalf of the Committee, William Mullaney Chair of the Remuneration and Nomination Committee Annual Report 2023X 29 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 and Company 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 David Hollander Director 20 February 2024 30 FINEOS Corporation Holdings plc 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 six-month period ended 31 December 2023, 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 31 December 2023 and of the Group’s loss for the six-month period 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 Directors’ 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; • We reviewed the supporting documentation for the funding options available to the Group including the nature of the facilities and their repayment terms; and • We assessed the adequacy of the disclosures in the financial statements in relation to going concern. Annual Report 2023X 31 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 (€61.1 million for the six-month period ended 31 December 2023; year ended 30 June 2023: €125.0 million). Refer to Note 2 (accounting (financial policy) and Notes 4 and 16 disclosures). 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 complexity associated with the varied nature of bespoke contracts in forming new commercial arrangements. How Our Audit Addressed the Key Audit Matter We performed a number of procedures including the following: • 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 period and for a select period post period end; and • Developed a risk-based approach to perform journal entry testing on a sample basis to the appropriateness of manual determine postings to revenue. 32 FINEOS Corporation Holdings plc Independent Auditor’s Report (continued) INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF FINEOS CORPORATION HOLDINGS PLC Key Audit Matter Capitalisation of development expenditure (€13.4 million capitalised during the six-month period ended 31 December 2023; year ended 30 June 2023: €26.7 million). Refer to Note 2 (accounting policy) and Note 11 (financial disclosures). the The Group capitalises costs 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 developing software, determining value attributable to that time, and determining which projects being developed meet the criteria to be capitalised. the Key Audit Matter Impairment consideration relating to capitalised development expenditure (€84.8 million at 31 December 2023; 30 June 2023: €81.9 million). Refer to Note 2 (accounting policy) and Note 11 (financial disclosures). Intangible assets make up €138.0 million of the Group’s non-current assets (30 June 2023: €137.3 million). The most significant of these intangibles is capitalised software development costs of (€84.8 million at 31 December 2023 (30 June 2023: (€81.9 million). IAS 36: Impairment of Assets requires 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 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: • 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; IAS 38 the • Assessing the procedures applied by the 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 period end. Annual Report 2023X 33 INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF FINEOS CORPORATION HOLDINGS PLC Key Audit Matter Impairment consideration relating to goodwill (€31.6 million at 31 December 2023; 30 June 2023: €32.2 million). Refer to Note 2 (accounting policy) and Note 11 (financial disclosures). Goodwill of €31.6 million is recorded in the balance sheet at 31 December 2023 (30 June 2023: €32.2 million). 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; 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 involve rates applied), which estimation and judgement. Our application of materiality How Our Audit Addressed the Key Audit Matter We performed a number of procedures including the following: • We reviewed management’s detailed assessment supporting the business having one cash-generating unit. • We obtained a third-party report in respect of an impairment review at the period end date, which included forecasts. • We evaluated management’s assessment in relation to impairment of goodwill, particularly the 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. these • We assessed management’s forecast accuracy based on historical forecasts and results and challenged the achievability of growth rates included in the model. • We performed a sensitivity analysis on the to consider impairment assessment, impact of assumptions. changes in the the underlying 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: 34 FINEOS Corporation Holdings plc Independent Auditor’s Report (continued) INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF FINEOS CORPORATION HOLDINGS PLC Overall materiality €916,800 How we determined it 1.5% of Group Revenue Rationale for benchmark applied 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. Performance materiality €641,800 which represents 70% of the overall materiality Performance materiality is set to reduce to an appropriately low level the probability that the aggregate of uncorrected and undetected misstatements in the financial statements exceeds materiality for the financial statements as a whole. In determining the current year performance materiality, we considered the following factors: a. The quality of the control environment and whether we were able to rely on controls, b. the amount and nature of control deficiencies, c. the nature, volume and size of misstatements (corrected and/or uncorrected) in the previous audit, d. prior period adjustments or errors found in the current year, and e. our assessment of engagement risk. We agreed with those charged with governance that we would report to them misstatements identified during our audit above €27,500 as well as misstatements below that amount that, in our view, warranted reporting for qualitative reasons. Reporting threshold We determined materiality for the Company to be €446,900 which is 0.5% of the parent company’s net assets (excluding intercompany loans), deemed the most appropriate benchmark as the company is a holding company driven by its investments in its subsidiaries. We determined performance materiality for the Company to be €312,800. 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 and the Group, its environment, controls, and critical business processes, to consider qualitative factors to ensure that we obtained sufficient coverage across all financial statement line items. Annual Report 2023X 35 INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF FINEOS CORPORATION HOLDINGS PLC 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. 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 period for which the financial statements are prepared is consistent with the financial statements; and The Directors’ Report has been prepared in accordance with applicable legal requirements; The accounting records of the Company 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 the Company and their 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 Company. We have nothing to report in this regard. 36 FINEOS Corporation Holdings plc Independent Auditor’s Report (continued) INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF FINEOS CORPORATION HOLDINGS PLC Respective Responsibilities Responsibilities of Directors for the financial statements As explained more fully in the Directors’ responsibilities statement set out on page 30, 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. Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below. Based on our understanding of the Group and the industry in which it operates, we identified that the principal risks of non-compliance with laws and regulations related to non-compliance with rules of the Australian Stock Exchange for companies trading securities on the Australian Stock Exchange, Companies Act 2014 and taxation legislation and we considered the extent to which non-compliance might have a material effect on the financial statements. In identifying and assessing risks of material misstatement in respect to irregularities including non- compliance with laws and regulations, our procedures included but were not limited to: • Gaining an understanding of the legal and regulatory framework applicable to the Group, the industry in which it operates and considered the risk of acts by the Group which were contrary to the applicable laws and regulations; • Discussing with the Directors and management the policies and procedures in place regarding compliance with laws and regulations; • Discussing amongst the engagement team the identified laws and regulations, and remaining alert to any indications of non-compliance; and • Focusing on areas of laws and regulations that could reasonably be expected to have a material effect on the financial statements from our general commercial and sector experience and through Annual Report 2023X 37 38 FINEOS Corporation Holdings plc Independent Auditor’s Report (continued) INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF FINEOS CORPORATION HOLDINGS PLC discussions with the Directors (as required by auditing standards), from inspection of the Group’s, regulatory and legal correspondence and review of minutes of Directors’ meetings in the year. We also considered those other laws and regulations that have a direct impact on the preparation of financial statements. Our procedures in relation to fraud included but were not limited to: • Making enquiries of the Directors and management on whether they had knowledge of any actual, suspected or alleged fraud; • Gaining an understanding of the internal controls established to mitigate risks related to fraud; • Discussing amongst the engagement team the risks of fraud such as opportunities for fraudulent manipulation of financial statements, and determined that the principal risks were related to posting manual journal entries to manipulate financial performance, management bias through judgements and assumptions in significant accounting estimates, and significant one-off or unusual transactions; and • Addressing the risks of fraud through management override of controls by performing journal entry testing. The primary responsibility for the prevention and detection of irregularities including fraud rests with both those charged with governance and management. As with any audit, there remained a risk of non-detection of irregularities, as these may involve collusion, forgery, intentional omissions, misrepresentations or the override of internal controls. As a result of our procedures, we did not identify any key audit matters relating to irregularities. The risks of material misstatement that had the greatest effect on our audit, including fraud, are discussed under “Key audit matters” within this report. 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 20 February 2024 Financial Statements Annual Report 2023X 39 Revenue Cost of sales Gross profit Product development and delivery Sales and marketing General and administration Amortisation Depreciation Other income Operating loss Finance income Finance costs Loss on ordinary activities before taxation Income tax Loss for the financial period/year Other comprehensive loss for the period/year: Foreign exchange differences on translation of operations of foreign subsidiaries and branches Total comprehensive loss for the period/year attributable to the equity holders of the parent Note 4 11 12 6 7 8 9 For the six-month period ended 31 December 2023 € For the year ended 30 June 2023 € 61,120,198 125,036,147 (17,398,737) (39,339,640) 43,721,461 85,696,507 (28,575,395) (61,347,992) (2,301,004) (7,943,329) (8,390,353) (18,354,175) (11,902,658) (23,065,911) (903,999) (2,046,005) 496,227 3,942,809 (7,855,721) (23,118,096) 103,456 37,780 (183,535) (666,046) (7,935,800) (23,746,362) 1,041,416 2,328,051 (6,894,384) (21,418,311) (1,319,698) (3,847,628) (8,214,082) (25,265,939) Basic and diluted (loss) per share (cents) 10 (2.07) (6.69) All results relate to continuing operations. The notes on pages 49 to 87 are an integral part of these financial statements. 40 FINEOS Corporation Holdings plc Consolidated Statement of Comprehensive Incomefor the six-month period ended 31 December 2023ASSETS Non-current assets Intangible assets Property, plant and equipment Deferred tax 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 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 As at 31 December 2023 € As at 30 June 2023 € Note 11 12 9 14 15 16 16 17 17 18 18 18 18 18 137,963,504 137,324,768 4,423,191 5,176,225 9,107,826 7,858,227 151,494,521 150,359,220 16,677,003 25,295,271 28,135,379 25,516,941 44,812,382 50,812,212 196,306,903 201,171,432 25,555,863 45,695,648 7,469,110 8,331,572 33,024,973 54,027,220 338,320 320,426 193,782,823 170,175,323 5,318,093 6,637,791 1 1 10,027,778 9,301,372 11,123,985 11,123,985 (57,309,070) (50,414,686) 163,281,930 147,144,212 196,306,903 201,171,432 The notes on pages 49 to 87 are an integral part of these financial statements. On behalf of the Board, Michael Kelly Director David Hollander Director 20 February 2024 Annual Report 2023X 41 Consolidated Statement of Financial Positionas at 31 December 2023Company Statement of Financial Position as at 31 December 2023 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 As at 31 December 2023 € As at 30 June 2023 € Note 13 14 15 16 17 17 18 18 85,507,168 85,507,168 110,076,189 86,814,256 3,867,869 3,727,824 113,944,058 90,542,080 199,451,226 176,049,248 20,017 20,017 17,767 17,767 338,320 320,426 193,782,823 170,175,323 1 1 22,609,813 22,609,813 (17,299,748) (17,074,082) 199,431,209 176,031,481 199,451,226 176,049,248 The notes on pages 49 to 87 are an integral part of these financial statements. On behalf of the Board, Michael Kelly Director David Hollander Director 20 February 2024 42 FINEOS Corporation Holdings plc Consolidated Statement of Changes in Equity for the year ended 30 June 2023 Called up share capital presented as equity € Share premium € Foreign exchange reserves arising on translation € 319,385 169,717,173 10,485,419 – – – – – – – (3,847,628) (3,847,628) At 30 June 2022 Loss for the year Other comprehensive loss for the year Total comprehensive loss for the year Issue of share capital 1,041 151,572 Reserves transfer from share options exercised Share-based payment charge Translation adjustment – – – 306,578 – – – – – – At 30 June 2023 320,426 170,175,323 6,637,791 Other undenominated capital € Share option reserve € Reorganisation reserve € Retained earnings € Total € 1 – – – – – – – 1 6,644,064 11,123,985 (28,996,375) 169,293,652 – – – – (306,578) 3,083,648 (119,762) 9,301,372 – (21,418,311) (21,418,311) – – – – – – – (3,847,628) (21,418,311) (25,265,939) – – – – 152,613 – 3,083,648 (119,762) 11,123,985 (50,414,686) 147,144,212 All amounts are attributable to the equity holders of the Group. The notes on pages 49 to 87 are an integral part of these financial statements. Annual Report 2023X 43 Consolidated Statement of Changes in Equity for the six-month period ended 31 December 2023 Called up share capital presented as equity € Foreign exchange reserves arising on translation € Share premium € At 30 June 2023 320,426 170,175,323 6,637,791 Loss for the period Other comprehensive loss for the period Total comprehensive loss for the period Issue of share capital Reserves transfer from share options exercised Share-based payment charge Translation adjustment At 31 December 2023 – – – – – – – (1,319,698) (1,319,698) 17,894 23,602,500 – – – 5,000 – – – – – – 338,320 193,782,823 5,318,093 Other undenominated capital € Share option reserve € Reorganisation reserve € Retained earnings € Total € 1 – – – – – – – 1 9,301,372 11,123,985 (50,414,686) 147,144,212 – – – – (5,000) 778,131 (46,725) – (6,894,384) (6,894,384) – – – – – – – (1,319,698) (6,894,384) (8,214,082) – – – – 23,620,394 – 778,131 (46,725) 10,027,778 11,123,985 (57,309,070) 163,281,930 All amounts are attributable to the equity holders of the Group. The notes on pages 49 to 87 are an integral part of these financial statements. 44 FINEOS Corporation Holdings plc Company Statement of Changes in Equity for the year ended 30 June 2023 Called up share capital presented as equity € Share premium € Other undenominated capital € At 30 June 2022 Loss for the year Other comprehensive loss for the year Total comprehensive loss for the year 319,385 169,717,173 – – – – Issue of share capital 1,041 151,572 Share premium from share options exercised – 306,578 At 30 June 2023 320,426 170,175,323 1 – – – – 1 Reorganisation reserve € Retained earnings € Total € 22,609,813 (16,712,269) 175,934,103 – – – – (361,813) (361,813) – – (361,813) (361,813) – – 152,613 306,578 22,609,813 (17,074,082) 176,031,481 All amounts are attributable to the equity holders of the parent Company. The notes on pages 49 to 87 are an integral part of these financial statements. Annual Report 2023X 45 Company Statement of Changes in Equity for the six-month period ended 31 December 2023 Called up share capital presented as equity € Share premium € Other undenominated capital € At 30 June 2023 Loss for the period Other comprehensive loss for the period Total comprehensive loss for the period 320,426 170,175,323 – – – – – – Issue of share capital 17,894 23,602,500 Share premium from share options exercised – 5,000 At 31 December 2023 338,320 193,782,823 1 – – – – – 1 Reorganisation reserve € Retained earnings € Total € 22,609,813 (17,074,082) 176,031,481 – – – – – (225,666) (225,666) – – (225,666) (225,666) – – 23,620,394 5,000 22,609,813 (17,299,748) 199,431,209 All amounts are attributable to the equity holders of the parent Company. The notes on pages 49 to 87 are an integral part of these financial statements. 46 FINEOS Corporation Holdings plc Consolidated Statement of Cash Flows for the six-month period ended 31 December 2023 Cash flows from operating activities Group loss after tax Adjusted for: Income tax Finance costs Finance income Other income Depreciation Amortisation 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 Other adjustment Net cash flows (used in)/generated from operating activities Cash flows from investing activities Interest received Payment for acquisition of subsidiary 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 period/year Note 9 7 6 12 11 21 For the six-month period ended 31 December 2023 € For the year ended 30 June 2023 € (6,894,384) (21,418,311) (1,041,416) (2,328,051) 183,535 666,046 (103,456) (37,780) (496,227) (3,942,809) 903,999 2,046,005 11,902,658 23,065,911 (576,823) (1,909,884) 8,779,057 5,973,944 (20,145,217) 6,105,852 (271,890) – 249,688 572,809 (483,674) (1,251,312) 19 778,131 3,083,648 14,563 46,197 (7,451,144) 10,921,953 12 11 17 17 103,456 37,780 – (2,403,458) (120,460) (436,067) (13,506,882) (27,002,761) (13,523,886) (29,804,506) (26,926) (64,485) 23,939,815 152,613 (319,421) – 23,593,468 88,128 2,618,438 (18,794,425) 25,516,941 44,311,366 Cash and cash equivalents at the end of the period/year 15 28,135,379 25,516,941 The notes on pages 49 to 87 are an integral part of these financial statements. Annual Report 2023X 47 Company Statement of Cash Flows for the six-month period ended 31 December 2023 Cash flows from operating activities Company loss after tax Adjusted for: Tax charge Finance costs Finance income Movement in trade and other receivables Movement in trade and other payables Net tax paid Effect of movement in exchange rates Net cash flows used in operating activities Cash flows from investing activities Interest received Amounts advanced to Group companies 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/(decrease) in cash and cash equivalents Cash and cash equivalents at the beginning of the period/year For the six-month period ended 31 December 2023 € For the year ended 30 June 2023 € Note (225,666) (361,813) 21 433 (238) (23,277) 2,250 (21) 1,940 – 7,466 (292) (2,686) (86,856) – (1,709) (244,558) (445,890) 238 292 (23,235,596) (17,629,374) (23,235,358) (17,629,082) (433) (7,466) 23,939,815 152,613 (319,421) – 23,619,961 145,147 140,045 (17,929,825) 3,727,824 21,657,649 14 16 17 17 Cash and cash equivalents at the end of the period/year 15 3,867,869 3,727,824 The notes on pages 49 to 87 are an integral part of these financial statements. 48 FINEOS Corporation Holdings plc 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 interpretations 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. New standards and interpretations The following new standards, interpretations and standard amendments became effective for the Group as of 1 July 2023: • Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS Practice Statement 2); • Definition of Accounting Estimates (Amendments to IAS 8); • Deferred Tax related to Assets and Liabilities arising from a Single Transaction (Amendments to IAS 12); and • International Tax Reform — Pillar Two Model Rules (Amendments to IAS 12) — application of the exception and disclosure of that fact. The standard amendments did not result in a material impact on the Group’s results. IFRS and IFRIC interpretations being adopted in subsequent years 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 standards and amendments to standards are effective for the period beginning 1 January 2024: • • IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information; IFRS S2 Climate-related Disclosures; • Classification of Liabilities as Current or Non-Current (Amendments to IAS 1); • Lease Liability in a Sale and Leaseback (Amendments to IFRS 16); and • Non-current Liabilities with Covenants (Amendments to IAS 1). 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 the 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 period to 31 December 2023 was €225,666 (year to 30 June 2023: €361,813). Annual Report 2023X 49 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 31 December. 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 circumstances 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. 50 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 clients. 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 2023X 51 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. 52 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 plan 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 reserve.” Annual Report 2023X 53 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. 54 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 2023X 55 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. 56 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 2023X 57 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. 58 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 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 2023X 59 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. 60 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 2023X 61 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, including capitalised development expenditure, 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 31 December 2023 was €106,332,169 (30 June 2023: €105,157,802) (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 consideration 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. The Group’s revenue recognised for the six months to 31 December 2023 was €61,120,198 (year to 30 June 2023: €125,036,147) (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 31 December 2023 was €31,631,335 (30 June 2023: €32,166,966) (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 31 December 2023 was €85,507,168 (30 June 2023: €85,507,168) (see Note 13). 62 FINEOS Corporation Holdings plc Notes to the Consolidated Financial Statements (continued)4. Revenue Amount of revenue by class of activity: Annual subscriptions Professional services Initial product licence fees Amount of revenue by market: North America APAC EMEA Segment information Six months ended 31 December 2023 € 12 months ended 30 June 2023 € 33,034,071 28,086,127 – 62,406,216 60,822,212 1,807,719 61,120,198 125,036,147 46,837,070 11,296,746 2,986,382 97,659,804 21,234,679 6,141,664 61,120,198 125,036,147 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 the six months ended 31 December 2023 there were two clients that each accounted for 10% or more of the Group’s revenue (12 months ended 30 June 2023: two clients), as follows: Client 1 Percentage of total revenue Client 2 Percentage of total revenue Contract assets and contract liabilities Contract assets Six months ended 31 December 2023 € 8,350,982 13.7% 7,623,676 12.5% 12 months ended 30 June 2023 € 19,335,470 15.5% 18,505,809 14.8% Contract assets are disclosed separately as unbilled receivables in Trade and other receivables amounting to €986,491 (30 June 2023: €2,010,916) (see Note 14). Contract liabilities Contract liabilities are disclosed separately as deferred revenue in Trade and other payables amounting to €12,106,038 (30 June 2023: €29,974,987) (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 2023X 63 5. Employees The average monthly number of persons employed by the Group (including Directors) during the period 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 Six months ended 31 December 2023 Number 12 months ended 30 June 2023 Number 802 23 54 879 778 26 51 855 Six months ended 31 December 2023 € 12 months ended 30 June 2023 € 42,642,243 89,361,174 4,013,811 2,182,769 778,131 8,275,937 4,631,520 3,083,648 49,616,954 105,352,279 Six months ended 31 December 2023 € 12 months ended 30 June 2023 € 365,456 5,544 371,000 938,126 25,502 963,628 The number of Directors to whom retirement benefits are accruing under defined contribution scheme pension/ superannuation costs noted above is one (12 months ended 30 June 2023: 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 period 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 period, qualifying staff costs amounted to €13,400,180 (12 months ended 30 June 2023: €26,724,612). 64 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 Six months ended 31 December 2023 € 12 months ended 30 June 2023 € 496,227 – – 1,133,463 2,805,846 3,500 496,227 3,942,809 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 (Note 21) Unwinding of discount applicable to contingent consideration Six months ended 31 December 2023 € 12 months ended 30 June 2023 € 26,926 156,609 – 64,485 334,858 266,703 183,535 666,046 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) Research and development expense Research and development tax credit (Note 6) Share-based payment expense (Note 19) Foreign exchange gain Six months ended 31 December 2023 € 12 months ended 30 June 2023 € 83,450 – 11,902,658 903,999 10,290,643 (496,227) 778,131 (426,467) 120,350 10,150 23,065,911 2,046,005 21,787,508 (1,133,463) 3,083,648 (247,836) Annual Report 2023X 65 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 periods Total current tax Deferred tax: Six months ended 31 December 2023 € 12 months ended 30 June 2023 € 201,534 (1,823) 383,758 57,344 199,711 441,102 Origination and reversal of timing differences (1,241,127) (2,769,153) Tax on loss on ordinary activities (1,041,416) (2,328,051) 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 period 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 Loss on ordinary activities multiplied by the standard rate of tax of 12.5% 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 Six months ended 31 December 2023 € 12 months ended 30 June 2023 € (7,935,800) (991,975) 99,533 (104,783) 101,832 12,009 140,913 (149,336) (1,823) 1,093,341 (1,241,127) (23,746,362) (2,968,295) 279,590 (87,125) 71,000 3,857 86,872 (350,089) 57,344 3,347,948 (2,769,153) (1,041,416) (2,328,051) 66 FINEOS Corporation Holdings plc Notes to the Consolidated Financial Statements (continued)(c) Deferred tax asset Group At beginning of period Released to the statement of comprehensive income (Note 9(a)) Foreign exchange Six months ended 31 December 2023 € 12 months ended 30 June 2023 € 7,858,227 5,180,339 1,241,127 8,472 2,769,153 (91,265) At end of period/year 9,107,826 7,858,227 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 216,359 503,715 8,182,501 205,251 209,512 494,365 6,988,248 166,102 At end of period/year 9,107,826 7,858,227 10. Earnings Per Share Six months ended 31 December 2023 € 12 months ended 30 June 2023 € Basic earnings per share Loss attributed to ordinary shareholders (6,894,384) (21,418,311) Weighted average number of ordinary shares outstanding 332,387,891 319,977,055 Basic loss per share (cents) (2.07) (6.69) Basic loss per share is calculated by dividing the loss for the period after taxation attributable to ordinary shareholders by the weighted average number of ordinary shares in issue during the period. Six months ended 31 December 2023 € 12 months ended 30 June 2023 € Diluted earnings per share Loss attributed to ordinary shareholders (6,894,384) (21,418,311) Weighted average number of ordinary shares outstanding 332,387,891 319,977,055 Diluted loss per share (cents) (2.07) (6.69) 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. Annual Report 2023X 67 11. Intangible Assets Right-of- use assets € Development expenditure € Contract costs € Computer software € Technology € Customer relationships € Goodwill € Total € Group Cost At 30 June 2023 6,180,517 163,329,247 3,400,177 341,736 8,575,006 19,376,375 45,204,295 246,407,353 – 13,400,180 106,702 (56,904) – (1,583) (167,582) – – – – – – – – – – – 13,506,882 (56,904) (142,787) (322,647) (752,723) (1,387,322) 6,122,030 176,561,845 3,506,879 341,736 8,432,219 19,053,728 44,451,572 258,470,009 Additions Modification Translation adjustment At 31 December 2023 Amortisation and impairment At 30 June 2023 5,812,526 81,424,019 2,515,924 341,736 3,272,686 2,678,365 13,037,329 109,082,585 137,301 10,448,827 253,053 (1,583) (138,737) – – – 585,494 477,983 – 11,902,658 (66,735) (54,591) (217,092) (478,738) 5,948,244 91,734,109 2,768,977 341,736 3,791,445 3,101,757 12,820,237 120,506,505 Amortisation charged in the period Translation adjustment At 31 December 2023 Net book amounts At 31 December 2023 – – 4,640,774 15,951,971 31,631,335 137,963,504 5,302,320 16,698,010 32,166,966 137,324,768 173,786 84,827,736 737,902 At 30 June 2023 367,991 81,905,228 884,253 68 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 Cost 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 Additions Translation adjustment – 26,724,612 278,149 (4,384) (464,106) – – – – – – 27,002,761 (395,440) (893,548) (2,084,611) (3,842,089) At 30 June 2023 6,180,517 163,329,247 3,400,177 341,736 8,575,006 19,376,375 45,204,295 246,407,353 Amortisation and impairment 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 Amortisation charged in the year Translation adjustment 603,652 19,689,965 574,024 (4,170) (350,397) – – – 1,210,251 988,019 – 23,065,911 (141,483) (115,809) (601,221) (1,213,080) At 30 June 2023 5,812,526 81,424,019 2,515,924 341,736 3,272,686 2,678,365 13,037,329 109,082,585 Net book amounts At 30 June 2023 367,991 81,905,228 884,253 At 30 June 2022 971,857 74,984,290 1,180,128 Development expenditure – – 5,302,320 16,698,010 32,166,966 137,324,768 6,766,528 18,463,768 33,650,356 136,016,927 In total, research and development costs for the Group amounted to €23,690,823 in the six months ended 31  December 2023 (12 months ended 30 June 2023: €48,512,120), out of which €13,400,180 (12 months ended 30 June 2023: €26,724,612) 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 €10,448,827 in the six months ended 31 December 2023 (12 months ended 30 June 2023: €19,689,965), of which €Nil (12 months ended 30 June 2023: €62,094) relates to the amortisation of previously capitalised borrowing costs. Cash-generating units Goodwill acquired through business combination activity is allocated to CGUs that are expected to benefit from synergies in that combination. As at 31 December 2023 the Group had one CGU (30 June 2023: one CGU). This CGU represents the lowest level within the Group at which the associated goodwill is monitored for internal management purposes and is not larger than the operating segments determined in accordance with IFRS 8 Operating Segments. During the 12 months ended 30 June 2023 FINEOS evolved its platform infrastructure such that all product offerings and any add-on functionalities and capabilities cannot operate without them being on the FINEOS Platform and each product offering or add-on functionality cannot generate cash inflows on its own. Annual Report 2023X 69 Impairment testing methodology and results Goodwill is subject to impairment testing on an annual basis at the financial year end. A value-in-use discounted cash flow model has been used at 31 December 2023 to value the one CGU. The cash flow forecasts are primarily based on a financial budget for year ending 31 December 2024, formally approved by the Board, and detailed management projections for years ending 31 December 2025 to 31 December 2027. These include projected revenues and operating margins determined with reference to historical Group experience, industry data and management’s expectations for the future. These forecasts are projected forward for a further six 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 2.5% (30 June 2023: 2.5%). This rate is based on the expected long-term inflation for the US of 2.0%, as forecasted by the Economics Intelligence Unit, plus a small real growth adjustment of 0.5%. The value-in-use represents the present value of the future cash flows, including the terminal value, discounted at a rate appropriate to the CGU. The discount rates (post tax) used range from 10.6% to 11.1% (30 June 2023: 11.1% to 11.4%); these rates are in line with the Group’s estimated weighted average cost of capital, arrived at using the Capital Asset Pricing Model. At 31 December 2023 and 30 June 2023, the goodwill impairment testing process has resulted in no impairment being identified. Key assumptions and significant goodwill amounts At both 31 December 2023 and 30 June 2023 all of the goodwill has been allocated to one CGU. The additional disclosures required for the FINEOS Group CGU 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 31 December 2023 FINEOS Group 30 June 2023 FINEOS Group €31,631 10.85% 11.65% 2.5% €32,167 11.25% 12.11% 2.5% The key assumptions and methodology used in respect of the FINEOS CGU are consistent with those described above. The value applied to each of the key estimates and assumptions are specific to the FINEOS CGU 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 CGU, it is management’s belief that the key assumptions are reasonable, and 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 CGU are considered to be warranted. 70 FINEOS Corporation Holdings plc Notes to the Consolidated Financial Statements (continued)12. Property, Plant and Equipment Group Cost Right-of-use assets € Office equipment € Computer equipment € Fixtures and fittings € Total € At 30 June 2023 11,158,548 795,208 5,785,146 2,117,384 19,856,286 Additions Translation adjustment 17,664 54,141 – 787 120,460 (7,752) – 4,818 138,124 51,994 At 31 December 2023 11,230,353 795,995 5,897,854 2,122,202 20,046,404 Depreciation At 30 June 2023 7,030,436 778,677 4,998,638 1,872,310 14,680,061 Charged in the period Translation adjustment 533,461 41,037 1,376 (3,069) 304,560 (1,895) 64,602 3,080 903,999 39,153 At 31 December 2023 7,604,934 776,984 5,301,303 1,939,992 15,623,213 Net book amounts At 31 December 2023 3,625,419 19,011 596,551 182,210 4,423,191 At 30 June 2023 4,128,112 16,531 786,508 245,074 5,176,225 Annual Report 2023X 71 Group Cost At 30 June 2022 Additions Modifications Translation adjustment Right-of-use assets € Office equipment € Computer equipment € Fixtures and fittings € Total € 10,198,970 1,166,586 5,585 (212,593) 796,221 – – 5,460,720 420,229 – 2,127,284 18,583,195 15,838 1,602,653 – 5,585 (1,013) (95,803) (25,738) (335,147) At 30 June 2023 11,158,548 795,208 5,785,146 2,117,384 19,856,286 Depreciation At 30 June 2022 Charged in the year Translation adjustment 6,035,479 1,115,003 (120,046) 750,450 4,330,151 1,730,944 12,847,024 33,186 (4,959) 741,436 (72,949) 156,380 (15,014) 2,046,005 (212,968) At 30 June 2023 7,030,436 778,677 4,998,638 1,872,310 14,680,061 Net book amounts At 30 June 2023 4,128,112 16,531 786,508 245,074 5,176,225 At 30 June 2022 4,163,491 45,771 1,130,569 396,340 5,736,171 13. Financial Assets Company Shares in Group undertakings – unlisted, at cost: At beginning and end of period Details of subsidiary undertakings are included in Note 27. 31 December 2023 € 30 June 2023 € 85,507,168 85,507,168 72 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 Company Other receivables Prepayments Amounts owed by subsidiary undertakings Trade and other receivables 31 December 2023 € 30 June 2023 € 8,263,462 17,351,780 986,491 74,378 2,010,916 78,368 5,259,362 4,021,707 654,366 618,834 1,125,104 1,025,083 313,840 188,583 16,677,003 25,295,271 31 December 2023 € – 27,998 30 June 2023 € 2,700 2,021 110,048,191 86,809,535 110,076,189 86,814,256 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 client due to billing arrangements. Taxes and tax credits Taxes and social welfare costs are subject to the terms of the relevant legislation. Annual Report 2023X 73 15. Cash and Cash Equivalents Group Cash and cash equivalents Company Cash and cash equivalents There are no restrictions on the cash held. 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) Company Trade payables Accruals 74 FINEOS Corporation Holdings plc 31 December 2023 € 30 June 2023 € 28,135,379 25,516,941 31 December 2023 € 30 June 2023 € 3,867,869 3,727,824 31 December 2023 € 30 June 2023 € 3,145,985 3,640,988 384,893 100,425 336,337 36,092 1,452,530 1,294,918 6,492,486 8,495,696 12,106,038 29,974,987 861,586 1,011,920 927,262 989,368 25,555,863 45,695,648 31 December 2023 € 30 June 2023 € 11,334 8,683 20,017 – 17,767 17,767 Notes to the Consolidated Financial Statements (continued)Non-current Group Lease liability (Note 21) Research and development tax credit Trade and other payables 31 December 2023 € 30 June 2023 € 4,124,877 4,592,320 3,344,233 3,739,252 7,469,110 8,331,572 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. 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 A payment of €2,403,458 was made during the 12 months ended 30 June 2023. There are no future payments relating to contingent consideration for which the Group may be liable. This is based on the expected payment amounts, and underlying performance metrics as agreed in May 2022. The movement in contingent consideration during the 12 months ended 30 June 2023 was as follows: At 1 July Discount unwinding Translation adjustment Payments during the year Gain on re-evaluation At 30 June 12 months ended 30 June 2023 € 4,977,930 266,703 (35,329) (2,403,458) (2,805,846) – Annual Report 2023X 75 17. Called up Share Capital Nominal value (per share) 31 December 2023 € 30 June 2023 € Authorised share capital (Group and Company) Ordinary shares €0.001 4,500,000 4,500,000 Issued share capital presented as equity Ordinary shares €0.001 338,320 320,426 The movement in issued share capital during the six-month period ended 31 December 2023 was as follows: Issued share capital At 30 June 2023 Share issue – equity raise Share issue – equity raise (conditional placement) Share issue – SPP Share issue – exercise of share options Transaction costs accounted for as a deduction from equity No. of shares Nominal value Share capital Share premium Total 320,425,675 15,555,556 2,222,222 96,212 20,000 – 338,319,665 €0.001 €0.001 €0.001 €0.001 €0.001 320,426 170,175,323 170,495,749 15,556 20,709,220 20,724,776 2,222 3,079,442 3,081,664 96 20 130,579 130,675 2,680 2,700 – (319,421) (319,421) 338,320 193,777,823 194,116,143 Transfer from share option reserve – – 5,000 5,000 At 31 December 2023 338,319,665 €0.001 338,320 193,782,823 194,121,143 The equivalent disclosure for the year ended 30 June 2023 is as follows: No. of shares Nominal value Share capital Share premium Total Issued share capital At 30 June 2022 Share issue – exercise of share options 1,040,888 319,384,787 €0.001 €0.001 319,385 169,717,173 170,036,558 1,041 151,572 152,613 Transfer from share option reserve – – 306,578 306,578 At 30 June 2023 320,425,675 €0.001 320,426 170,175,323 170,495,749 320,425,675 320,426 169,868,745 170,189,171 FINEOS undertook an equity raising on 15 August 2023 to provide general working capital, strengthen the FINEOS balance sheet position and maintain flexibility for timing of cash flows. FINEOS successfully completed a fully underwritten institutional placement, raising approximately AU$35 million through the issue of approximately 15.5 million new fully paid CDIs over FCL shares. The placement was undertaken at an offer price of AU$2.25 per new CDI. A further AU$5.0 million conditional placement was made to Michael Kelly, Director and CEO of FINEOS, also at an offer price of AU$2.25 per new CDI, and was subject to security holder approval. This was obtained at the Company’s Annual General Meeting (AGM) on 5 December 2023. Shortly thereafter, the Company received AU$5.0 million from Michael Kelly and issued approximately 2.2 million new, fully paid CDIs over FCL shares. FINEOS also undertook a non-underwritten Security Purchase Plan (SPP) raising approximately AU$0.2 million through the issue of 96,212 new, fully paid CDIs, at an offer price of AU$2.25 per new CDI, which completed on 20 September 2023. 76 FINEOS Corporation Holdings plc 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.” Reorganisation 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 reorganisation 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 37 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: Six months ended 31 December 2023 € 12 months ended 30 June 2023 € Share-based payment expense 778,131 3,083,648 Details of the schemes operated by the Group are set out below. 2019 Equity Incentive Plan 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. No awards were issued under the 2019 Equity Incentive Plan in the six months ended 31 December 2023. An expense of €778,131 was recognised during the financial period (12 months ended 30 June 2023: €3,083,648) relating to the award of options under the 2019 Equity Incentive Plan in 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 Annual Report 2023X 77 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 period. An expense of €Nil was recognised during the financial period (12 months to 30 June 2023: €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 and Retention 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 period. Six months ended 31 December 2023 12 months ended 30 June 2023 Number WAEP Number WAEP Outstanding at 1 July at €0.001 per share 21,848,298 1.18 21,430,139 Options granted Options exercised Options forfeited – – 2,508,700 (20,000) (613,077) 0.14 1.74 (1,040,888) (1,049,653) 1.32 0.73 0.15 2.25 Outstanding at 31 December 2023/30 June 2023 at €0.001 per share 21,215,221 1.17 21,848,298 1.18 Exercisable at 31 December 2023/30 June 2023 at €0.001 per share 12,797,610 1.11 10,604,296 0.77 For the share options not yet exercisable as at 31 December 2023 the weighted average remaining contractual life is 1.5 years (30 June 2023: 1.6 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 period ended 31 December 2023 (weighted average in each case): Dividend yield Expected volatility Risk free interest rate Average expected life remaining in years 78 FINEOS Corporation Holdings plc 31 December 2023 % 30 June 2023 % 0 46.13 1.57 3.3 0 46.14 1.55 3.8 Notes to the Consolidated Financial Statements (continued)20. Commitments and Contingencies (a) Capital commitments At the period end the Group had no capital commitments. (b) Contingent liabilities At the period 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 31 December 2023 Due within one year Due within two to five years Due after five years At 30 June 2023 Due within one year Due within two to five years Due after five years Land and buildings € 1,202,100 4,209,612 389,828 Software licenses € Total € 85,477 85,478 1,287,577 4,295,090 – 389,828 5,801,540 170,955 5,972,495 Land and buildings € 1,183,734 4,397,728 779,656 Software licenses € 107,494 107,494 Total € 1,291,228 4,505,222 – 779,656 6,361,118 214,988 6,576,106 Annual Report 2023X 79 21. Lease Liabilities Group Current lease liabilities Non-current lease liabilities Total lease liabilities The Group’s total lease liability over the periods is as follows: Opening liability Additions for the period Modifications for the period Interest for the period Lease expense for the period Closing lease liability 31 December 2023 € 30 June 2023 € 1,011,920 989,368 4,124,877 4,592,320 5,136,797 5,581,688 Six months to 31 December 2023 € 12 months to 30 June 2023 € (5,581,688) (5,984,477) (17,664) (1,166,586) 42,341 (5,651) (156,609) (334,858) 576,823 1,909,884 (5,136,797) (5,581,688) 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 licences. 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 period ranged from 3.2% to 7% (12 months ended 30 June 2023: 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 licences 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 period to which they relate and amounted to €2,182,769 (12 months ended 30 June 2023: €4,631,520). An amount of €396,477 was payable at the period end (30 June 2023: €409,299). 80 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. 31 December 2023 Group Financial liabilities Finance lease 30 June 2023 Group Financial liabilities Finance lease Fair values Total € Within 1 year € Between 1 to 5 years € Over 5 years € 9,638,471 9,638,471 – – 5,136,797 1,011,920 3,745,036 379,841 14,775,268 10,650,391 3,745,036 379,841 Total € Within 1 year € Between 1 to 5 years € Over 5 years € 12,136,684 12,136,684 – – 5,581,688 989,368 3,845,604 746,716 17,718,372 13,126,052 3,845,604 746,716 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 2023X 81 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 31 December 2023 € 8,263,462 28,135,379 Group 30 June 2023 € 17,351,780 25,516,941 3,145,985 5,136,797 3,640,988 5,581,688 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 client 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 client. The Group has established credit limits for each client under which these clients are analysed for credit-worthiness before the Group’s standard payment and delivery terms are offered. Most of the clients 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 31 December 2023 Current 1 month 2 months 3 months 4+ months Balance Trade receivables as at 31 December 2023 Expected credit losses % Loss allowance 6,348,313 783,158 460,906 289,242 445,461 8,327,080 0% – 0% – 1% 4,609 5% 10% 14,462 44,547 63,618 At 30 June 2023 Current 1 month 2 months 3 months 4+ months Balance Trade receivables as at 30 June 2023 Expected credit losses % Loss allowance 14,958,811 2,176,826 178,725 4,135 39,197 17,357,694 0% – 0% – 1% 1,787 5% 207 10% 3,920 5,914 82 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 period, the Group used foreign currency forward exchange contracts to hedge its exposure. However, at the period end the Group had no outstanding contracts in place. Sensitivity analysis At 31 December 2023, 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 periods presented would have been as set out overleaf: NZ$ AU$ US$ CAN$ GBP PLN INR Six months ended 31 December 2023 € 12 months ended 30 June 2023 € 88,252 58,316 831,086 257,431 22,890 (47,108) (42,937) 200,044 (87,242) 1,564,732 379,395 48,609 (82,370) (50,767) 1,167,930 1,972,401 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 31 December 2023. 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 31 December 2023 € 30 June 2023 € – – Annual Report 2023X 83 25. Related Party Transactions 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 six months ended 31 December 2023 was €389,828 (12 months ended 30 June 2023: €779,656). The total rent due at 31 December 2023 was €Nil (30 June 2023: €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 16 of the Annual Report. Total remuneration in respect of these individuals is split as follows: Wages and salaries Employer’s PRSI Pension Six months ended 31 December 2023 € 12 months ended 30 June 2023 € 365,456 – 5,544 371,000 938,126 39,189 25,502 1,002,817 During the six months ended 31 December 2023, 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 and the lease disclosed above. 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 period. 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. 84 FINEOS Corporation Holdings plc Notes to the Consolidated Financial Statements (continued)The gearing ratio of the Group at 31 December 2023 was as follows: Total borrowings Less: cash and cash equivalents Net funds Total equity Total capital Gearing ratio Group 31 December 2023 € Group 30 June 2023 € – – (28,135,379) (25,516,941) (28,135,379) (25,516,941) 163,281,930 147,144,212 163,281,930 147,144,212 Nil Nil 27. Subsidiary Undertakings The Company has the following subsidiary undertakings. All subsidiaries are wholly owned unless otherwise indicated: Subsidiary Undertaking Country of Incorporation Principal Activity FINEOS Corporation Limited Republic of Ireland FINEOS UK Limited United Kingdom FINEOS Corporation Inc. 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 India 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 2023X 85 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 c/o BDO LLP Two Snowhill, 7th Floor, Birmingham, B4 6GA 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 FINEOS India Private Limited 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 c/ Castelló 8, 2 ª B, 28001 Madrid, Spain Registered Address 23, Siva Archade, 29th Main, BTM Layout 1st Stage, Bangalore KA 560068 86 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 period end that would require disclosure in or adjustment to the consolidated financial statements. 29. Approval of Consolidated Financial Statements The consolidated financial statements and Company statement of financial position in respect of the six-month period ended 31 December 2023 were approved and authorised for issue by the Directors on 20 February 2024. Annual Report 2023X 87 Information required by ASX Listing Rules and not disclosed elsewhere in this document is set out below. The information is correct as of 14 February 2024 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 the 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 the 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 338,319,665 CDIs on issue held by 3,652 registered holders. The number of securities held by substantial security holders is set out below: JACQUEL INVESTMENTS LIMITED There are no securities subject to voluntary escrow. There are 21,185,879 unlisted options issued and held by 1,269 option holders. Distribution spread of security holdings Balance 170,824,123 % 50.5 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 1,766 1,119 363 365 39 792,630 2,863,202 2,823,875 9,077,344 322,762,614 3,652 338,319,665 % 0.23 0.85 0.83 2.68 95.41 100.00 88 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 BNP PARIBAS NOMS PTY LTD CITICORP NOMINEES PTY LIMITED HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED – A/C 2 UBS NOMINEES PTY LTD BNP PARIBAS NOMINEES PTY LTD WARBONT NOMINEES PTY LTD MIRRABOOKA INVESTMENTS LIMITED MERRILL LYNCH (AUSTRALIA) NOMINEES PTY LIMITED BNP PARIBAS NOMS (NZ) LTD NEWECONOMY COM AU NOMINEES PTY LIMITED <900 ACCOUNT> MR MICHAEL KELLY BNP PARIBAS NOMINEES PTY LTD DJERRIWARRH INVESTMENTS LIMITED POWERWRAP LIMITED HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED-GSI EDA MR WILLIAM DALY TELUNAPA PTY LTD Total Securities of Top 20 Holdings Balance 170,824,123 48,090,877 28,943,166 18,649,166 14,238,528 7,391,565 5,461,910 4,279,843 4,111,315 3,544,509 2,620,691 1,900,406 1,835,282 1,544,565 1,407,920 1,398,891 669,124 657,145 570,724 500,000 % 50.5 14.2 8.6 5.5 4.2 2.2 1.6 1.3 1.2 1.0 0.8 0.6 0.5 0.5 0.4 0.4 0.2 0.2 0.2 0.1 318,639,750 94.2 Total of Securities 338,319,665 Unmarketable Parcels (UMP) (based on a CDI price of $1.84) Total Securities/Issued Capital UMP Securities UMP Holders UMP Percent 338,319,665 97,613 630 0.02885 Annual Report 2023X 89 This page has been left blank intentionally. 90 FINEOS Corporation Holdings plc Company Information Directors Anne O’Driscoll (Chairman) Michael Kelly David Hollander William Mullaney Terri Rhodes Joint Company Secretary John McKnight Joint Company Secretary Natalie Climo Registered Office FINEOS House, East Point Business Park, Dublin 3, Ireland Ph: +353 1 639 9700 North Tower Level 22, 459 Collins Street, Melbourne, VIC 3000 Australia Ph: +61 3 9018 3400 Registered Number 639640 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 Share Registry Boardroom Pty Ltd GPO Box 3993, Sydney, NSW 2001 Australia Ph: +61 2 9290 9600 Annual Report 2023X 91 

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