Fineos’ quarterly update (attached) is strangely silent on previous FY21 sales guidance which leaves questions on a poor cash flow update and notice of escrow release sting in the tail that probably explain’s it being down -5% currently on the release.

Updates:

·         Nothing on sales, previous guidance was upper end of €102-105m range that was given at the Macquarie conference in early May.  No news is bad news.

·         Spraoi acquisition completed in May, this resulted in –€3.1m cash outflow in the qtr.

·         Cash €13.3m down from €27.4m last quarter, mostly driven by –€10.5m in FCF the highest quarterly FCF outflow to date driven by lower customer receipts (supposedly timing related with receipts in July) and higher operating and R&D spending.

·         2 new client contract wins in North America signing up to FINEOS New Business and Underwriting, and FINEOS Claims and Payments modules

·         Escrow Release: Post results release on 26 August, at total of 85.1m shares held by associates of Michael Kelly, Executive Director and CEO will be released from voluntary escrow.  This is 27% of shares (including unquoted) and given the current free float is 126.3m shares according to YahooFinance, this is a 67% increase in free float… Wow, lets hope he doesn’t need cash for a while.

I own FCL and am updating my valuation but will wait for the full year results before completing and publishing it on strawman.  In the meantime I am sitting tight and looking through a messy quarterly update for what I hope is long term sustained growth and improved FCF performance as it scales.

For those interested FCL came up on the call yesterday (28Jul) 45min in, Henry Jennings and Andrew Wielandt are on and usually worth listening to.

the call: Wednesday 28 July on ausbiz