FINEOS Corporation Holdings plc (FCL) Earnings Call Transcript & Summary

Thank you for standing by and welcome to the FINEOS Corporation Holdings plc FY '21 Results Presentation. [Operator Instructions] I would now like to hand the conference over to Mr. Michael Kelly, CEO and founder.

Thank you, Naomi, and welcome everybody to our financial year-end results announcement for FY '21. I am going to use the slide presentation that we issued to the ASX over the day earlier this morning. And I'll walk through that page by page as I go through the results. I'm joined here by Tom Wall, our CFO, and I'll be handing over to Tom to give some more color and detail on the financials as we go through this presentation. So if you have the presentation to hand, I'm going to start on Slide 3. And really, the highlight I suppose, is that our revenues have grown to EUR 108 million as of the end of the FY, which is a 23.3% growth rate over FY '20. But very pleasingly, within that, our subscriptions revenue have grown to EUR 40.1 million, which overall is a 48.6% growth rate on FY '20. And on services were EUR 66 million, which is 13.9% on the growth side. Gross profit of EUR 72 million, 66.5% margin. And again, in line with the revenue growth, 23% growth, on the profit side. And pro forma EBITDA slightly was down on last year, but fully expected, it was EUR 7.9 million in the FY. And our annual recurring revenue, our subscriptions as we look forward is -- as of the 30th of June, we're now doing EUR 45.7 million in terms of the 30th of June and the look forward. And that's a 50% growth on what it was this time last year in terms of our financial results. And I think overall, it's important to point out that we've moved from 3 to 4 years ago where we were an old ILF, initial license fee, and annual license fee to really a fully subscription model with less than EUR 2 million now of the old ILF fees in our numbers. So very much a move towards the SaaS model. I'll turn to Page 4. And one of the great strengths of FINEOS is our track record and the number of clients that we have in our industry. So with 60-plus clients in the Life, Accident and Health industry globally. And as our investors will know from our IPO prospectus and the strategies that we've continuously talked about, we very much have had a North America-first revenue and company growth strategy. Given that North America is about 1/3 of the size of the global market, we see a huge opportunity for FINEOS to grow in North America. And again, pleasingly, the growth rate in the States has continued to grow very healthily and it now represents 73% of our total revenues globally, up from 59% last year. We also, again, towards the end of last calendar year -- or sorry, calendar year '20, we launched our FINEOS new business and underwriting solution, which really completed our core FINEOS suite in terms of the modules of the full AdminSuite. And so we're very pleased to do that as well, and we launched that at FINEOS Summit and demonstrated it to our clients and some prospects. And our employee retention has remained high. And obviously, we are very much a people business in FINEOS, and we work hard on employee engagement and employee retention. So we're well above the average rates in terms of employee retention at the 90%. And our overall headcount, including employees and contractors, finished off 1,065 people at the end of FY '21. So we're up about 20%. And lastly, on Page 4, we did make 2 acquisitions during the year. Limelight Health, which gave us that new business and underwriting solution and Spraoi right towards the end of the year in May. So little impact on the FY, but a really strategic buy for FINEOS as well. Page 5 is just really a summary of what I've just said in terms of the results and Tom intends to go into these numbers a little bit more in more detail with you. But again, from our perspective, it was a solid year's growth in what would have been regarded as a difficult environment given the employment situation as a result of the COVID-19 pandemic. We are very much in the employee benefits business. And I don't think any business was unaffected by the COVID-19, but we've certainly come through it in a very solid and healthy manner in terms of the business growth and our underlying performance. I'll move into Slide 6. And in Slide 6, what I said earlier about our revenue growth is shown here in historical as well going back to FY '18. And over the past 3 years, FINEOS has doubled in revenue size over the 3 years from EUR 53.7 million to EUR 108.3 million. But really importantly, in that growth, we have changed our business from being an old on-premise type business to becoming a true SaaS player. And as a SaaS vendor, we've grown our subscription revenues very, very healthily through the 3 years. So total revenue has grown and quite a bit of that revenue has been grown through cross-selling and up-selling to existing clients, but also we've added Limelight and the Spraoi acquisitions. So you can see there the amount of contribution from both of those on that slide. Our total organic growth for the revenue would have been 12.5% for the FY. But again, I think importantly, we have set our stall out as becoming a SaaS software product company. And our subscriptions revenues were ahead of prediction in terms of a 32.4% growth. So overall, we're in a strong position. And our annual recurring revenue looking forward from the 1st of July was at the EUR 45.7 million. So to move that along to Slide 7, and a bit more color then in terms of zeroing in on the North American performance. And as you can see, North America has been faster than any other country to adopt cloud and SaaS software and FINEOS has very much taken advantage of the opportunity to grow our SaaS revenues in North America. Plus, it is the largest base of clients we have and some of the biggest insurance companies in the world are using FINEOS today. We delivered a very solid implementation of FINEOS with several clients over the year and several upgrades and in particular, our larger clients where we had good, strong go-live situations with the customers through the year. So overall, North America now represents 73% of our growth. And if you look at of our overall revenues, and if you look at the cloud subscription side, you can see the tremendous growth that we've achieved with cloud subscriptions through upgrades to the cloud, through cross-sells and through new sales. We've grown the business in North America subscriptions to EUR 27.9 million. So the geographic mix of our revenues on Slide 8, I've just really covered that, but you can see that ANZ or APAC for us is 22% and 5% in EMEA. So although we have market leadership in the ANZ region, in particular, within the Life, Accident and Health space and we've continued to run a healthy business in the region, that revenue hasn't grown nearly as fast as the revenue in North America. So more commentary on that really would be that in the ANZ region, we've had a fair bit of M&A, which looks like it's coming to conclusions now with the likes of TAL and AIA doing well out of it and becoming quite dominant insurance companies in the market. Both of them are clients at FINEOS. So ANZ, we feel will settle down and begin to grow. And again, I think the ANZ market has become very much cloud-focused, and we're seeing cloud growing in the region and being much more acceptable and seen as the way to go for the future. So from a perspective of upgrades and the future of FINEOS business, we feel we're in a healthy position in that region as well. I'll turn to the Slide 9 and Slide 9 just covers the research and development and the amount invested in the product and the platform over the past year. And as you can see, investment was slightly higher at 38.1%, driven mainly by demand from particularly our very, very large clients who really pushed us to drive the product on, and they're very excited about what FINEOS is doing. And we've basically invested very, very strategically in the product to continue the journey of the FINEOS platform and becoming the industry and market leader. So the research and development has been a continuous important strategic investment for us. And over the past few years, we've invested over EUR 150 million in this platform, and we'll continue to invest because we can see the healthy growth from, as you can see, the subscriptions and the performance of the business coming through. So a solid kind of a track record and a solid strategy in terms of the future. I'll move to Slide 10, where you can see the last couple of years in terms of our top 10 clients. And as you can read from Slide 10, in FY '21, there was no particular client that had an impact of more than 15% on our revenues. So quite a few clients doing implementations and so on and buying software from FINEOS in the year. But as I said, there's no big client dominant in our numbers. And over the year as well, those client spends change. They continue to spend year-by-year, but some years, we do big upgrades or we cross-sell a product to them and they may spend more in that particular year. So again, just gives you a breakdown of the clients. And we do have some very large clients in North America, particularly, and there's going to continue to be activity with those clients as well as we move forward. Slide 11 covers our people. And you can see the breakdown by function with the 45% being the research and development and the biggest team in FINEOS in terms of the investment. On the services side, we have the product consulting team. We haven't grown that as much in this year percentage-wise as we would have done in the past couple of years, but that was very much a well-thought out strategy in terms of partnering with professional services companies. So we have begun to give away professional services work and projects with FINEOS and we're seeing the demand for that growth. And so we're working through getting the balance right as we grow our subscriptions revenue and become that true product SaaS vendor, we'll see more and more services moving across just to partners. And in particular, like there was one deal we did a few months ago and we gave 2/3 of the services of that implementation to a partner -- a strategic partner of FINEOS that will help us, hopefully, probably. Our utilization rates were 88%, which is kind of more normalized than the 91% we hit the previous year. And there's a slight increase in attrition. And this is something we'll continue to watch, obviously, as people come out of the COVID lockdowns and so on. But we, as a business, have put our focus into working remotely. And that has been a tremendous success for FINEOS. We've actually surveyed our people and the vast majority of people still want to work remotely, but we will be promoting a remote-first hybrid approach and we've invested in our offices in various countries now so that we can offer that hybrid part-time in the office a lot of time at home as well, working from home, as part of the team. So overall, as I said, the team was quite happy with the way things have been working and productivity has been good. And then lastly, on the people side, we did launch -- our relaunch, I suppose, our diversity, equality and inclusion initiative, and we call it Embrace in FINEOS. And we are very much a people business, as I said at the beginning, and we're committed to the people engagement side of our business, but also corporate responsibility in terms of the market and what we do and the overall health and well-being of our people. And very much from a strategic perspective in the FINEOS mission, one of our principal objectives is to drive organizational health to create a great place to work in a competitive environment or competitive advantage for FINEOS. And we do believe we have that in our people. So I'm going to hand over to Tom now, who's going to step into the financials and work through those, and Tom will hand back to me after that. So Tom, can I ask you to give the presentation from Slide 14 onwards. Hello, Tom?

Hello.

Can I ask you to go from Slide 14, please.

Mike, maybe given Tom is just having difficulties, if you want to push out to the next section on Slide 19, and we'll come back to Tom at the end then to run through financials.

Sure. Yes. Thanks, Orla. I'm happy to go through the financials as well, but I'll jump on to Slide 19. Apologies for the delay here. We're having some technology problems. So Slide 20, very much the strategy we set out at our IPO and our prospectus was across these 4 kind of columns. We want to grow and upsell to our clients. And we see a significant road ahead for us to upgrade our clients to the cloud and to cross-sell products out of the FINEOS AdminSuite and the FINEOS Platform right into the future. So we have a significant opportunity there. We have been very successful on cross-selling the Absence product into existing clients in North America. And indeed, we've been very successful with the upgrades to the cloud. And now we've had the full suite with the underwriting or the new business and underwriting and the machine learning. And if you look at our platform, these very much fit into where we always intentionally said we were going. So the cloud-based revenues have continued to do well out of that. I think we all know that those headwinds against the global business market, and as I said, the employment market as well, over the past 12 months due to the pandemic. But there is green shoots in terms of what Swiss Re and others are saying about growth opportunity. And the market is coming back in terms of growth. We're seeing it in particular in North America where we're starting to see investment cycles coming into place and so on. And hopefully, that will give us some new wins and indeed some more cross-sells across our business. And we're also seeing the increased increase in SaaS everywhere now. It's not just North America. So I think, again, we see ourselves well positioned in that space. Insurance companies are still having to modernize their systems and regulatory complexity has continued to increase as well. So I think we're going to see the insurers continue on their digital transformation journeys. And again, FINEOS is well positioned to take advantage of that. We will continue to expand our sales and marketing, and we will look at new markets in terms of opportunities to sell into some of the multinationals that we have in different regions, in different geographies. And I think we have an opportunity to go totally global. But again, over the past couple of years, we're very much focused on the North American market with the opportunity to expand into the Asia Pac and then down the road into the EMEA markets as well. There's quite a bit of opportunity in terms of extra lines of business and things that we can see. We can take on to the platform. And again, we will do that with carriers who are already working with us today. So making that journey a fairly solid and a good foundation in terms of moving into other lines of business within our own industry of Life, Accident and Health. And then FINEOS, the goal that we've set ourselves out and that we're driving is very much to make FINEOS the leading industry platform for Life, Accident and Health and we're well on that journey now and continuing to add new business and obviously, new product as well as we move through the platform forward. So overall, our strategy hasn't changed. And the Slide 21, very much kind of gives you a picture of how we're doing. We now have the FINEOS AdminSuite and strategically, we are the only guys in the employee benefit space in North America who can offer a full end-to-end solution that's fully integrated, quote-to-claim core system for group insurance, for voluntary insurance, which is a growing line in North America and for Absence management, which is essentially for employee benefits carriers to offer this as a service. The FINEOS AdminSuite is in live production. We're a very large player on the group side, a $4 billion-plus top 5 group player in the States, and they are using that system in from all the way through from new business all the way through to claims and so on, all sitting on the SaaS platform and all integrated as well as a suite. So they're really enjoying that experience and they would be ahead of the marketplace in terms of having that full suite end-to-end system. We have 35 carriers altogether in North America on the platform, primarily for claims, but quite a lot of them now for the Absence space and an opportunity to bring them into the AdminSuite as well. And we've got 5 of the top 10 group carriers in the U.S. using FINEOS. So again, on the IDAM side, again, this shows the strategy is paying off. I think overall, when you look at FINEOS as a vendor, we would have the largest number of employee benefits, software, clients, employees and revenues on our platform today in North America. And as I said, we still have a lot of road ahead of us in terms of all the cross-sell and upsell. So if you look at Slide 22, it really shows all these clients on this page are all in the public domain, they've all been very much advocating for FINEOS and they've all been moving in the direction of the platform in terms of the full end-to-end. So moving to Slide 23. The Limelight acquisition in 2020, we've basically been doing a lot of work around integration and streamlining that team and that product and bringing that product into the full FINEOS suite. So we've basically -- we've been doing that for the past year, and it was our first acquisition. We've learned a lot from going through the process with them, and I think they've learned a lot as well coming into a business like FINEOS. And overall, they've contributed EUR 9.2 million in revenue in the FY. They would be off in terms of what we thought we would do with the Limelight through the year, but there was very little activity in the new business side through the COVID year in terms of any business growth. So hopefully, we'll see that turn up as we move forward and there's great opportunity for us, as I said, to do the cross-selling. The cost savings as well that we pulled out of the merger, that will hit our numbers this year coming and you'll continue to see our expenses driven down in terms of the margins and so on should increase. So the investment has been made, and we're continuing to invest in Limelight in that product and continuing to bring it up to the market standard. Slide 24. We then acquired Spraoi, which is in a very hot space of machine learning, a group of -- a team that had never raised capital on the markets, but boots dropped in the old-fashioned way, but have built a nice product in the employee benefit space. We've come across them with some of our existing clients and we value them. So it was a very good merger, and we're looking forward to growing that in terms of cross-sell and global appeal. And we've got some great talent out of it. Indeed, Spraoi did a lot of work in India, where the product was built out. And so we will build on that Indian operation, and that will -- that is now FINEOS India, that team. So we're going to grow that. So delighted with that -- delighted with the new, the new skills and talent that's brought with -- to the business and looking forward to a strong future with Spraoi. My last slide, Slide 25. We're going to guide revenues of EUR 125 million to EUR 130 million. Again, very much with the focus on the subscription revenue growth. And again, we're going to guide 13%, again, a huge healthy growth rates in terms of subscription of FINEOS and to the platform world on the SaaS side. We have a very good pipeline, and we've got a significant client base with a lot of cross-sell and upsell. As you can see, we've done that through the year. And we've got a huge investment behind us in terms of the platform that we've already built and yet to sell. So we do see ourselves in a healthy situation. We'll continue to research and development. One important point, I think, is we're drawing out is that we issued a notice to all of our customers who are on-premise that the release 20.02, which was July '21, will be our last on-premise release. So in other words, clients who are on-premise, we've given them a 3-year and August period. That they can back patch releases, if possible, some of the functionality they can back patch to their on-premise systems, and we will do that for them and with them and keep them running, but over the next year or 2 years, they really need to be planning to move to the SaaS and move to the upgrade on the SaaS platform. So I might call Tom to give that presentation on the detail of the financials, please, if you're available, Tom.

Yes, Michael, kind of just checking, you can hear me okay now?

Yes, perfectly.

Apologies, everybody. The joys of technology. Michael, thank you many for the update. And unfortunately, we didn't go in the format here we were looking for. So going to Slide 14, which is a pro forma income statement review. I suppose the first contract we've got to say is for our full trading period for FY '21 for FINEOS' staff for working from home. We had a COVID year from an activity point of view. I think it's the one thing that when we discuss with folks on investment, we're building more staff. Everyone has experienced the impact of COVID. It's now become, unfortunately, more business as usual, where people work through that. In spite of that, all the projects that we worked on have been delivered remotely. And as Mike alluded to, we've been looking at the office infrastructure as well as the well-being of the staff. The main focus, as opposed from our numbers perspective is that the majority of our cost base is people related, which is in the mid-80s. And then the other material costs would be AWS as a specific line item. If we go through on Slide 14, without going through verbatim in all the notes, I suppose the main challenge would be to opportunity from the business as we've managed to grow the revenues year-on-year in spite of the backdrop. The ARR has been strong, as Michael has reiterated, software growth has been substantial and the organic part from the FINEOS perspective grew 32.4% on FY '20. And again, as was alluded at the organic revenue for the services was in around 5%. But if we went back to FY '19 to '20, that grew by 48%. It's a strong base, strong amount of activity in people. The ILF, or initial license fees, are always good revenue models for us and good margin, but they have been reducing in line with our overall strategy over the last 4 years from a SaaS perspective. Services, as we said before, grew by 14% when you looked about the activity levels and the increase on the acquisition from Limelight to EUR 5.2 million and Spraoi about EUR 200,000. So from a timing point of view, we took Limelight on board August last year. And then Spraoi May of this year. So to integrate that in the business, we've been looking overall at the -- obviously, the revenue model, but the economies of scale and headcount on the integration. With the increased revenues, obviously, we've had increased cost of sales, which flow in line with that from an overall revenue point of view, services and the overall activity levels. And from an overall perspective on here, the depreciation and amortization costs as we add more activity from an R&D point of view, which we've continued to invest in substantially, as Michael alluded to earlier, it also means that the amortization would flow through on that as well. And we've had a true-up on that as well from an overall activity from the acquisition and the purchase price account, or PPA. The key point then obviously that from a revenue split, FCL would have made up about 89%; Limelight, 10%; and Spraoi 1%. And calling out a small point just on our overall headcount, which we alluded to earlier, the 1,065, in our results, we have to report on an average basis and only with full-time staff. So that you'll see a disconnect and look at the accounts, the average number is 794. And in this report, the reporting is at 1,065. The other part then is if you move to Slide 15, on the operating expenses, again, the key trend on this from an overall investment point of view is the R&D, which as Michael referred to, is around 38% growth year-on-year. The main movements on our overall operating expense and the research and development is the element that isn't capitalized, we would look at the constituent parts that the movement of the expenses. Cloud ops have made up about 29% of our growth on expenses. And that's really attributable to the major increase in headcount, which obviously with 60-plus customers focusing on a SaaS plus model, remote support and access, we have a regional coverage of that follow the sun approach, whereby we're adding people in Australia, New Zealand, the U.S. and then Europe. And with the acquisition of Spraoi, we're also looking at adding more staff in India as we have a subsidiary in there as part of the acquisition, which took place in May. The other part, obviously, from an overall economy of scale perspective is we're working through consolidating staff, and we should see some more improvements in the overall cost base and integration in FY '22. With AWS from an overall perspective in cloud ops and elements of that cost and overall from an AWS engagement with the scale of the activity and the spend, we're getting increased discounts as we work through with those, which again will flow forward. Obviously, from a scale point of view, we're getting to different bands from the activity level. The next material movement is obviously the increase in the R&D OpEx, which is for the head count, which is not going to be capitalized, which is roughly around the 60 to 40 split. So 25% of the increase in the cost would be R&D. The other substantial increases in the G&A side, which is EUR 5.3 million. And the narrative and there we're calling out the key elements, with the Limelight contributing to that. And then across the business, we would have had to make some more additional accruals on holidays, which has impacted the overall cost given the fact that we've had a full COVID year, not everybody has been able to take holidays and from what I'm reading in the market, it seems to be a common trend regards to companies having to make additional provisions for the unused holidays, but the strategy is working through on that from a staff perspective as well. With sales and marketing, we obviously integrate both teams. And we've taken the sales and marketing functions from Limelight and integrated that to the overall business. Again, then from an overall business perspective, we've had close to minimal -- travel from an overall transaction perspective, and that has been beneficial for both our carbon footprint and also for staff from an overall travel perspective. So from that point of view, we're reviewing that from an overall activity level to see what's happening going forward from both the customer and the business requirements. Moving to Slide 16, which is the pro forma reconciliation between statutories and to move through them to the overall pro forma, the one-off elements. Obviously, acquisition costs include both Limelight and Spraoi, which came to EUR 2.1 million, which was the direct expense element. There was an amortization element the EUR 1.6 million, which linked to Limelight and Spraoi as part of the purchase price accounting and the activity; share-based payment, which was the integration of Limelight; and then the reorganization cost, which was really around the structural changes and some headcount movements on that from an overall perspective. If we move to Slide 17, the -- obviously, some of the key metrics in there from a business perspective are around the incremental development expenditure, which has increased around EUR 16 million or so year-on-year. The cash at bank is a key message for, I suppose, everybody will be looking at. The element on that would have been that we had some cash that was received in July, and we received approximately about EUR 15 million in July. Our DSO in June would have been around 72, and it moved to 49 in July. So there were some timing differences for the first week after the new year, some cash that come in. So again, we're debt free from a business point of view, so we're comfortable enough on that. Trade debtors has obviously increased substantially because of the billing and the project work and then the payments, which took place in the month of July. We also then, as part of the acquisition, would have taken in Spraoi and Limelight, which again would have contributed to the goodwill, which is in -- let's say, the EUR 41 million. And then with the technology and customer relationship side, which was about EUR 24 million between those. Call out the total contingent consideration elements, which are linked to the earn-out parts on the Spraoi deal. So as Michael, I think, alluded to earlier on, there's a learning in this regard to the business activity. And we got the short-term element from the contingency and then the longer-term elements as well. Moving to Page 18. We can see on there that from an overall perspective, the cash amount from a net cash flow from operating activities reduced substantially, which is about 75%. From a high-level point of view, the Spraoi acquisition element was about EUR 3.1 million. And then from the acquisition cost of about EUR 2.1 billion. And if we added the cash elements back in from an overall timing point of view, we would have been very close to all in excess of what we would have done in June '20. Again, call out it's debt-free. We've access to funds. And from an overall perspective, we're in a strong position from a business perspective. And that's Slide 18. That's my last slide. So from that point of view, I'll hand back to Michael.

Yes. Thank you very much, Tom. And I think we've given that the overview of the business, we're -- as I said, it's been a healthy year. We're quite happy with the growth rate and looking forward to the next FY as well. As I said, we're projecting EUR 125 million to EUR 130 million. And again, we're projecting the subscriptions growth of 30%, and continuing to invest as well in the business overall. So I'm going to pass it back for questions, myself and Tom are happy to take any questions that are out there. Thank you.

[Operator Instructions] Your first question comes from Garry Sherriff with RBC.

Firstly, just your organic growth in FY '21. I'm just wondering if you can quantify maybe the rough split between new logos versus upsell, cross-sell from existing customers?

Yes. Well, the vast majority of the growth was sales to existing clients through the cloud upgrades and through the cross-selling of add-on software, but we've managed to get clients to move to, plus new lines of business that clients have taken more of our product to cover more spread of their business. And yes, the cross-sell of the Absence product as well. So overall, I would say that quite significant amount of the growth has come from the existing clients. There were 2 new deals, but they weren't huge deals in terms of new logos. And one of those was on the core business in terms of the organic growth. If you remember, Garry, the previous year, we come into the year with 9 new deals the previous year. And so that was a record year for FINEOS. And obviously, with the COVID situation as well, we didn't see as many deals in this FY in terms of new name. But we do have a very large client base. So we've continued to be heads down and cross-selling, and that has worked very, very well for us.

Understood. And talking maybe about your pipeline, can you maybe give any commentary on perhaps the total size of that pipeline, a number of RFPs? Or are there more opportunities, I guess, at a later stage than perhaps were at the same time last year?

Yes. Look, we've just bought Spraoi. So the pipeline is continuing to strengthen. Overall, it's still out there in terms of new business because in the past 12 months or so, there's been very few deals done. And I'm thinking ANZ and NOAM as far as I know, apart of the one we got in New Zealand. In North America, very few as well. So the market stood still a little bit in North America, which from our perspective, was quite good because we're bringing our full AdminSuite into the marketplace. We've made some great progress with our partner, New York Life Group Benefits, in terms of the suite and end-to-end and having their full production system aggressively running on our platform. And indeed, we got market recognition from some of the analysts for the full AdminSuite. So the analysts are starting to see FINEOS as a full end-to-end suite for employee benefits. So I think the solidity of the pipeline has remained similar to what it was, say, 12 months ago. And look, we're looking at the growth rates of the market and the economy. And I think we will see insurance carriers investing. They have to invest. They have to move to the new paradigm in terms of digital. So I'm seeing an uptick from a personal perspective in the marketplace. And hopefully, that pipeline will start to convert over the next few months and so. But as I said, like we're in a very healthy position from our existing client base of 60 carriers. So it puts us in a very strong situation.

Last couple of questions for me. One on pricing, should we assume some form of organic price increase as you transition to the cloud, whether that's renewing old contracts on to the cloud or just general organic price growth on per user basis?

Yes, we are. And that's for sure. We have an opportunity to continually address our pricing and increase our pricing as we strengthen the platform and as we see the benefits that our carriers using the platform are deriving. So we're seeing significant savings by carriers with the platform. And therefore, we're able to price and price that in, in terms of the future. Also, the cost of labor and the cost of really good innovative people has gone up, and there is a tightening of the market in terms of people. So again, that's going to drive more cost as well, and I guess that will affect our pricing as we see the market come back.

Perfect. And just the last one on the EBITDA margin outlook for '22. Should we be thinking a similar level of margin time for FY '22 versus FY '21?

On the EBITDA stuff, Garry, is that you're saying?

Yes. Gross margin and EBITDA margin would be interesting just in terms of high-level thoughts.

From an overall perspective on gross margin, like we would see that running the same. On EBITDA, we would probably see it increasing a piece from economies of scale going forward.

Your next question comes from Siraj Ahmed with Citi.

I have 3. So just first one, Michael, just on the bridge from the ARR for the subscription revenue guidance. I think from memory, some of the contracts that you won in the last few years still has to ramp up into FY '22 as you deliver the work. So can you just tell us what's left there? And what do you actually have to win to deliver that 30% growth you have forecasted?

Yes. Thanks, Siraj. The -- much of the implementation side of those systems is finished in terms of them being live and so on, but they're now scaling on those systems. And in some cases, they're scaling beyond what we actually had in the contracts. So there's some kind of upside on those numbers that we would have talked about a couple of years ago. So there's probably 20%, 30% of that number left in the go forward. But there's opportunity with those carriers to cross-sell and on-sell further product to those people. So we don't see it stopping, I guess, is the message. There will be -- that was a point in time when we gave that number, but the market is continuing to move to the platform as I said. And we'll see further growth from those carriers and other carriers. But we're probably 20% off where we would have given guidance back on that number 3 or 2 years ago. But as I said, there's other opportunities now with those carriers. These carriers are $10 billion, $15 billion type carriers. They have a lot of opportunity just within their own company. So it's not just a onetime -- one product to sell. There's going to be multiple deals with these carriers as we move forward in the medium and long term.

Understood. But I guess your point is for your subscription growth guidance, you don't really need a lot of new name client wins. You're pretty comfortable with the existing...

Yes. That's the point exactly. If you look back at 2, 3 years ago, when we did the IPO, we had whatever it was, 50 clients on-premise on claims. And we had a track record of over EUR 100 million investment in R&D, which we still have to sell. So we're in a very strong position to go from that single product on-premise to a full suite across our own base and we have a very big base in comparison to any of the competition.

Got it. Second question for you or Tom, just on the balance sheet and capacity. So you're saying pro forma in July, your cash balance is closer to EUR 30 million. Your cash burn previously was around EUR 4 million per quarter. So just keen to hear whether you need growth capital and what your thoughts are on that?

I think the overall part on here is that we're obviously watching it very closely. So we have access to debt because we're fully debt-free at this stage. From an overall point of view -- and we have access to cash in the short term overall facilities, we will be having conversations with bankers and financial institutions. So from an overall point of view, we're confident enough of what we have cash-wise in there, Siraj.

Got it. Okay. And just going back to the price increase coming. So Michael, have you actually put price up? Or are you saying you could look at price increases? And just on that, should we also assume given a cost of labor is going up that your consulting rates are going up as well?

Yes. Look, I think overall, the price -- the market is increasing and the pricing will continue to increase. But each year, we index our pricing with existing clients. In some cases, they restrict us to cost of living type indexation. So we get a natural increase on most of our contracts year-by-year. And then with our products, we've been able to increase pricing for new business. Particularly in the cross-sell, where clients is very happy and comfortable with FINEOS, we've been able to get a better deal from existing clients where we're not in a competitive environment. So we continue to look for those opportunities. And given we've invested so much in terms of the R&D side, we want to drive up our subscription pricing and our subscription deals as we move forward. So the opportunity is going to increase or going to be there for us to keep increasing. On the services side, we are actually now working with partners. And that kind of draws the services from our perspective into them, and they're doing some of the work as well. So again, I think there's an opportunity for us to increase our services rates because the FINEOS people would be seen as premium people in terms of the product. And we'll do that over the next couple of years and continue to try and differentiate us from the partners and add the value from a product consulting perspective.

Your next question comes from Tim Lawson with Macquarie.

Just a follow-up question on the cash position. So with that EUR 30 million, has there been any other working capital movements that have supported that cash increase? Or is that just a pure normalization of those cash receipts from outstanding debtors?

That's for you, Tom.

Sorry. Yes, yes. Could you just repeat that there, Tim? Apologies.

So I'm just trying to confirm that the EUR 30 million that you're talking about is sort of pro forma net cash position that there hasn't been any other sort of movement sort of increase debt. It's a just a pure receipt of debtors rather than increasing payables or other working capital movements on to see that cash go up?

No. It's just pure regards to the debtors and receivables.

Yes. Okay. And just a second question for me. With the cloud ops line, is there any particular reason why we shouldn't include that in the gross profit margin, that's obviously ramping up with the scale of the business -- just trying to understand that line a bit better.

The convention we have on that, Tim, is that we would allocate the direct time that people spend on the actual projects themselves and the activity levels because they would provide general support across the whole business. So that's the convention we would have on that.

I would add, Tim, that the cloud ops teams have obviously noticed that it's increased significantly this year given the very large carriers and the 24x7 nature of what they want in terms of support. We are investing, though, on the R&D side to continually automate the cloud side and to continually drive a self-healing type strategy around our cloud product. And as we advance that, you're going to see economies of scale as we grow the business and the platform and the subscriptions against that cloud team. So we very much have a strategy of investing in engineering rather than necessarily cloud ops as we move forward.