How Is Integrated Research’s Product-Led Strategy Reshaping Its Growth?
Integrated Research reported steady pro-forma revenue in FY25 despite declines in statutory revenue and profits, driven by a softer renewals book and market uncertainty. The company’s product-led growth strategy gained momentum with new product launches and a major contract renewal.
- FY25 pro-forma revenue steady at $74.3m, statutory revenue down 18%
- EBITDA fell 35% to $15.9m, NPAT halved to $13.4m
- Final fully franked dividend maintained at 2.00 cents per share
- New product launches, High Value Payments, Prognosis Elevate, and AI product Iris beta
- Secured $9.8m five-year renewal with JP Morgan Chase
Steady Underlying Revenue Amid Statutory Declines
Integrated Research (ASX, IRI), a global provider of IT observability solutions, released its FY25 results showing a nuanced financial picture. While statutory revenue declined 18% to $68.3 million and net profit after tax halved to $13.4 million, the company’s pro-forma revenue, a key metric adjusting for subscription revenue recognition, remained steady at $74.3 million, down just 1% from the prior year. This divergence highlights the impact of a softer renewals book on reported revenue, a recurring challenge for the company.
Product-Led Growth Strategy Gains Traction
The company’s pivot to a product-led growth strategy, announced in August 2024, is beginning to bear fruit. FY25 saw the launch of several new offerings, including High Value Payments (HVP), designed to mitigate risks in banking transactions, and Prognosis Elevate, a hybrid license and consumption-based product that simplifies client activation and maintenance. Notably, a top 10 US bank signed a five-year contract for HVP, underscoring market confidence in the new product suite.
Additionally, Integrated Research’s AI innovation team, IR Labs, developed a beta version of Iris, an AI-powered product integrated within Prognosis, with a planned full launch in calendar 2025. The company also prototyped a standalone AI product expected to enter beta testing in FY26, signaling a strong commitment to embedding AI and machine learning into its core offerings.
Revenue Mix and Market Dynamics
Despite market uncertainty, particularly in the Americas during the second half, revenue from new clients grew 31% year-on-year to $6.7 million, and consumption-based revenue surged 77% to $3.9 million. However, expansion revenue from existing clients declined 51% to $3.3 million, reflecting the timing lag in new product adoption and the ongoing challenge of offsetting fluctuations in the renewals book.
The company secured a significant five-year renewal contract worth $9.8 million with JP Morgan Chase, reinforcing the value of its core solutions among blue-chip clients. Yet, FY26 renewals are expected to be softer than FY25, adding pressure to the company’s growth trajectory.
Financial Position and Outlook
Integrated Research ended FY25 with a robust cash position of $40.6 million, up 27% from the prior year, providing a strong foundation for planned investments. Management emphasized that while the product-led growth strategy may suppress short-term profits due to increased investment, it is designed to drive sustainable medium- to long-term growth. The company declared a final fully franked dividend of 2.00 cents per share, maintaining shareholder returns despite the challenging year.
Looking ahead, the company aims to accelerate product development and commercialization in FY26, leveraging its capital strength and innovation pipeline. The success of new AI-driven products and the ability to convert new client wins into expansion revenue will be critical to overcoming the volatility in renewals and achieving consistent growth.
Bottom Line?
Integrated Research’s FY25 results reflect a transitional year where strategic product innovation sets the stage for future growth amid near-term revenue headwinds.
Questions in the middle?
- How quickly will new AI products like Iris contribute materially to revenue?
- Can expansion revenue from existing clients rebound to offset renewals volatility?
- What impact will softer FY26 renewals have on overall financial performance?
