FINEOS Grows ARR 11.2% and EBITDA 80% in 1H25 Despite Economic Challenges

Strong Financial Momentum in 1H25

FINEOS Corporation Ltd, a global leader in insurance software for life, accident, and health sectors, reported robust financial results for the first half of fiscal 2025. Total revenue climbed 4.2% year-on-year to €67.1 million, underpinned by a 5.7% increase in subscription revenue which now accounts for over half of total revenue. This growth was complemented by an 11.2% rise in annual recurring revenue (ARR) to €76.4 million, reflecting the company’s expanding footprint within existing clients and new contract wins.

Profitability metrics showed marked improvement, with EBITDA soaring 80.1% to €13.1 million and the EBITDA margin nearly doubling to 19.6%. Gross profit also increased by 8.4%, reaching €51.4 million, supported by cost efficiencies and a reduction in cost of sales. Despite still reporting a loss after tax of €1.3 million, this represented a significant 76.4% narrowing compared to the prior year, signaling meaningful progress towards sustained profitability.

Operational Highlights and Strategic Advances

Operationally, FINEOS continued to strengthen its position in the North American market, which now contributes nearly 80% of total revenue. The company secured two new North American carrier clients and successfully launched embedded AI capabilities within its platform, enhancing internal efficiencies and product offerings. The ongoing Guardian Phase 2 project remains on track, aiming to support all new business onboarding from 2026 and facilitate legacy system migration thereafter.

Cost management remains a priority, with restructuring costs of approximately €1 million absorbed in the first half and further savings anticipated in the second half. The company also focused on talent optimization by increasing contract resources in lower-cost regions, maintaining a high employee retention rate above 90%, and improving utilization rates.

Outlook Tempered by Currency and Economic Factors

Looking ahead, FINEOS reaffirmed its FY25 guidance but adjusted revenue expectations to the lower end of the €138 million to €143 million range, primarily due to adverse currency movements, especially the weakening of the US dollar against the euro, and ongoing global economic uncertainties. Despite these headwinds, the company expects to achieve positive free cash flow for the full year and maintain margin expansion through operational efficiencies and strategic investments.

Key priorities for the remainder of 2025 include delivering critical platform upgrades to support new business growth, expanding sales particularly in the ANZ region, embedding AI more deeply into the platform, and continuing cost reduction initiatives. The company also aims to increase subscription revenue as a percentage of total revenue to 65% by 2027, while targeting gross margins of 75% and EBITDA margins of 25% in the same timeframe.

Positioning for Long-Term Growth

FINEOS’ strategic focus on cloud-based subscription services, AI integration, and legacy system migration positions it well to capitalize on the growing demand for digital insurance solutions. The company’s strong cash position of €34.9 million and absence of debt provide financial flexibility to invest in innovation and market expansion. However, the impact of currency fluctuations and the length of sales cycles for large programs remain risks to watch.