Q2 2026 FINEOS Corp Holdings PLC Earnings Call

August 13, 2026

Speaker #2: Thank you for standing by, and welcome to the FINEOS Corporation Holdings PLC first half 2026 results briefing. All participants are on listen-only mode.

Operator: Thank you for standing by, and welcome to the FINEOS Corporation Holdings PLC H1 2026 results briefing. All participants are on a listen-only mode. There will be a presentation followed by a question and answer session. If you would like to ask a question, you will need to press the star key followed by the number 1 on your telephone keypad. I would now like to hand the conference over to Mr. Michael Kelly, CEO. Please go ahead.

Speaker #2: There will be a presentation followed by a question-and-answer session. If you'd like to ask a question, you'll need to press the star key, followed by the number 1 on your telephone keypad.

Speaker #2: I'd now like to hand the conference over to Mr. Michael Kelly, CEO. Please go ahead.

Speaker #3: Thank you, and welcome, everybody, to today's call. I'm joined here today by our CFO, Ian Lynagh, and we're going to go through our first half-year results and give you an overview and some color behind the results. So, I would ask you to turn to slide 2, please, and we'll start off.

Michael Kelly: Thank you, and welcome everybody to today's call. I am joined here today by our CFO, Ian Lynagh, and we are going to go through our H1 results, and give you an overview and some color behind the results. I would ask you to turn to slide 2, please, and we will start off. As you can see from slide 2, we have had a very good performance in the half. Subscription revenues of EUR 41.9 million, up 15% on June 2025, and 57.8% of total revenue now, in line with our strategy to drive up our subscriptions as a percentage of overall revenue. Our total revenue was EUR 72.5 million, up 7.9% on June 2025, up 7.2% to EUR 72 million, on a constant currency basis. Gross profit, EUR 54.6 million, and gross profit margin, 75.4%. Gross profit is up 6.3% on the previous corresponding period of June 2025.

Speaker #3: So, as you can see from slide 2, we've had a very good performance in the half. Subscription revenue is up 41.9%, or €41.9 million, up 15% on June 25, and is now 57.8% of total revenue— in line with our strategy to drive up our subscriptions as a percentage of overall revenue.

Speaker #3: Our total revenue was €72.5 million, up 7.9% on June 25, and up 7.2% to €72 million on a constant currency basis. Gross profit was €54.6 million, and gross profit margin was 75.4%. Gross profit is up 6.3% on the previous corresponding period of June 25.

Michael Kelly: EBITDA, EUR 17.4 million, and EBITDA margin expanding to 24%. EBITDA is up 32.3% on June 2025, and the EBITDA margin is up from 19.6%. Again, expanding our margins in line with strategy. Net profit after tax is EUR 1.9 million, up 254.6% on June 2025, where the loss was actually EUR 1.3 million. Cash was up to EUR 39 million, up 11.9% on June 2025, and of course no debt. The positive free cash flow was EUR 10.9 million, and really indicating that we are continuing that momentum of positive free cash flow and cash generation in this business. The ARR was EUR 87.8 million, and the net revenue retention 115%.

Speaker #3: 17.4 million, and EBITDA margin expanding to 24%. So EBITDA is up 32.3% on June 25, and the EBITDA margin is up from 19.6%. So again, expanding our margins in line with strategy.

Speaker #3: Net profit after tax is $1.9 million, up 254.6% on June 25, where the loss was actually $1.3 million. Cash was up to $39 million, up 11.9% on June 25.

Speaker #3: And of course, no debt. Deposit of free cash flow was $10.9 million, really indicating that we're continuing that momentum of positive free cash flow and cash generation in this business.

Speaker #3: And the ARR was $87.8 million, and the net retained earnings was 150%. So both are very strong numbers, again indicating very strong and sticky customers who are continually buying and expanding their footprint with FINEOS.

Michael Kelly: Both very strong numbers, and again indicating very strong and sticky customers who are continually buying and expanding their footprint with FINEOS. Our ARR is up 14.9% from EUR 76.4 million, and the NRR is up 15.3% since June 2025.

Speaker #3: Our ARR is up 14.9%, from $76.4 million, and the NRR is up 15.3% since June 25. So overall, we're very pleased with those results and those headlines.

Michael Kelly: Overall, we are very pleased with those results and those headlines. I suppose what is causing the kind of growth is a number of things, but certainly new name sales in the H1. We had two of those FINEOS AdminSuite for claims, the MAIB in Australia and one other in the States. That kind of continues to drive that market leadership. Very, very pleasingly for us, we had two more sales of AdminSuite, one to OneAmerica, and in that one we signed a 10-year contract. OneAmerica was very keen for a long-term contract for AdminSuite because they can see themselves using this for 10 years and well beyond. Of course, there was one other smaller client in the US who also bought AdminSuite.

Speaker #3: And I suppose what's causing the kind of growth is a number of things, but certainly new name sales in the half—we had two of those.

Speaker #3: FINEOS AdminSuite for claims, the MAIB in Australia, and one other in the States. So that kind of continues to drive that market leadership.

Speaker #3: But very, very pleasingly for us, we had two more sales of AdminSuite—one to OneAmerica. And in that one, we signed a 10-year contract.

Speaker #3: So, One America—we're very keen for a long-term contract for AdminSuite because they can see themselves using this for 10 years and well beyond.

Speaker #3: And of course, there was one other smaller client in the US who also bought AdminSuite. They didn't want to publicize their name due to being owned by a large Blue Cross Blue Shield in the States and not having their permissions.

Michael Kelly: They did not want to publicize their name due to being owned by a large Blue Cross Blue Shield in the States and not having the permissions. We are really seeing the benefits of the AdminSuite now, and customers are going to see more and more opportunity to expand into the AdminSuite. Very pleasingly, again, OneAmerica licensed FINEOS AdminSuite for Quote, Underwrite and Rate plus the FINEOS Employer Connect, and both 10-year contracts. I am calling that out because both of these products are derivatives from acquisitions we made, One Life Health and Spraoi. It is really pleasing that we have actually re-engineered and got those products in the full suite end to end. We are looking forward to seeing OneAmerica really driving home now that full suite of products that we have out there.

Speaker #3: So we're really seeing the benefits of the admin suite now, and customers are going to see more and more opportunity to expand into the admin suite.

Speaker #3: And very pleasingly, again, One America licensed the FINEOS AdminSuite for Quote, Underwrite, Rate, plus the FINEOS Employer Connect. And both are 10-year contracts. I'm calling that out because both of these products are derivatives from acquisitions we made—One Life Health and Spree.

Speaker #3: So it's really pleasing that we've actually re-engineered and got those products into the full suite, end-to-end. So we're looking forward to seeing One America really driving home, now, that full suite of products that we have out there.

Speaker #3: And it's proved that our R&D and our strategy are coming together very nicely. On the customer side, we've had multiple on-time go-lives. With ACC in New Zealand, one of our largest clients in the Southern Hemisphere, we're executing a two-year migration from an on-premise major scheme in the country to the FINEOS AdminSuite for claims.

Michael Kelly: It has proved that our R&D and our strategy is coming together very nicely. On the customer side, we have had multiple on-time go lives. With ACC in New Zealand, one of our largest clients in the Southern Hemisphere, doing a two-year migration from an on-premise major scheme in the country to the FINEOS AdminSuite for claims. That just took two years, was on time, on budget, and they are thrilled with that program. Indeed, the publicity is on our website if you would like to go and see it. Our FINEOS Customer Connect events have been in New York and Sydney in the last few months, and we have one coming up in Toronto, and we have another one in November in Sydney, just to let you know.

Speaker #3: And that just took two years, was on time, on budget, and they're thrilled with that program. And indeed, the publicity is on our website if you'd like to go and see it.

Speaker #3: Our FINEOS Customer Connect events have been in New York and Sydney in the last few months, and we've got one coming up in Toronto. We have another one in November in Sydney, just to let you know.

Speaker #3: And these are proving to be very useful because we're demonstrating product, we're showing our clients where the product is going, our roadmaps, and, more importantly I think, we're bringing customers with us to talk about their experiences and their transformation.

Michael Kelly: These are proving to be very useful because we are demonstrating product, we are showing our clients where the product is going, our roadmaps, and more importantly, I think we are bringing customers with us to talk about their experiences under transformation. This is going down very well. We have got some really good case studies with Guardian and New York Life, but also other customers are joining in. Building positive momentum. We are gaining a multiplier effect from embedded AI in our product. With our deep domain focus and our market leadership, baking the AI in at the core is just helping us to accelerate our growth and making our product far more attractive and sticky with our clients. If you turn to slide 4, this is just a look back and we are pretty proud of the growth we have had since we launched on the ASX in August 2019.

Speaker #3: And this is going down very, very well. We've got some really good case studies with Guardian and New York Life, but also other customers are joining in.

Speaker #3: We're building positive momentum, and we're gaining a multiplier effect from embedded AI in our product. With our deep domain focus and our market leadership, baking the AI in at the core is just helping us to accelerate our growth.

Michael Kelly: With our deep domain focus and our market leadership, baking the AI in at the core is just helping us to accelerate our growth and making our product far more attractive and sticky with our clients. If you turn to slide 4, this is just a look back and we are pretty proud of the growth we have had since we launched on the ASX in August 2019.

Speaker #3: And making our product far more attractive and sticky with our clients. So if you turn to slide 4, this is just a look back.

Speaker #3: We're pretty proud of the growth we've had since we launched on the ASX in August '19. As you can see, we've very much driven to the strategy.

Michael Kelly: As you can see, we very much have driven to the strategy we laid out in our IPO prospectus of growing our business in North America, which is 33% of the global insurance market, and by far the biggest market in the world. If you can prove yourself in North America, you can pretty much prove yourself in every country. North America is leading in the technology space, and a lot of the multinationals and so on are in North America. Very highly competitive market. It is very pleasing to see the market growth in North America up to 80% in the previous trailing 12 months. Of course, we also promised that we would turn FINEOS from a services business into a product company. We are well on the route there as you can see, over 300% growth in subscription revenue since we IPO’d.

Speaker #3: We laid out in our IPO prospectus our plan to grow our business in North America, which is 33% of the global insurance market and by far the biggest market in the world. If you can prove yourself in North America, you can pretty much prove yourself in every country.

Speaker #3: North America is leading in the technology space, and a lot of the multinationals and so on are in North America. It's a very highly competitive market.

Speaker #3: So it's very pleasing to see the market growth in North America up to 80% in the previous trailing 12 months. And, of course, we also promised that we would turn FINEOS from a services business into a product company.

Speaker #3: And we're well on the route there. As you can see, we've had over 300% growth in subscription revenues since we IPO'd. Again, that's very much down to the expansion of the product and the R&D that we've invested through our IPO and ongoing profitability in the core business—the underlying core business.

Michael Kelly: Again, is that very much down to the expansion of the product and the R&D that we have invested through our IPO and ongoing profitability in the core business, the underlying core business. Indeed, when we IPO’d most of our clients were on premise. Most of our clients, the vast majority are now on the cloud or moving to the cloud. That is just one step in terms of the growth strategy. Of course, the next step is to grow the FINEOS AdminSuite footprint across our whole customer base. Today only four of our 60 clients have AdminSuite, the full product, the policy and billing product in place. So we have a lot of runway ahead.

Speaker #3: And indeed, when we IPO'd, most of our clients were on-premise. Most of our clients—the vast majority—are now on the cloud or moving to the cloud.

Speaker #3: But that's just one step in terms of the growth strategy. Of course, the next step is to grow the FINEOS AdminSuite footprint across our whole customer base.

Speaker #3: And today, only four of our 60 clients have AdminSuite—the full product, the Policy and Billing product—in place. So we have a lot of runway ahead.

Speaker #3: And with the very strong customer success we've been having, our customers really trust that we can bring them to the place where they can actually, finally, say goodbye to those legacy systems.

Michael Kelly: With the very strong customer success we have been having, our customers really trust that we can bring them to the place where they can actually finally say goodbye to those legacy systems. Our people headcount, we put that in this presentation every year, but it has not changed that much in the last few months. It just gives you a breakdown there on page 5. The geographic mix of revenues in terms of the region for the past six months. Again, you can see the North American market is by far the biggest space that we have been growing and where we have really doubled down on our strategy for growth for our full suite. APAC revenues actually increased by 1.1% and indeed the subscription revenue in the APAC market grew by 17.6%.

Speaker #3: Our people headcount—we put that in this presentation every year, but it hasn't changed that much in the last few months. It just gives you a breakdown there on page five.

Speaker #3: And the geographic mix of revenues, in terms of the region for the past six months, again, you can see the North American market is by far the biggest space where we've been growing and where we've really doubled down on our strategy for growth for our full suite.

Speaker #3: APAC revenues actually increased by 1.1%. And indeed, the subscription revenue in the APAC market grew by 17.6%. We are seeing good progress in the APAC market, particularly around cloud upgrades.

Michael Kelly: We are seeing good progress in the APAC market, particularly around cloud upgrades and our customers starting to move to the cloud. In the recent event we held back in March, the FINEOS Customer Connect in Sydney, we had a couple of clients, icare, ART, sitting on stage telling about their transformation and how they use the FINEOS in the cloud. Again, very pleasing to see that.

Speaker #3: And our customers are starting to move to the cloud. And in the recent event we held back in March, the FINEOS Customer Connect in Sydney, we had a couple of clients—Eye Care Art—sitting on stage talking about their transformation and how they use FINEOS in the cloud.

Speaker #3: So again, very pleasing to see that—rate of 7.9%. In terms of cost of sales, we have seen an increase by $2.2 million, compared to 1H25.

Ian Lynagh: Rate of 7.9%. In terms of cost of sales, we have seen an increase by EUR 2.2 million compared to H1 2025. We have had some level of higher employee costs and contractor costs. You have seen that the gross margin in its own right has gone down a little bit. That is partly because we brought on new resources, we put more demand to the sales side, reallocated their effort against that. I would see that normalizing as we move to the full year, insofar as those resources will be up to speed in the second half year, we will not need to double up as much. This is just part of growing pains as we have relocated resources from higher cost regions to lower cost regions. Secondly, we have also got in place a provision for an infrastructure spend, and I have mentioned this before. This is actually with Amazon AWS.

Speaker #3: But we have had some level of higher employee costs and contractor costs, and you've seen that the gross margin, in its own right, has gone down a little bit.

Speaker #3: But that's partly because we brought on new resources. We put more demand on the sales side. We allocated our efforts against that. So I would see that normalizing as we move through the full year, in so far as those resources will be up to speed in the second half of the year.

Ian Lynagh: I would see that normalizing as we move to the full year, insofar as those resources will be up to speed in the second half year, we will not need to double up as much. This is just part of growing pains as we have relocated resources from higher cost regions to lower cost regions. Secondly, we have also got in place a provision for an infrastructure spend, and I have mentioned this before. This is actually with Amazon AWS.

Speaker #3: We won't need to double up as much, because this is just part of the growing pains as we've relocated resources from higher-cost regions to lower-cost regions.

Speaker #3: Secondly, we've also got in place a provision for an infrastructure spend, and I've mentioned this before. This is actually with Amazon AWS—we signed up to a five-year contract with them, which completes in December 2027.

Ian Lynagh: We signed up to a five-year contract with them, which completes in December 2027. We have done so well in terms of managing costs and driving efficiencies in terms of use of their infrastructure, that the commitment we made in that contract we are not going to achieve within that time period. However, we are in negotiation with them at the moment, whereby for the deficit or the shortfall in that spend, what we are looking to do is actually buy forward services for beyond the end of December 2027 at a heavily discounted price. That transaction is not yet completed, and when it does take place, it will be in 2027. The aim is to remove that provision from the accounts. What you can see there, in terms of that at the moment, is that that provision is EUR 0.5 million that is put in against that cost of sales.

Speaker #3: We have done so well in terms of managing costs and driving efficiencies with our used infrastructure that the commitment we made in that contract—we're not going to achieve it within that time period.

Speaker #3: However, we are in negotiation with them at the moment. For the deficit or the shortfall in that spend, what we're looking to do is actually buy forward services for beyond the end of December 2027 at a heavily discounted price.

Ian Lynagh: However, we are in negotiation with them at the moment, whereby for the deficit or the shortfall in that spend, what we are looking to do is actually buy forward services for beyond the end of December 2027 at a heavily discounted price. That transaction is not yet completed, and when it does take place, it will be in 2027. The aim is to remove that provision from the accounts. What you can see there, in terms of that at the moment, is that that provision is EUR 0.5 million that is put in against that cost of sales.

Speaker #3: That transaction is not yet completed, and when it does take place, it'll be in 2027. But the aim is to remove that provision from the accounts.

Speaker #3: And what you can see there, in terms of that at the moment, is that that provision is half a million that’s put in against that cost of sales.

Speaker #3: So, the plan will be that that will come out as we move towards the full year. And that moves me on then to EBITDA.

Ian Lynagh: The plan would be that that will come out as we move towards the full year. That moves me on to EBITDA. You are seeing there that EBITDA has increased significantly. It is up 32.3% from H1 2025. We set a target for FY27 of 25%, and we are already achieving 24%. I expect that to improve as we go through the full year, simply because within the full year, we will continue to manage costs very well and we will also grow revenue. All the business we gained, in addition to the traditional throughput of business we gained in the first half will flow into the second half, and the additional business we gain in the second half will also be registered to the extent it exists in the second half. That EBITDA margin will increase again for the full year.

Speaker #3: So, you're seeing there that EBITDA has increased significantly. It's up 32.3% from 1H25. We set a target for FY27 of 25%, and we're already achieving 24%.

Speaker #3: So I expect that to improve as we go to the full year, simply because within the full year, we'll continue to manage costs very well.

Speaker #3: And we'll also grow revenue. So, all the business we gain, in addition to the traditional throughput of business, the business we gain in the first half will flow into the second half. The additional business we'll gain in the second half will also be registered, to the extent it exists, in the second half.

Speaker #3: So that EBITDA margin will increase again for the full year. But it's very pleasing to see the 24% when we set an expectation of 25% for FY27.

Ian Lynagh: Very pleasing to see the 24% when we set an expectation of 25% for FY27. Net profit after tax, that is a very good sign in terms of our journey, in terms of moving forward to be a profitable company, a cash generative company. We do not see ourselves looking back. Albeit it looks like a small number, EUR 1.9 million compared to a deficit of EUR 1.3 million, it is a very significant step. Again, if you look at the provisions that we made with respect to infrastructure, Amazon AWS, another EUR 300K has been added in as well there in OpEx. That is EUR 800K. If you added that EUR 800K back in because it is not real money, it is not money we have spent, then you are up to EUR 2.6 million in terms of net profit after tax. That said, we need to get rid of the provision in terms of moving forward.

Speaker #3: So that profit after tax— that's a very good sign in terms of our journey, in terms of moving forward to be a profitable company.

Speaker #3: A cash-generative company. We don't see ourselves looking back. So, albeit it looks like a small number—1.9, compared to a deficit of 1.3—it's a very significant step.

Speaker #3: And again, if you look at the provision that we made with respect to infrastructure—Amazon AWS—another $300K has been added in as well there, in OPEX.

Speaker #3: So that's $800K. So, if you added that $800K back in, because it's not real money—it's not money we've spent—then you're up to $2.6 million in terms of net profit after tax.

Ian Lynagh: That is EUR 800K. If you added that EUR 800K back in because it is not real money, it is not money we have spent, then you are up to EUR 2.6 million in terms of net profit after tax. That said, we need to get rid of the provision in terms of moving forward.

Speaker #3: That said, we need to get rid of the provision in terms of moving forward. But I just thought I'd point that out. If we move now to slide nine, we're looking here, as a product company, progressively we want to grow the subscription revenues. That's a very sticky customer base that we have, which plays a big part in terms of our ability to project revenues moving forward.

Ian Lynagh: I just thought I would point that out. If we move now to slide 9. We are looking here at, as a product company, progressively, we want to grow the subscription revenues. That very sticky customer base that we have plays a big part in terms of our ability to project revenues moving forward. As you can see, that is constantly increasing. We are making comparisons here against the cost base, and the cost base has increased slightly against the corresponding period, but it has increased a level more against the H2 of last year. We know about the increases in fees. Michael Kelly has already mentioned subscription fees and ARR and NRR.

Speaker #3: And as you can see, that's constantly increasing. We're making comparisons here against the cost base, and the cost base has increased slightly against the corresponding period, but it's increased a level more against the second half of last year.

Speaker #3: We know about the increases in fees. Michael's already mentioned subscription fees, ARR, and NRR. NRR is something that we've introduced as a measurement due to requests from various investors and analysts.

Ian Lynagh: NRR is something that we have introduced as a measurement due to requests from various investors and analysts just to show and reiterate the importance of our existing customer base in terms of upsell and cross-sell to our continuous growth as a company. We are going to keep that up in terms of relaying that from now on. In terms of the total cash spend going up, part of that is the increased headcount in lower cost regions. As you know, over the last 2 to 3 years, we have done a significant level of restructuring, but we also had to replace resources. Our headcounts remain reasonably constant, but where they are has changed significantly as a proportion. As you can see on the people side, we have over 37% of our people in what we would deem to be lower cost regions.

Speaker #3: Just to show and reiterate the importance of our existing customer base in terms of upsell and cross-sell to our continuous growth as a company.

Speaker #3: So we're going to keep that up in terms of relaying that from now on. But in terms of the total cash spend going up, part of that is the increased headcount in lower-cost regions.

Speaker #3: As you know, over the last two to three years, we've done a significant level of restructuring. But we also had to replace resources, so our headcount has remained reasonably constant.

Speaker #3: But where they are has changed significantly. As a proportion, as you can see on the people slide, we have over 37% of our people in what we would deem to be lower cost regions.

Speaker #3: This was also reflected in the comment I made on cost of sales, in terms of taking on more resources. But the resources are also coming into the product group.

Ian Lynagh: This also is reflected in the comments I made on cost of sales in terms of taking on more resources. The resources as well are coming into the product group. It is product delivery support is where those resources are coming in. We have that in place. We also provided salary increases. The overriding element there is that in terms of the cost as well, is that we have moved the payment for insurance and internal software licenses, which is about EUR 3 million, from a payment in the Q3 of the year to the Q1. The reason we made that shift was because up until 2024, our fiscal year started in July. We moved our fiscal year to start in January.

Speaker #3: So it's product delivery support; that's where those resources are coming in. So we have that in place. We also provided salary increases. But the overriding element there, in terms of the cost as well, is that we have moved the payment for insurance and internal software licenses—which is about $3 million—from a payment in the third quarter of the year to the first quarter.

Speaker #3: And the reason we made that shift was because up until 2024, our fiscal year started in July. We moved our fiscal year to start in January.

Speaker #3: So, we wanted to make sure that when we're spending money on services in a particular fiscal year, that money spent reflects the duration of the fiscal year, as opposed to forward-buying into another fiscal year.

Ian Lynagh: We wanted to make sure that when we are spending money on services in a particular fiscal year, we wanted that money spent to reflect the duration of the fiscal year as opposed to forward buying into another fiscal year. That is a one-off shift, and the important thing about that shift of that approximate EUR 3 million expenditure is that it will not reoccur in the H2 of the year. We have just moved it forward to the H1 of the year. That explains the shift in cost there. We are still very much under control, very much in line with our expectations. If we can move now to Slide 10, looking at the operation expenses. That is reflective of the cost control. You can see that R&D is down due to lower employee costs, again, reflecting the lower cost regions I mentioned earlier on.

Speaker #3: So that's a one-off shift. And the important thing about that shift, of that approximate $3 million expenditure, is that it won't reoccur in the second half of the year.

Speaker #3: We've just moved it forward to the first half of the year, so that explains the shift in cost there. We're still very, very much under control, very much in line with our—now, to slide 10, looking at the operational expenses.

Speaker #3: So that's reflected in the cost control. You can see that R&D is down, due to lower employee costs—again, reflecting the lower-cost regions I mentioned earlier on.

Speaker #3: A higher capitalization of R&D—which is a criteria you have to meet around high R&D—that's happened simply because of the extent of innovative capabilities we're building out, particularly around AI now as well.

Ian Lynagh: A higher capitalization of R&D, there's criteria you have to meet around high R&D. That's happened simply because of the extent of innovative capabilities we're building out, particularly around AI now as well. A higher proportion had to be allocated towards that capitalization side of the fence. We didn't have a repeat of restructuring costs as we had in H1 of last year. That helped in terms of reducing the costs. We're somewhat up on sales and marketing costs, and that's intentional. As we've mentioned before, we've spent the money that you investors have provided to us into R&D, developing out that product, maturing out that product, getting our position in the market into a much more prominent space.

Speaker #3: So a higher proportion had to be allocated towards that capitalization side of the fence, and we didn't have a repeat of restructuring costs as we had in the first half of last year.

Speaker #3: So, that helped in terms of reducing the costs. We're somewhat up on sales and marketing costs, and that's intentional. As we've mentioned before, we've spent the money that you investors have provided to us in R&D—developing that product, maturing that product, and getting our position in the market into a much more prominent space.

Speaker #3: But what we're doing now is looking at how we expand out in terms of sales and marketing and sell more of the product, get more in the face of our customers and, you know, prospects.

Ian Lynagh: What we're doing now is looking at how we expand out in terms of sales and marketing and sell more of the product, get more in the face of our customers and new name prospects. This is part of that expectation. We expect to spend more, also in sales and marketing as we go into the new year. Really where you're seeing the change there in terms of expenditures related to sales events, the FINEOS Customer Connect events that Michael mentioned earlier on. We had one last year, and we're planning out four this year. We've had two already, one in New York, one in Sydney in March. Michael mentioned we've another one coming up in Toronto in September. Indeed, we've another one in Sydney coming up in November.

Speaker #3: So, this is part of that expectation. We expect to spend more also on sales and marketing as we go into the new year. And really, where you're seeing the change there in terms of expenditures related to sales events, the FINEOS Connect customer connector events that Michael mentioned earlier on—we had one last year, and we're planning four this year.

Speaker #3: So we've had two already: one in New York, and one in Sydney in March. Michael mentioned we have another one coming up in Toronto in September.

Speaker #3: Indeed, we have another one in Sydney coming up in November, so it's playing out very well in terms of relaying our product strategy to our customers and getting their feedback.

Ian Lynagh: Playing out very well in terms of relaying our product strategy with our customers, getting the feedback, and also getting customer testimony at those events as well, particularly with an audience that includes other customers and prospects, where they're explaining the journey they've gone on with FINEOS and how that's working out for them. Cloud operations in terms of our continuous focus on reducing cost, driving efficiencies. We've seen a decrease in terms of internal infrastructure usage, just through more efficient usage. Hiring of people in lower cost regions has helped drive that down. In terms of G&A, the real factor there is FX movement. Our reporting currency is EUR. Approximately 70% of our revenues comes in US dollars, and we receive revenue in six different currencies. We are always subject to the FX movement side of things.

Speaker #3: And also getting customer testimonials at those events as well, particularly with an audience that includes other customers and prospects. If we're there explaining the journey they've gone on with FINEOS and how that's working out for them.

Speaker #3: Cloud operations, in terms of our continuous focus on reducing costs and driving efficiencies, we've seen a decrease in internal infrastructure usage—just more efficient usage overall.

Speaker #3: Hiring of people in lower cost regions has terms of G&A, the real factor there is FX movement. Our reporting currency is euro. Approximately 70% of our revenues comes in US dollars.

Speaker #3: And we receive revenue from six different currencies, so we're always subject to FX movements. But on the flip side, about 50% of our costs are in euro.

Ian Lynagh: On the flip side, about 50% of our costs are in Europe and approximately 35% of our costs are in US dollars. There's always an argument about the currency and the approach we should take. In the meantime, there will always be FX movement for a global company like ours. If you move on now to Slide 11. Again, we've made a commitment in terms of FY27 and FY29 in terms of overall R&D spend as a percentage of revenue. Obviously, when we IPO'd back in 2019, as referenced above, the whole thesis there was to build out a product to service the life accident health industry all the way from quote to claim. We were spending very much ahead of the curve in terms of revenues coming in. We've now rebalanced that through 2025 now into 2026.

Speaker #3: And approximately 35% of our costs are in US dollars. So there's always an argument about the currency and the approach you should take. But in the meantime, we'll always be FX movement for a global company like ours.

Speaker #3: If you move on now to slide 11, again, we've made a commitment, in terms of FY27 and FY29, in terms of overall R&D spend, as a percentage of revenue.

Speaker #3: Because, obviously, when we IPO'd back in 2019, as referenced above, the whole thesis there was to build out a product to service the Life, Accident, and Health industry all the way from quality claim.

Speaker #3: So we were spending very much ahead of the curve in terms of revenues coming in. We've now rebalanced that through 2025, now into 2026.

Speaker #3: So, our expectation is that we'll continue to reduce the relative cost of R&D as a percentage of total revenues. You are seeing a slight rise there.

Ian Lynagh: Our expectancy is that we will continue to reduce the relative cost of R&D as a percentage of total revenues. You are seeing a slight rise there. As demand comes in from customers in terms of what we are delivering to them so we can secure that additional fee, we will toggle it a bit. Some of our flexible resourcing mentioned on the people side there is also in R&D. So we can toggle that up and down a bit. But overall, if you look at each half year there, you are seeing our spend is remaining reasonably consistent. So we are keeping very strong focus on that and intend to keep that percentage moving in a general downward direction in line with the expectations with respect to the guidance. If we move now on to slide 12, the balance sheet. The bits I will point out just be around trade receivables.

Speaker #3: As demand comes in from customers, in terms of what we're delivering to them, so we can secure that additional fee, we will toggle it a bit.

Speaker #3: Some of our flexible resourcing, mentioned on the people side, there is also in R&D. So we can toggle that up and down a bit.

Speaker #3: But overall, if you look at each half-year there, you're seeing our spend is remaining reasonably consistent. So we're keeping very strong focus on that and intend to keep that percentage moving in a general downward direction, in line with the expectations set with respect to the guidance.

Ian Lynagh: But overall, if you look at each half year there, you are seeing our spend is remaining reasonably consistent. So we are keeping very strong focus on that and intend to keep that percentage moving in a general downward direction in line with the expectations with respect to the guidance. If we move now on to slide 12, the balance sheet. The bits I will point out just be around trade receivables.

Speaker #3: If we move now on to slide 12, the balance sheet, the bits I'll point out would just be around trade receivables. So, obviously, you're seeing that our subscription fees are going up.

Ian Lynagh: Obviously you are seeing that our subscription fees are going up. Some services for bigger customers at a reasonable level as well. So we have seen an increase in trade receivables. We are comparing against the H2 of last year on the balance sheet as opposed to the previous corresponding period 12 months in the past. But that is a good indicative sign in terms of the increased revenues that we are going to secure within the marketplace. Indeed, if you look down at deferred revenues, what you also see there is a big increase. To put that in context, we invoice typically yearly in advance for subscription fees, monthly in arrear for service fees. With the subscription fees, almost about 40% of invoices go out in January and about another 20% go out in the Q2.

Speaker #3: Some services for bigger customers at a reasonable level as well. So, we've seen an increase in trade receivables. We are comparing against the second half of last year on the balance sheet, as opposed to the previous corresponding period, 12 months in the past.

Speaker #3: But that's a good indicative sign in terms of the increased revenues that we're going to secure within the marketplace. And indeed, if you look down at deferred revenues, what you also see there is a big increase.

Speaker #3: To put that in context, we invoice typically yearly in advance for our subscription fees, and monthly in arrears for service fees. With the subscription fees, almost about 40% of invoices go out in January, and about another 20% go out in the second quarter.

Speaker #3: So there's a skew in the first half of the year, in terms of those subscription fees: 60% versus 40% in the second half. We do see that balancing out a bit more.

Ian Lynagh: There is a skew in the H1 of the year in terms of those subscription fees, 60% versus 40% in the H2. We do see that balancing out a bit more, and that has already started happening where it may even out a bit more throughout the year. But it is always that magnetic pull back to that Q1 as customers expand with FINEOS if their fiscal year is a calendar year, and typically it is, they may wish to reset contracts for the beginning of the year. That works well for us because, again, just mentioned the FX volatility that any company has that deals globally. We can get the invoices out early on in the year, then that gives us predictability around that proportion of revenue as we look forward to the rest of year movements.

Speaker #3: And that's already started happening, where it may even out a bit more throughout the year. But there's always that magnetic pull back to that first quarter.

Speaker #3: As customers expand with FINEOS, if their fiscal year is a calendar year, and typically it is, they may wish to reset contracts for the beginning of the year.

Speaker #3: That works well for us because, again, just to mention the FX volatility that any company has that deals globally. If we can get the invoices out early on in the year, then that gives us predictability around that proportion of revenue as we look forward through the rest of the year's movements.

Speaker #3: So if we move on now, then, to slide 13—the cash flows. So this year, in terms of net cash generated, you can see a decrease of 24.7%.

Ian Lynagh: If we move on now to slide 13, the cash flows. This year in terms of net cash generated, you can see a decrease of 24.7%. The explanation around that partly was defined in the 4C for Q2. But just to provide a bit more color around that, there was two invoices, two large invoices amounting to approximately EUR 8 million with two large US-based insurers where the payments were delayed into this quarter. One of them was with an insurer that actually changed our payment, our online payment system. It had TV problems and that delayed payment and that payment has been secured as they teased out those problems. So it was just a delay in payment. The second one was a situation again with another large insurer and we renewed our five-year contract with them. It is for the larger proportion of that amount.

Speaker #3: And the explanation around that part of it was defined in the 4C for Q2. But just to provide a bit more color around that, there are two invoices, two large invoices amounting to approximately $8 million, with two large US-based insurers.

Speaker #3: Where the payments were delayed into this quarter. One of them was with an insurer that actually changed our online payment system. It had TV problems, and that delayed payment.

Speaker #3: And that payment has been secured. So as they teased out those problems, it was just a delay in payment. The second one was a situation, again, with another large insurer.

Speaker #3: And we renewed our five-year contract with them. It's for the larger proportion of that amount. We managed to secure an uplift in subscription fees.

Ian Lynagh: We managed to secure an uplift in subscription fees and that contributed towards the ARR contract assigned. We also managed to change the pricing approach for the absence product to a per employee per month type basis. As they grow, we will grow in line with that because previously it was on a per user basis. That took a while to negotiate. These things generally do when you are looking to extract more money from customers, it usually is a negotiation. Also because of the size of the contract, because it is a five-year contract multiplied by that singular invoice amount, it goes to a lot of sign-off. There was about 10 sign-offs within that and it was just frustrating for us, delayed the process, but it is done and dusted now.

Speaker #3: And that contributed towards the ARR; the contract is signed. We also managed to change the pricing approach for the Absence product to a per-employee, per-month basis.

Speaker #3: So as they grow, we'll grow in line with that. Because previously, it was on a per-user basis. That took a while to negotiate. These things generally do—when you're looking to extract more money from customers, it usually is a negotiation.

Speaker #3: And also, because of the size of the contract—because it's a five-year contract multiplied by that single invoice amount—it goes through a lot of sign-off.

Speaker #3: There were about 10 sign-offs within that, and it was just frustrating for us to delay the process. But it's done and dusted now. So if you look at that $8 million that was delayed, and you look at the $3 million that I mentioned earlier on in terms of insurance and software payments, that would have made a difference of $11 million.

Ian Lynagh: If you look at that EUR 8 million that was delayed and you look at the EUR 3 million I mentioned earlier on in terms of insurance and software payments, that would have made a difference of EUR 11 million. You can work your way down, even taking out the exchange rates, you see a positive impact in terms of the bottom line. I think that will all be flushed through as we get into Q3. Of course, we still produce important new cash flow so you can see that at the end of the quarter. We are very positive about that cash flow movement overall, knowing the dynamics of what happened with respect to those couple of invoices. I will leave it at that, Michael. I will pass it back to you.

Speaker #3: And you can work your way down—even taking out the exchange rate, you see a positive impact in terms of the bottom line. I think that will all be flushed through as we get into Q3.

Speaker #3: And of course, we're still producing quarterly cash. You'll see that at the end of the quarter, so we're very, very positive about that cash flow movement overall, knowing the dynamics of what happened with respect to those couple of invoices.

Speaker #3: And I'll leave it at that, Michael. I'll pass it back to you.

Speaker #1: Thanks, Ian. Pretty comprehensive overview there. So I'm going to move along to the outlook and the key priorities. If you turn to slide 15, this is a new slide in the presentation, which really is for our ASX investors to take a look at the investment thesis for FINEOS.

Michael Kelly: Thanks, Ian. Pretty comprehensive overview there. I am going to move along to the outlook and the key priorities. If you turn to slide 15, this is a new slide in the presentation which really kind of is for our ASX investors to take a view of the investment thesis for FINEOS. I think we are coming off a very good half. We are increasing our revenues, profit, and cash as you can see. We have no debt and actually we have a deferred tax asset which is quite significant given the losses we have had over the past several years building out the AdminSuite. That is there to be had.

Speaker #1: So I think we're coming off a very good half. We're increasing our revenues, profit, and cash, as you can see. We have no debt. And actually, we have a deferred tax asset, which was quite significant given the losses we've had over the past several years building out the Admin Suite.

Speaker #1: So that's there to be had. I'd also point out that our headquarters is in a low corporate tax operating center or country, where the headline tax rate is 12.5% on profits.

Michael Kelly: I would also point out that our headquarters is in a low corporate tax operating center or country, where the headline tax is 12.5% on profits when we do have to start paying tax, which obviously is a great position to be in as well. Recurring revenues are increasing and as Ian said there, 57.8% and we are on our way to the 65% we said we would achieve in FY27. I want to point out the strength of our customer relationships, the size of our customers, blue-chip clients who are tying up five-year agreements, and in the case of OneAmerica wanted a 10-year agreement with us based on GWP, gross written premium growth, and lives on our absence product. Very long-term, sticky clients, blue-chip, who are totally reliant on the mission-critical system we provide them.

Speaker #1: When we do have to start paying tax—which, obviously, is a great position to be in as well—recurring revenues are increasing and, as Ian said there, 57.8.

Speaker #1: And we're on our way to the 65% we said we'd achieve in FY27. I want to point out the strength of our customer relationships, the size of our customers, blue-chip clients who are tying up five-year agreements, and in the case of one, America wanted a 10-year agreement with us.

Speaker #1: Based on GWP—gross written premium growth—and lives on our absence product. We have very long-term, sticky clients; blue-chip companies who are totally reliant on the mission-critical system we provide them.

Speaker #1: And that is giving us increasing visibility and long-term profitability and growth, and cash generation as a business, which means that we've got great operating leverage ahead of us.

Michael Kelly: That is giving us increasing visibility on long-term profitability, growth, and cash generation as a business. Which means that we have got great operating leverage ahead of us. We are already, as I said, growing our EBITDA and our cash. We have not cut our costs and cut everything to the bone to arrive at a margin or increasing margin. We have continued to invest, but we are getting far greater efficiencies as we move along now going forward, and particularly now with AI. As we operate in the North American market, we tend to stay very current with technology trends, which is one of the huge advantages of being an American market leader versus anywhere else, because things happen just faster over there and clients want things quicker. So that gives us a competitive edge as well on a global basis.

Speaker #1: We're already, as I said, growing our EBITDA and our cash. But we haven't cut our costs and cut everything to the bone to arrive at a margin or increasing margin.

Speaker #1: We've continued to invest. What we are getting is far greater efficiencies as we move along now, going forward, and particularly now with AI. As we operate in the North American market, we tend to stay very, very current with technology trends.

Speaker #1: That is one of the huge advantages of being a market leader in America versus anywhere else, because things just happen faster over there, and clients want things more quickly.

Speaker #1: So that gives us a competitive edge as well on a global basis. Our operating expenses are declining as a proportion of revenue. And really, where we're getting that leverage is through revenue growth and the continuous efficiencies that we're driving within the business.

Michael Kelly: Our operating expenses are declining as a proportion of revenue. Really where we are getting that leverage is through revenue growth and continuous efficiencies that we are driving within the business. We have a large North American TAM, and we talked about this all going back as far as November 2024, where we said there was a $200 billion premium market in North America. A serviceable addressable market that we can target with the product set we already support of $125 billion in premium. Our own clients, who are some of the most substantial customers are carriers in the employee benefits world, already account for about $50 billion of that, of which we have only penetrated just a bit more than 10% of that opportunity within those customer sites. As I said, we have got four full suite clients out of 60 customers.

Speaker #1: We have a large North American TAM, and we've talked about this, going back as far as November 2024, where we said there was a $200 billion premium market in North America.

Speaker #1: A serviceable addressable market that we can target with the products that we already support of $125 billion in premium. And our own clients, who are some of the most substantial customers, are carriers in the employee benefits world.

Speaker #1: We already account for about $50 billion of that, of which we've only penetrated just a bit more than 10% of that opportunity within those customer sites.

Speaker #1: As I said, we've got four full-suite clients out of 60 customers. Two of the top ten of these carriers are now AdminSuite clients.

Michael Kelly: Two of the top 10 of these carriers are now FINEOS AdminSuite clients. Of course, we see more opportunity to convert clients across to our full suite and really get the benefit of all the historical investment we have made. We are the market leader in this employee benefit space in North America, and we are really driving the customer success. So we are driving those partnerships to deliver more revenues, more trust, and more new business in terms of opportunity to work with our carriers and our partners. It is a cloud-native product. Again, we were early into the cloud because we were very much competing in North America, who had the cloud well before any other country. Many countries did not go into the cloud until much later because of data residency and the technology itself had to move to them.

Speaker #1: And of course, we see more opportunity to convert clients across to our full suite and really get the benefit of all the historical investment we've made.

Speaker #1: We are the market leader in the employee benefits space in North America. And we're really driving customer success. So we're driving those partnerships to deliver more revenue, more trust, and more new business, in terms of opportunities to work with our carriers and our partners.

Speaker #1: It's a cloud-native product. And again, we were early into the cloud because we were very much competing in North America. We had the cloud well before any other country.

Speaker #1: Many countries didn't move to the cloud until much later because of data residency, and the technology itself had to move to them. Our cloud is very much built on the AWS cloud, which is secure, scalable, and future-proofed.

Michael Kelly: Our cloud is very much built on the AWS cloud, which is secure, scalable, and future-proofed. Because we have embedded AI in the product safely, it is right there at the heart of the core. So everything we are doing in our base product, we can take advantage of AI more and more, and we are showing that to customers, which is coming through very loud and clear. So the embedded AI for FINEOS is a real advantage. We see it across our whole suite. Of course, our suite is now in production with New York Life Insurance Company on a $5 billion US book for group voluntary and absence management. We are implementing very quickly now in terms of deployments. Really we have shifted the focus to maximizing the benefits of FINEOS when it is already implemented.

Speaker #1: And because we've embedded AI in the product safely, it's right there at the heart of the core. So everything we're doing in our base product, we can take advantage of AI more and more.

Speaker #1: And we're showing that to customers, which is coming through very loud and clear. So the embedded AI for FINEOS is a real advantage. We see it across our whole suite.

Speaker #1: And, of course, our suite is now in production with New York Life on a $5 billion US book for group voluntary and absence management.

Speaker #1: We are implementing very, very quickly now in terms of deployments. And really, we've shifted the focus to maximizing the benefits of FINEOS once it's already implemented.

Speaker #1: So we immediately talk about operating models and so on with our clients, and how we actually help them really transform and help their bottom line.

Michael Kelly: So we immediately talk about operating models and so on with our clients and how we actually help them really transform and help their bottom line. As I said, AI is an accelerator. It really, where we see the advantages in FINEOS, it provides more intelligence and assistance and automates a lot of stuff to our agentic side as well. Our AWS partnership is really good for FINEOS, and we have a strategic partnership on a global basis, very much at executive level, at technology and engineering level, and at sales level as well. Our SIs are becoming more and more confident and are growing the teams on FINEOS. As Ian said, we give them as much services as we can, and we are pretty okay and open with them around how do we cut the cake in terms of services.

Speaker #1: And as I said, AI is an accelerator. Really, where we see the advantages in FINEOS, it provides more intelligence and assistance and automates a lot of stuff to our agentic side as well.

Speaker #1: Our AWP partners' AWS partnership is really good for FINEOS. And we have a strategic partnership on a global basis, very much at the executive level, at the technology and engineering level, and at the sales level as well.

Speaker #1: Our SIs are becoming more and more confident and are growing the teams on FINEOS. So, as Ian said, we give them as much services as we can.

Speaker #1: And we're pretty okay and open with them around, how do we cut the cake in terms of services. To be quite honest, we're not looking for services.

Michael Kelly: To be quite honest, we are not looking for services, and we are upping the kind of quality of services that we do in terms of helping customers to maximize the benefits of the product. The services revenue ultimately in total would have grown on FINEOS, surely in terms of the new business growth and the subscription growth. But we have given a lot of it away to our SI partners who really appreciate it, and indeed who work closely with us. Then we are building B2B partnerships as well that are complementary and that help our customers. Overall, I think feeling very positive about the business. If you turn to slide 16 on our key priorities for the H2. We definitely want to get OneAmerica up and running as quickly as we can. That is going very well. Of course, our other AdminSuite clients as well.

Speaker #1: And we are upping the kind of quality of services that we do in terms of helping customers to maximize the benefits of the product.

Speaker #1: So the services revenue ultimately, in total, would have grown on FINEOS, surely in terms of the new business growth and the subscription growth. But we've given a lot of it away to our SI partners, who really appreciate it.

Speaker #1: And indeed, who work closely with us. And then we're building B2B partnerships as well that are complementary and that help our customers. So overall, I think we're feeling very positive about the business.

Speaker #1: If you turn to slide 16, and our key priorities for the second half, we definitely want to get OneAmerica up and running as quickly as we can.

Speaker #1: That's going very well. And of course, our other AdminSuite clients as well. So they'll go live early in 2027. We've also continued to scale with Guardian.

Michael Kelly: They will go live early in 2027. We have also continued to scale with Guardian and really hitting at that legacy system now where we have actually developed the FINEOS Migrator tool, and that will assist them to get off that legacy. So that one is going well as well. Upselling to existing large clients. Again, we have got customers who have got mega portfolios spread across multiple legacy systems, and we are well down the road with that as well in terms of growing their FINEOS footprint and migrating stuff across to FINEOS. We also want to grow our new business sales, as Ian indicated. We definitely want to invest more in sales and marketing. We want to progressively embed the AI across the whole platform and expand the internal use of AI as well within the company, which obviously gives us great efficiencies and so on.

Speaker #1: And really hitting at that legacy system now, where we've actually developed the FINEOS Migrator tool. And that will assist them to get off that legacy.

Speaker #1: So, that one is going well as well—upselling to existing large clients. Again, we've got customers who've got mega portfolios spread across multiple legacy systems.

Speaker #1: And we're well down the road with that as well, in terms of growing our FINEOS footprint and migrating stuff across to FINEOS. We also want to grow our new business sales, as Ian indicated.

Speaker #1: We definitely want to invest more in sales and marketing. We want to progressively embed AI across the whole platform, and expand the internal use of AI within the company as well.

Speaker #1: Which obviously gives us great efficiencies and so on. And we're already seeing the kind of uptick in terms of what that is doing for our bottom line.

Michael Kelly: We are already seeing the kind of uptick in terms of what that is doing for our bottom line. So all very positive. Then, of course, FINEOS Absence for Employer. We are working with some carriers as well around how do we work and get this product into the employers in parallel and in partnership with some of our carriers as well. Again, the employer market is very much small deals. But really our main focus is with our carriers who are our partners in this growth trajectory of FINEOS. So, I will move on to slide 17 and talk about the outlook and the guidance. Again, as you can see, we are well on target to hit the range and terms we gave at the start of the year.

Speaker #1: So, all very positive. And then, of course, FINEOS Absence for Employer. We're working with some carriers as well around how we work and get this product into the employers, in parallel and in partnership with some of our carriers as well.

Speaker #1: Again, the employer market is very much small deals. But really, our main focus is with our carriers, who are our partners in this growth trajectory of FINEOS.

Speaker #1: So, I'll move on to slide 17 and talk about the outlook and the guidance. So again, as you can see, we're well on target to hit the range in terms we gave at the start of the year.

Speaker #1: So, as Ian said, we're reiterating that we will be within the range, with a healthy number at the end of this year. This is supported by a strong pipeline and locked-in, long-term revenues with existing clients who are scaling on the FINEOS AdminSuite and are fully committed.

Michael Kelly: As Ian said, we are reiterating that we will be within the range with a healthy number at the end of this year, supported by strong pipeline and locked-in long-term revenues with existing clients who are scaling on the FINEOS AdminSuite and fully committed. We are growing profitably and generating cash through the year. Indeed, we want to drive the North American employee benefits domain on the sales side. We want to explore opportunities too of new product lines where carriers are actually talking to us about various product lines that they would like FINEOS to look at. Again, that will be another expansion opportunity, and will be more revenue for us as well. Then, as we said, invest in the marketing, more events, more case studies, more customer success stories, and indeed more sales and revenue. If I turn to slide 18.

Speaker #1: We're growing profitably and generating cash through the year. And indeed, we want to drive the North American employee benefits domain on the sales side.

Speaker #1: We want to explore opportunities, too, for new product lines, where carriers are actually talking to us about various product lines that they'd like FINEOS to look at.

Speaker #1: So again, that'll be another expansion opportunity, and will be more revenue for us as well. And then, as we said, invest in the marketing.

Speaker #1: More events. More case studies. More customer success stories. And indeed, more sales and revenue. So, if I turn to slide 18—before I talk about this slide, I want to go back to November 24, when Ian and I visited Sydney.

Michael Kelly: Before I talk about this slide, I want to go back to November 2024 when Ian and I visited Sydney, and we made some declarations and promises to you as investors in FINEOS. We said by the end of 2025, we would be cash flow positive, free cash flow. We delivered. We are saying that in FY27, our subscription fees will make up 65% of our total revenues. As you can see, we are well on target. We will bring the R&D investment into a 30% range in terms of total revenue, in terms of spend and investment. Our gross margins will be 75%, which as Ian has already said, we have achieved that last year, and we are on it again this year. EBIT margins of 25% moving up to 40% in FY29. So we reiterate that guidance around what we want to do, particularly in FY27.

Speaker #1: And we made some declarations and promises to you as investors in FINEOS. We said that by the end of 2025, we would be cash flow positive.

Speaker #1: Free cash flow. We delivered. We are saying that in FY27, our subscription fees will make up 65% of our total revenues. And as you can see, we're well on target.

Speaker #1: We'll bring the R&D investment into a 30% range, in terms of total revenue, in terms of spend and investment. And our gross margins will be 75%, which, as Ian has already said, we achieved last year.

Speaker #1: And we're on it again this year, with EBIT margins of 25% moving up to 40% in FY29. So we reiterate that guidance around what we want to do, particularly in FY27.

Speaker #1: So, hopefully you see that we're delivering on our promise, and you see FINEOS as a good investment. Thank you. I'll open it up for questions.

Michael Kelly: Hopefully you see that we are delivering on our promise and you see FINEOS as a good investment. Thank you. I will open it up for questions.

Speaker #2: Thank you. If you'd like to ask a question, please press dial one on your telephone and wait for your name to be announced. If you would like to cancel your request, please press star two.

Operator: Thank you. If you would like to ask a question, please press star 1 on your telephone and wait for your name to be announced. If you would like to cancel your request, please press star 2. If you are on a speakerphone, please pick up the handset to ask your question. Your first question today comes from Siraj Ahmed from Citi. Please go ahead.

Speaker #2: If you are on speakerphone, please pick up the handset to ask your question. Your first question today comes from Suraj Ahmed from Sydney. Please go ahead.

Speaker #3: Hi Michael. Hi Ian. I have three questions. The first one: very strong ARR growth, right? I just want to confirm that this includes the new wins and the cross-sales that you called out, like OneAmerica?

Siraj Ahmed: Hi, Michael. Hi, Ian. I have three questions. First one, very strong ARR growth, right? Just want to confirm that this includes the new wins in the crosses that you called out, like OneAmerica.

Speaker #1: Hi. Yes, it does. Yeah. Yeah, it does.

Michael Kelly: Hi.

Ian Lynagh: Hi.

Siraj Ahmed: Go ahead, Ian.

Michael Kelly: Go ahead, Ian.

Michael Kelly: Yes, it does. Yeah, it does.

Ian Lynagh: Yes, it does. Yeah, it does.

Speaker #3: Yeah, because I was just confused, because your NRR growth is actually higher than the ARR growth. So I wasn't sure if it includes some of the new wins.

Siraj Ahmed: Yeah, because I was just confused because your NRR growth is actually higher than the ARR growth, so I just wasn't sure if it includes some of the new wins. Okay. That is good. Just looking ahead, right? Michael, your comments sort of indicate the pipeline is very strong. You just had a very strong half of ARR growth. Do you reckon you can repeat that in the H2 or is that a bit too tough?

Speaker #3: Okay, so that's good. Just looking ahead, right? I mean, Michael, your comments sort of indicate the pipeline is very strong. You just had a very strong half of ARR growth.

Speaker #3: Do you reckon you can repeat that in the second half, or is that a bit too tough?

Speaker #1: I think we'll see. Suraj, we are optimistic about the second half—I mean, into next year as well. As you know, we have a business that is focused on long-term, lumpy deals.

Michael Kelly: I think we will see, Siraj. We are optimistic about the H2 and into next year as well. As you know, we have got a business that is long-term lumpy deals. It does take time to kind of get deals through some of the very largest carrier companies in the world. So, we have given a prediction that we are well within, and we will see how it goes through the year. But as I said, we are optimistic. We have come in with a very good half and, as you say, the ARR is heading in a very positive direction.

Speaker #1: And it does take time to kind of get deals through some of the very largest carrier companies in the world. So we've kind of done—we've given a prediction that we're well within.

Speaker #1: And we'll see how it goes through the year. But as I said, we're optimistic. We've come in with a very good half, and as you say, the ARR is heading in a very positive direction.

Speaker #1: So I'll leave it at that for the moment. Thank you.

Siraj Ahmed: Yeah

Michael Kelly: I will leave it at that for the moment. Thank you.

Speaker #3: Yeah. Michael, the reason I'm asking that is—sorry, just a second. The reason I'm asking that is, I mean, you sort of need your ARR growth to pick up to get your FY27 targets, right?

Siraj Ahmed: Yeah, Michael, the reason I am asking that is. Sorry, just a second. The reason I am asking that is you sort of need your ARR growth to pick up to get to your FY27 targets, right? Which you, like Ian mentioned, need to accelerate from here, sort of need to get like 20% plus subscription growth. Just can you help us build that bridge right from where you are right now to FY27 to get to 65%?

Speaker #3: Which is, like Ian mentioned, it needs to accelerate from here. It sort of needs to get like 20% plus subscription growth. So just, can you help us build that bridge, right, from where you are right now to FY27 to get to 65%?

Speaker #1: Do you want to do that, Ian?

Michael Kelly: You want to do that, Ian?

Speaker #4: Yeah, so your starting point, obviously, is the ARR at the half year. As I was speaking earlier on, we expect to get a level of new wins during the second half of the year.

Ian Lynagh: Yeah. Your start point obviously is the ARR over the H1. As I was speaking earlier on, we expect to get a level of new win during the H2. We expect no churn during the H2. That will be a higher figure. The services fees for next year will, in terms of our expectation setting, will either be in line with what we achieved this year. I indicated earlier on that that will be in line with what we achieved last year. Or it could toggle by 5% next year. Again, that SI bit really makes a difference as deals flow. If there is more SIs involved and they become more versed in our product, they may take on more services. The reason we allow them to do that is that they influence buyer decisions.

Speaker #4: We expect no churn during the second half of the year, so that will be a higher figure. The services fees for next year, in terms of our expectation setting, will either be in line with what we achieved this year.

Speaker #4: And I indicated earlier on that this will be in line with what we achieved last year, or it could toggle by 5% next year.

Speaker #4: Again, that SI bit really makes a difference as deals flow. If there are more SIs involved, then they become more versed in our product. They may take on more services.

Speaker #4: And the reason we allow them to do that is because they influence buyer decisions. So it's not that we're giving it away; we're giving it away in exchange for them helping us make greater sales.

Ian Lynagh: It is not that we are giving it away. We are giving it away in exchange for them helping us make greater sales. If you toggle up that up and down, that services bit in your modeling a little bit, then you know that what we need to achieve in terms of the subscription growth is probably bringing it up to about 107, 108, in terms of actual revenues for next year. We are going to be going into the new year with 80, 85% of that achievable will be the target we are setting ourselves. We have got to bridge that gap. We have a number of customers then, in terms of, as we have always said, upsell is the key element for us, and that really is scaling what customers already have as opposed to trying to sell them something new.

Speaker #4: So if you toggle that up and down, that services bit in your modeling a little bit, then you know that what we need to achieve in terms of the subscription growth is probably bringing it up to about 107, 108 in terms of actual revenues for next year.

Speaker #4: We're going into the new year with 80 to 85% of that achievable. That will be the target we're setting for ourselves, so then we've got to bridge that gap.

Speaker #4: We have a number of customers then, in terms of, as we've always said, upsell is the key element for us. And that really is scaling what customers already have, as opposed to trying to sell them something new.

Speaker #4: So, as they move their legacy across to FINEOS, we see that as being the biggest growth area. If I look back at the last 12 months and look at that ARR growth—and just look at it through the lens of upsell, cross-sell, and you name it—the upsell element of that growth is about 80% of the growth.

Ian Lynagh: As they move their legacy across to FINEOS, we see that as being the biggest growth area. If I look back at the last 12 months and look at that ARR growth and just look at it through the lens of upsell, cross-sell and new name, the upsell element of that growth is about 80% of the growth. The cross-sell is about 15%, and the new name is about 5%. As it comes in and then obviously those new names become existing customers moving forward. We see a significant amount of it coming through upsell, and we see a significant amount of that coming from a handful of customers. We very much have line of sight of how to achieve that in terms of those particular trajectories.

Speaker #4: The cross-sell is about 15%, and the new name is about 5%, as it comes in. Then, obviously, those new names become existing customers moving forward.

Speaker #4: So we see a significant amount of that coming from a handful of customers. So we very much have line of sight on how to achieve that in terms of those particular trajectories.

Speaker #3: Okay, sure. And just one last thing—in terms of confirming two things, Ian, as you mentioned, services are flat for the year, which would imply that the second half is slightly up, half on half.

Siraj Ahmed: Okay, sure. Just last one, in terms of just confirming two things, Ian. As you mentioned, services flat for the year, so that we should imply that H2 is slightly up half on half. Secondly, your FX assumptions for the revenue guide is 1.175. Spot is right now 1.15. Just confirming that that should be maybe EUR 1 million benefit to your revenue number. Thanks.

Speaker #3: And secondly, your FX assumptions for the revenue guide are 1.175. Spot is right now 1.15. So just confirming, that should be maybe a million euros benefit to your revenue number?

Speaker #3: Thanks.

Speaker #4: Yes. The revenues in the second half of the year, traditionally, are higher than the first half, because the second half benefits from deal closures and other end-of-year increases over the first half.

Ian Lynagh: Yes, the revenues in H2 of the year traditionally are higher than H1 because H2 benefits from deals closure and other increases in H1. Plus the fact as we win more deals, then the services will go up as well. Definitely, the services and the overall revenue expectations for H2 of the year will be greater. Sorry, what was the second part of your question there, Siraj?

Speaker #4: Plus, the fact is as we win more deals, then the services will go up as well. So definitely, the services and the overall revenue expectation for the second half of the year will be greater.

Speaker #4: Sorry, what was the second part of your question there, Suraj?

Speaker #3: Just on FX, right? I think your guide assumes 1.175.

Siraj Ahmed: Just on FX, right? I think your guide assumes 1.15.

Speaker #4: Yes.

Ian Lynagh: Yes.

Speaker #3: Right? The spot trade is 1.15. So there should be a benefit if this holds, right? In terms of the second half?

Siraj Ahmed: Right? The spot rate is 1.15, so there should be a benefit if this holds right in terms of H2.

Speaker #4: Yeah. I mean, so far the benefit will be about $1 million, a million or thereabouts. But as I said earlier on, the more we invoice, particularly for subscription fees, when the invoice is actually released, that's when the FX is set.

Ian Lynagh: Yeah. I mean, so far the benefit will be about EUR 1 million or thereabout. But as I said earlier on, the more we invoice, particularly for subscription fees, when the invoice is actually released, that is when the FX is set in terms of what we put out there then. So it is about EUR 1 million to date, but I do not know what is going to happen in H2 of the year.

Speaker #4: In terms of what we've put out there then, it's about a million to date, but I don't know what's going to happen in the second half of the year.

Speaker #3: Sure. Okay. All right. Thank you.

Siraj Ahmed: Sure. Okay. All right. Thank you.

Speaker #1: Thank you. Your next question comes from Tim Lawson from Macquarie. Please go ahead.

Operator: Thank you. Your next question comes from Tim Lawson from Macquarie. Please go ahead.

Speaker #5: Hi, guys. Thanks for taking my questions. Just a couple. I'm just trying to confirm on your medium-term targets, so FY27 and FY29, that they're percentages across the year rather than exit rates?

Tim Lawson: Hi, guys. Thanks for taking my questions. Just a couple. Just can I confirm on your medium term, so FY27, FY29, that they are percentages across the year rather than exit rates, just to make sure?

Speaker #5: Just to make sure.

Ian Lynagh: The guidance that we have set, Tim, in terms of

Speaker #4: The guidance that we've set, Tim, in terms of...

Tim Lawson: Yeah, the 65% subscription fee in 2027 and 25% in 2029.

Speaker #5: Yeah, 65% subscription fee in '27 and '25.

Ian Lynagh: Yeah, that will be at the end of 2027 and at the end of 2029.

Speaker #4: Yeah, that's out there at the end of '27. And it's the end of '29.

Speaker #5: So that's an exit rate, rather than the percentage across the year—to be clear.

Tim Lawson: So that's an exit rate rather than the percentage across the year, to be clear?

Speaker #4: Yeah, yeah. That's because of the nature of our business and the lumpiness of the invoicing cycles. So that's—

Ian Lynagh: Yeah. Because of the lumpy nature of our business and the lumpiness of the invoicing cycles.

Speaker #5: So for the full-year revenue. For the full-year revenue, when we look back at the end of the year, we'll say 65% of that was subscriptions.

Michael Kelly: For the full year revenue, when we look back at the end of the year, we will say 65% of that was subscriptions.

Speaker #3: Sure, yeah, because that's where I'm getting confused. So, the way you say that, Michael, I'm assuming, therefore, across the full year—FY27—the number that you report, 65% of that will be subscription fee, rather than looking at the mix on the day you leave the year.

Tim Lawson: Sorry. Okay, that is where I am getting confused. The way you say that, Michael, I am assuming therefore across the full year FY27, the number that you report, 65% of that will be subscription fee rather than looking at the mix.

Michael Kelly: Right

Tim Lawson: On the day you leave the year.

Speaker #4: No, correct. On the 65%, as we look back.

Michael Kelly: No, correct. We will be under 65% as we look back.

Speaker #3: Okay, across the full year. Okay, that's right, that's good. And can I just pick up—yeah, yeah—and can I just pick up on the pricing changes you talked about, that contract you renewed and renegotiated, and a bit of a slight payer, which—I mean, it's good to get price increases even if they pay a bit late.

Tim Lawson: Okay. Across the full year. Okay. That is all right. That is good.

Michael Kelly: All the way.

Tim Lawson: Can I just pick up. Yeah. Can I just pick up on the pricing changes? You talked about that contract you renewed and renegotiated and a bit of a slow pay, which, I mean, it is good to get price increases even if they pay a bit late. Can you talk about what that might mean if you applied that across your book? I mean, how much do you feel like you have got existing contracts that are underpriced effectively?

Speaker #3: Can you talk about what that might mean if you applied that across your book? I mean, how much do you feel like you’ve got existing contracts that are underpriced, effectively?

Speaker #4: Yeah, that's interesting. Yeah. Yeah—no, go ahead, go on. Yeah, so around about four years ago, Tim, we switched the pricing to GWP and per employee, per month.

Ian Lynagh: Yeah, that is an interesting.

Michael Kelly: You go ahead. No, go ahead. Go on.

Ian Lynagh: Yes. Around about four years ago, Tim, we switched the pricing to GWP and per employee per month. Obviously, what would have happened in the interim is we had already signed up to five-year duration contracts with customers, so we couldn't make that switch in the middle of that five-year period. We had to wait until we got to the end of the term to make that switch. In the interim, as we gain new customers, we put them straight onto a new model. But there have been other customers that we have in the mix that have come towards end of term. One of them was mentioned there earlier on in terms of that delayed payment, where we went through that switch because they were on a per user basis prior to that.

Speaker #4: Obviously, what would have happened in the interim is we had already signed up to five-year duration contracts with customers, so we couldn't make that switch in the middle of that five-year period.

Speaker #4: We had to wait until we got to the end of the term to make that switch. In the interim, as we gained new customers, we put them straight onto the new model.

Speaker #4: But there have been other customers that we have in the mix who have come towards the end of term. One of them was mentioned earlier in terms of that delayed payment, where we went through that switch.

Speaker #4: Because they were on a per-user basis prior to that. So, at this point in time, the majority of our customers are on that growth model—value-based pricing, as opposed to per-user-based pricing.

Ian Lynagh: At this point in time, the majority of our customers are on that growth model, value-based pricing as opposed to per user-based pricing. Per user-based pricing was always something over the last five years or so that we hit against, just in terms of general automation. But the need to move away from it with the advent of AI has been accelerated, and customers get that as well. So they may haggle over pricing, et cetera, and the fact that they need to switch. But they understand, particularly with the advent of AI, it needs to happen. So we're materially across the line. I would say, let's call it 90% are thereabout across the line. The rest should be resolved within the next 12 months.

Speaker #4: Per-user-based pricing was always something, over the last five years or so, that we hit against just in terms of general automation. But the need to move away from it with the advent of AI has been accelerated.

Speaker #4: And customers get that as well. So they may haggle over pricing, etc., and the fact that they need to switch, but they understand, particularly with the advent of AI, that it needs to happen.

Speaker #4: So we're materially across the line. I would say let's call it 90%, or thereabouts, across the line. The rest should be resolved within the next 12 months.

Speaker #3: Okay. Yeah. That's helpful.

Tim Lawson: Okay.

Michael Kelly: Yes. To add to that, Tim, we do have other contracts that are coming up for renewal, and so we can get increases on those as well.

Speaker #1: And to add to that, Tim, we do have other contracts that are coming up for renewal, so we can get increases on those as well.

Speaker #1: So, the vast majority of the growth we see in '27 and beyond is already in our base.

Ian Lynagh: Yeah.

Michael Kelly: The vast majority of the growth we see, 2027 and beyond, is already in our base.

Tim Lawson: Yeah, okay. It sounds like there is only about 10% of that that remains to get repriced. It is probably not going to have a huge material impact.

Speaker #3: Yeah, okay. So it sounds like it's only about 10% of that that remains to get repriced, so it's probably not going to have a huge material impact.

Speaker #1: Not that end of it, no. There are other contracts, though, that are due for renewal. And again, we can crank up pricing based on their GWP usage and, indeed, the lives.

Michael Kelly: Not that end of it, no. There are other contracts.

Tim Lawson: Yeah. Okay.

Michael Kelly: though, that are due for renewal. Again, we can crank up pricing based on their GWP usage and indeed the lives.

Speaker #1: So we still see an opportunity to continue to do that. And, of course, as we lay in new products and features and stuff, sometimes we charge some extras as well for those. The AI is a good example.

Tim Lawson: Yeah. Okay.

Michael Kelly: We still see an opportunity to continue to do that. Of course, as we lay in new products and features and stuff, we sometimes we charge some extras as well for those. The AI is a good example. Yeah, there is continual opportunity to cross-sell and upsell.

Speaker #1: So, yeah, there's continual opportunity to cross-sell and upsell.

Speaker #3: Yep. Yep. And then just with the ACC renewal, can you just when we look at the APAC revenue growth, it's been broadly sort of around that sort of 10 million 11 million sort of euro number for quite a number of years.

Tim Lawson: Yep. Then just with the ACC renewal, when we look at the APAC revenue growth, it has been broadly around that 10 million, 11 million EUR number for quite a number of years. Does that reset cause that number to grow into the next half? Have we seen the full annualization of that repricing impact or that contract impact?

Speaker #3: Does that reset cause that number to grow into the next half? Have we seen the sort of full annualization of that repricing impact, or that contract impact?

Speaker #1: Ian.

Ian Lynagh: Ian?

Michael Kelly: Ian?

Speaker #4: Yeah, so, albeit the revenue has remained at that type of level or grown a little bit year on year, the mix of that revenue has changed quite materially.

Michael Kelly: Yeah. Albeit the revenue has remained at that type of level or grown a little bit year-on-year.

Tim Lawson: Right

Michael Kelly: The mix of that revenue has changed quite materially. Initially within the market is going back to the IPO days and slightly beyond. The majority of revenue we are getting from the market was services revenue. What we are seeing is that we are getting more high-quality recurring revenue in terms of subs. ACC in its own right, we effectively doubled what we were getting out of them. But that contract was signed two years ago, and we got an uplift when we went live in April. It is higher quality revenue that we are getting there. Again, we are working with partners in the region also, so they are picking up some of the services, so we are splitting that out. It is much more sticky and particularly as we move to the cloud and we are starting to see that movement now in the region.

Speaker #4: Initially, within the market, going back to the IPO days and slightly before, the majority of revenue we were getting from the market was services revenue.

Speaker #4: So what we're seeing is that we're getting more high-quality recurring revenue, in terms of subs. So ACC, in its own right, we effectively doubled what we were getting out of them.

Speaker #4: But that contract was signed two years ago, and we got an uplift when we went live in April. So it's higher-quality revenue that we're getting there.

Speaker #4: Again, we're working with partners in the region also, so they're picking up some of the services. So we're splitting that out, so it's much more sticky, and particularly as we move to the cloud.

Speaker #4: And we're starting to see that movement now in the region. We've got a number of customers that are in the cloud or in discussion with us about moving to the cloud.

Michael Kelly: We have got a number of customers that are in the cloud or are in discussion with us about moving to the cloud.

Speaker #3: Yeah, okay. So the subscription revenue for ACC would have doubled, but the overall total revenue would not have doubled. Is that the message?

Tim Lawson: Yeah. Okay. The subscription revenue for ACC would have doubled, but the overall total revenue would not have doubled. Is that the message?

Speaker #4: Correct. Yeah. Correct.

Michael Kelly: Correct. Yeah. Correct.

Speaker #3: Okay, just staying on sort of revenue. I've got one more question after this as well. You talked about the sort of broadly flat services.

Tim Lawson: Okay. Just staying on the revenue, I have one more question on after this as well. You talk about the broadly flat services, partly because you are passing more work to SIs. Do you have a feel for if you combined the SI take and what you are still riding, how much is that actually growing by? How much are they actually doing with you, the SIs? Because ultimately that is what is going to drive your confidence in the subscription number.

Speaker #3: Partly because you're pricing more work to SIs. Do you have a sense of, if you combine the SI sort of take and what you're still writing, how much is that actually growing by?

Speaker #3: How much are they actually doing with you, the SIs? Because ultimately, that's what’s going to drive your confidence in the subscription number.

Speaker #4: So what are you asking? What kind of revenues are the SIs getting for our implementations? It certainly will be combined double digits, Tim. We don't know the exact numbers because they contract directly with the customer.

Michael Kelly: Are you asking what kind of revenues are the SIs getting?

Tim Lawson: Yeah.

Michael Kelly: For our implementations, it certainly will be combined double digits, Tim. We do not know the exact numbers because they contract directly with the customer. But they will be looking after significant tranches of work that historically FINEOS would have performed, such as program governance, integration, data conversion. It will be double digit. It would make a difference to.

Speaker #4: But they will be looking after significant tranches of work that, historically, FINEOS would have performed, such as program governance, integration, and data conversion, so it'll be double digit.

Speaker #4: I would make a difference.

Speaker #3: Double-digit millions, you mean? Double-digit millions?

Tim Lawson: Double digit millions, you mean? Double digit millions?

Michael Kelly: Yeah, yeah.

Speaker #4: Yeah. Double digit millions. Yeah.

Tim Lawson: Ten.

Michael Kelly: Double digit millions, yeah.

Speaker #3: Yeah. Okay. Yeah.

Tim Lawson: Yeah. Okay.

Michael Kelly: Yeah.

Tim Lawson: Yeah.

Speaker #4: But I think for us—and again, it's a message we keep on reiterating—it's a very, very sticky client base. Recurring revenues are where the future growth is.

Michael Kelly: But I think for us, and again, it's a message we keep on reiterating. It's a very sticky time base. Recurring revenues is where the future growth is. The subscription fees are key, five-year contracts. Once you're embedded, we're replacing systems, as we said before, that are 20, 30, 40 years old. So sometimes we get the sense that services is valued the same as subscription, but in our mind, it's not. It's very important for us to stay very focused on that subscription and just accept the services yield to the SIs as being part of the way we grow forward.

Speaker #4: The subscription fees are key—five-year contracts. And once you're embedded, we're replacing systems, as we said before, that are 20, 30, 40 years old.

Speaker #4: So, sometimes we get the sense that services are valued the same as subscription, but in our mind, they're not. It's very important for us to stay very focused on that subscription.

Speaker #4: And just accept the services yield to the SIs as being part of the way we grow forward.

Speaker #3: Yeah. And this last question from me—and thanks for the answer to it, really helpful. You've got a comment in the pack talking about exploring opportunities to expand product lines and new markets for FINEOS Administrate.

Tim Lawson: Yep.

Ian Lynagh: Absolutely.

Tim Lawson: Then just last question from me, and thanks for the answers. They're really helpful. You've got a comment in the pack talking about explore opportunities to expand product lines and new markets for FINEOS AdminSuite. Is that dental and is that with one of your key customers? Does that mean that you think they're progressing down a path to use you for that product? Is that what's driving the interest and the comment in the pack?

Speaker #3: Is that dental? And is that with one of your key customers? Does that mean that you think they're progressing down a path to use you for that product?

Speaker #3: And is that what's driving the interest and the comment in the pack?

Speaker #1: Yeah. Look, there are a few lines of business, not just dental—things like stop loss business, vision business. We're very close to those lines of business as well.

Michael Kelly: Yeah. Look, there's a few lines of business, not just dental. Things like stop-loss business, vision business. We're very close to those lines of business as well. Other variants of the life side in terms of the various types of life insurance, just adding more and more tweaks to the product that allows us to grow the kind of footprint of the TAM and indeed the opportunity with the clients. Dental is not something that we have on our horizon at this stage in terms of the claims side, but we will see, obviously, Guardian coming towards FINEOS on that side, on the dental side with the admin side. So yeah, look, just kind of continuously, these are incremental add-ons that we can do and just tuck it under into the R&D budgets and so on, and work with the clients.

Speaker #1: Other variants on the life side, in terms of the various types of life insurance—just adding more and more tweaks to the product that allow us to grow the kind of footprint of the TAM and, indeed, the opportunity with the clients.

Speaker #1: Dental is not something that we have on our horizon at this stage in terms of the claim side. But we will say, obviously, Guardian coming towards FINEOS on that side, on the dental side, with the admin side.

Speaker #1: So, yeah, look, there’s just kind of continuously—these are incremental add-ons that we can do and just token under into the R&D budgets and so on, and work with the clients.

Speaker #1: I think as well, when you look at the subscription growth, I just want to point out as well that subscription versus services—given the global situation in the markets, and particularly the frothy investment going into AI startups and AI this, AI that—if there's any kind of a turndown, our subscription revenues will stand up.

Michael Kelly: I think as well, when you look at the subscription growth, I just want to point out as well that subscription versus services. Given the global situation in the markets, and particularly the broad investment going into AI startups and AI this, AI that, if there's any kind of a turndown, our subscription revenues will stand up. We're locked in, and that's why we're going after subscription. Services will just be wiped out immediately if there's any kind of a downturn. So from our perspective, we're locking in certainty on these numbers and with these clients. That's why we're happy to continually build up our SIs as well and let them take the risk around services and us basically drive that long-term growth and that product revenue.

Speaker #1: We're locked in, and that's why we're going after subscriptions. Services will just be wiped out immediately if there's any kind of a downturn. So, just from our perspective, we're locking in certainty.

Speaker #1: On these numbers and with these clients. And that's why we're happy to kind of continually build up our SIs as well and let them take the risk around services.

Speaker #1: And us basically drive that long-term growth and that product revenue.

Speaker #3: Yeah, and thanks for kind of clarifying that. You talked about, sort of, the R&D budget. So the opportunities that you're looking at to expand product lines and new markets, etc.—does that fit within the R&D budget that you're talking about?

Tim Lawson: Yeah. Thanks. Can I just clarify that you talk about the R&D budget. The opportunities that you are looking at to expand product lines and new markets, et cetera, does that fit within the R&D budget that you are talking about? Because you have medium-term targets of that R&D investment as a percentage of revenue, so we are not seeing incremental R&D spend that would be captured within that envelope?

Speaker #3: Because you've got medium-term targets of that R&D investment as a percentage of revenue. So we're not seeing incremental R&D spend that would be captured within that envelope?

Speaker #1: Yeah, in the main, Tim, yes. The answer to that is, in the main, we are putting more and more of our R&D into AI and into the innovation side.

Michael Kelly: Yeah. In the main, Tim, yes. The answer to that is in the main. We are putting more and more of our R&D into the AI and into the innovation side. So we are growing our investment in that. We could easily cut back our R&D now because we have kind of hit a plateau in terms of the product, and we have got ourselves to where we wanted to be. But obviously, with AI coming in over the last three or four years, we bought Spraoi, and then we have been investing in the AI and rewriting the Limelight Health and Spraoi products into our base product. So we are continually innovating so that the product stays modern and ready. Then in terms of the extra business, in most cases, we can tuck that in on our R&D number, and we will not be increasing our R&D numbers.

Speaker #1: So we're growing our investment in that. We could easily cut back our R&D now because we've kind of hit a plateau in terms of the product, and we've got ourselves to where we wanted to be.

Speaker #1: But obviously, with AI coming in over the last three or four years, we bought Spree and then we've been investing in AI and rewriting the Limelight and Spree products into our base product.

Speaker #1: So we're continually innovating so that the product stays modern and ready. And then in terms of the extra business, in most cases, we can tuck that in on our R&D number.

Speaker #1: And we won't be increasing our R&D numbers if we have to. The client will basically pay us, and we'll do some kind of partnership where they'll pay us for the services or the product revenues for that extra line of business.

Michael Kelly: If we have to, the client will basically pay us, and we will do some kind of partnership where they will pay us for the services or whatever are the product revenues for that extra line of business. We can easily carve that out and show it to you if we do that, if there is a big spend in any particular year. But it will be well covered, and it is outside the thesis that we have set ourselves for FY27 and FY29.

Speaker #1: And we can easily carve that out and show it to you, as if we do do that, if there's a big spend in any particular year.

Speaker #1: But it'll be well covered, and it's outside the thesis that we've set ourselves for FY27 and FY29.

Speaker #3: Yeah, yeah, that's great. Thank you very much.

Tim Lawson: Yeah. That is great. Thank you very much.

Speaker #1: Thanks, Tim.

Michael Kelly: Thanks, Tim.

Speaker #2: Thank you. Your next question comes from Jackson Lee from RBC Capital Markets. Please go ahead.

Operator: Thank you. Your next question comes from Jackson Lee from RBC Capital Markets. Please go ahead.

Speaker #5: Hi, guys. Well done on the strong AR print. Just a question around the GP margins. Ian, I know you mentioned it in the prepared remarks, but yeah, just want to understand.

Jackson Lee: Well done on the strong ARR print. Just a question around the GP margins. Ian, I know you mentioned it in some of the prepared remarks, but just want to understand. We are seeing sort of like a decline in GP margins despite you guys having higher subscriptions as a percentage of revenues. I know you mentioned the AWS provision. Does that come from the GP margin line? If you could just help us or break out that GP margin.

Speaker #5: I was seeing sort of like a decline in GP margins, despite you guys having higher subscriptions as a percentage of revenues. I know you mentioned the AWS provision—does that come from the GP margin line?

Speaker #5: And if you could just help us or break out that gross profit margin.

Michael Kelly: Over to you, Ian. It is about the decline in our gross profit margin.

Speaker #1: So, over to you, Ian. It's about the decline in our gross profit margin, which is small, as against the big growth in ARR, and why that is—the decline.

Jackson Lee: Yeah

Michael Kelly: which is small, as against the big growth in ARR and why that is, the decline. You might cover that off.

Speaker #1: You might cover that off.

Ian Lynagh: Yeah. Hi, Jackson. The AWS provision you already have, so you see the amount that is there that has impacted it. The second reason I mentioned as well, that is we have taken on a lot of new resources, particularly from lower cost regions. What we were effectively doing during H1 of this year is we were doubling up on resources for a number of projects. We had to allocate that cost against our cost of sale during H1 of the year. Those individuals now are skilled up throughout H1 of this year, so we do not need to do that handholding, that double up of resources as we go into H2 of the year.

Speaker #4: Yeah, so, hi, Jack. The AWS provision you already have, so you see the amount that's there—that has impacted it. The second reason I mentioned as well is that we've taken on a lot of new resources, particularly from lower-cost regions.

Speaker #4: What we were effectively doing during the first half of this year is doubling up on resources for a number of projects.

Speaker #4: So we had to allocate that cost against our cost of sale during the first half of the year. Those individuals are now skilled up throughout the first half of this year.

Speaker #4: So, we don't need to do that hand-holding, that doubling up of resources, as we go into the second half of the year. So, I would expect that by the time we've done the full year, for the entirety of the year, we'll see a gross margin which will be roughly reflective of what we achieved last year.

Ian Lynagh: I would expect that by the time we have done the full year for the entirety of the year, we will see a gross margin which will be roughly reflective of what we achieved last year, and also is ahead of expectation that we set for FY27 at 75%.

Speaker #4: And also, as ahead of the expectation that we set for FY27 at 75%.

Jackson Lee: Okay, great. Just a quick one on AI. Most of your software peers in the small cap space have seen their headcount decline. I think you have added 40 in a half. Are you seeing any AI benefits internally, and do you expect this number to keep declining?

Speaker #5: Okay. Great. And just a quick one on sort of AI. Most of your sort of software peers in the small-cap space are sort of seeing their heads counts decline.

Speaker #5: But I think you've added, sort of, 40 and a half. Are you seeing any AI benefits internally? And do you expect this number to keep climbing?

Michael Kelly: Yeah, I can take that one.

Speaker #1: Yeah, I can take that one. Yep. Yeah. So, we are seeing benefits from the AI internally, and we've got a very much focused program on making sure we extract those benefits across our teams.

Ian Lynagh: Do you want to take it?

Michael Kelly: Yep. Yeah, we are seeing benefits from the AI internally, and we have a very much a focused program on making sure we extract those benefits across our teams. We have increased the headcount. As Ian said, we have increased headcount because we have doubled up some headcount on lower-cost countries. He has basically mentioned that to you already. We will see less headcount needed for what we are doing today as we move forward. There is a cost, of course, to the AI, which needs to go back in. We are moving faster now, developing features quicker and turning quality product out faster as well through our investment in the AI within our engineering and SDLC. Yes, we definitely get more bang for our buck out of our engineering and testing teams, and across the organization.

Speaker #1: We have increased the headcount, as Ian said. We've increased headcount because we've doubled up in some headcount in lower-cost countries. So he's basically mentioned that to you already.

Speaker #1: We will see fewer headcount needed for what we're doing today. As we move forward, there is a cost, of course, to the AI, which needs to go back in.

Speaker #1: But we're moving faster now, developing features quicker, and turning quality product out faster as well through our investment in the AI within our engineering and SDLC.

Speaker #1: And so, yes, we can definitely get more buying for our book out of our engineering and testing teams, and across the organization. So again, our business is growing, though.

Michael Kelly: Again, our business is growing though, and therefore with new name and existing cross-sell, up-sell and extra features and functions we are doing, we are where we are, but we do see that we are gaining the efficiencies from the investment we are making in the AI. That is going to continue. Any further questions?

Speaker #1: And therefore, with the new name and existing cross-sell, upsell, and extra features and functions we're doing, we're kind of—we are where we are. But we do see that we're gaining the efficiencies.

Speaker #1: From the investment we're making in the AI, and that's going to continue. Any further questions?

Operator: Thank you. Your next question comes from Jules Cooper from Schroders Partners Limited. Please go ahead.

Speaker #2: Thank you. Your next question comes from Jules Cooper from Shore & Partners Limited. Please, go ahead.

Operator: Hi, Michael. Can you hear me?

Jules Cooper: Hi, Michael. Can you hear me?

Speaker #5: Hi, Michael. Can you hear me? All right. Look, I just wanted to say thank you for putting the slide on page 15 in the deck.

Michael Kelly: Yep. Hi, Jules.

Michael Kelly: Look, I just wanted to say thank you for putting the slide on page 15 in the deck. It is a great overview of the business, and I loved the passion that you could hear in your voice as you were going through it. So well done on that. My question, it was really about one of the boxes there, which was the embedded AI. I wondered if you could just talk to us a little bit about the interest and the engagement that you are seeing from your customers, where they are asking you about what you are doing, how they could utilize the AI embedded in the platform, just to sort of gauge where the sort of interest and the demand is. Then also, we have definitely noticed an improved deal cadence.

Jules Cooper: Look, I just wanted to say thank you for putting the slide on page 15 in the deck. It is a great overview of the business, and I loved the passion that you could hear in your voice as you were going through it. So well done on that. My question, it was really about one of the boxes there, which was the embedded AI. I wondered if you could just talk to us a little bit about the interest and the engagement that you are seeing from your customers, where they are asking you about what you are doing, how they could utilize the AI embedded in the platform, just to sort of gauge where the sort of interest and the demand is. Then also, we have definitely noticed an improved deal cadence.

Speaker #5: It's a great overview of the business, and I loved the passion that you could hear in your voice as you were going through it.

Speaker #5: So, well done on that. My question was really about one of the boxes there, which was the embedded AI, and I wondered if you could just talk to us a little bit about the interest and the engagement that you're seeing from your customers, where they're asking you about what you're doing and how they could utilize the AI embedded.

Speaker #5: In the platform, just to sort of gauge where the interest and the demand are. And then also, we've definitely noticed an improved deal cadence.

Michael Kelly: And I just wondered, is that, in your mind, do you think related to your customers starting to think about if they are going to move into this sort of agentic era about tightening up the core system? Is it actually driving benefits from you, not just in AI itself, but in selling the core and upgrading customers in readiness?

Jules Cooper: And I just wondered, is that, in your mind, do you think related to your customers starting to think about if they are going to move into this sort of agentic era about tightening up the core system? Is it actually driving benefits from you, not just in AI itself, but in selling the core and upgrading customers in readiness?

Speaker #5: And I just wondered, is that, in your mind, do you think, related to your customers starting to think about if they are going to—if we're going to move into this sort of agentic era—about tightening up the core system?

Speaker #5: Is it actually driving benefits for you, not just in AI itself, but in selling the core and upgrading customers in readiness?

Michael Kelly: Thanks, Jules. Yeah, great questions. In terms of the AI, at our event in New York, where we brought together eight CIOs in a room of our biggest clients, we had a discussion around how do we partner? What are the common themes? What would you want us to focus in on and double down on? AI, AI were the answers. There was a kind of an interesting perspective from them. They want us to help them to make AI safe. So they were all interested in FINEOS leading out on compliance and AI compliance, given that we are global as well and European Union has brought in some AI Act as well. We are able to take all that on board, and we have a compliance team in FINEOS. So we have doubled down on the compliance side.

Speaker #1: Thanks, Jules. Yeah, great questions. In terms of the AI, at another event in New York where we brought together eight CIOs in a room—some of our biggest clients—we had a discussion around how do we partner?

Speaker #1: What are the common themes? What would you want us to focus in on and double down on? And AI, AI, AI. Those were the answers.

Speaker #1: So there was kind of an interesting perspective from them. They want us to help them make AI safe. So they were all interested in FINEOS leading out on compliance and AI compliance, given that we're global as well, and the European Union has brought in some AI legislation as well.

Speaker #1: We're able to take all that on board, and we have a compliance team in FINEOS. So we've doubled down on the compliance side. But they also saw that FINEOS has the opportunity at the core to drive agentic AI and automation in terms of our workflows and orchestration of our core system.

Michael Kelly: But they all saw that FINEOS has the opportunity at the core to drive agentic AI and automation in terms of our workflows and orchestration of our core system. Indeed, the insights that we can present in terms of the deterministic and the assistive type AI that we can present into case managers, whether it be on the underwriting or on the claim side or on the service side. They all see that as FINEOS having a big jump. That is encouraging them to kind of come behind us. It will encourage more AdminSuite deals because of that, because they can see the multiplier effect we get by having AI at the core and across the full landscape of our suite. Obviously it being safe. So that is where it really comes down to. The CIOs have experimented with AI.

Speaker #1: And indeed, the insights that we can present in terms of the deterministic and the assistive-type AI that we can present to case managers, whether it be on the underwriting, or on the claim side, or in the service side, they all see that as FINEOS having a big jump.

Speaker #1: That is encouraging them to kind of come behind us, and it will encourage more admin suite deals because of that. Because they can see the multiplier effect we get by having AI at the core and across the full landscape of our suite.

Speaker #1: And obviously, it being safe. So that's what it really comes down to. The CIOs have experimented with AI. They have been working on POCs and developing stuff themselves, and bringing in consultants—some very expensive ones—to help them get their heads around where they can use AI.

Michael Kelly: They have been working in POCs and developing stuff themselves and bringing in consultants, some very expensive ones, to help them to get their heads around where they can use AI. They are concluding that the data is the most important aspect of being able to drive AI, followed by a really modern workflow system which can be automated, and indeed agentic can be implemented within the core to orchestrate the business. So it is a step-by-step process, though, because they obviously are in a regulated environment, and they want to test everything. They want to be absolutely sure an agent could not go AWOL and do things on their core system, on their business that would get them into big trouble. So again, it has to be done in a compliant way.

Speaker #1: And they're concluding that the data is the most important aspect of being able to drive AI, followed by a really modern workflow system, which can be automated.

Speaker #1: And indeed, agentic can be implemented within the core to orchestrate the business. So it's a step-by-step process, though, because they obviously are in a regulated environment and they want to test everything.

Speaker #1: They want to be absolutely sure an agent couldn't go awol and do things on their core system, on their business, that would get them into big trouble.

Speaker #1: And so again, it has to be done in a compliant way. But I think, ultimately, we all see the advantages of FINEOS being a core system—a system of record which is crucial to having the modern data set for a business like an employee benefits carrier. But it's also crucial in terms of being a system of intelligence and a system of automation and orchestration.

Michael Kelly: But I think ultimately we all see the advantages of FINEOS being a core system, a system of record, which is crucial to having the modern data set for a business like an employee benefits carrier. But also crucial in terms of being a system of intelligence and system of automation and orchestration. So that is where we are going, and I think what you will find with the AI is that it is going to be a huge benefit. Honestly, I see the AI becoming a commodity. You can see what is going on in the world on AI in terms of more and more models coming out and the competitive environment. So watch this space is my view. It has not played out yet.

Speaker #1: So that's where we're going. And I think what you'll find with the AI is that it's going to be a huge benefit. Honestly, I see the AI becoming a commodity.

Speaker #1: You can see what's going on in the world on AI, in terms of more and more models coming out and the competitive environment. So, watch this space, is my view.

Speaker #1: It hasn't played out yet. But in the long term, where it will play out is that systems very much will be much more intelligent at the core.

Michael Kelly: But in the long term, where it will play out is that systems very much will be much more intelligent at the core. And indeed, they need to be compliant, but it should leverage up time then for carriers to really focus in on their clients and change their business models. I will talk about that in November when I come down for the event in Sydney. But I do believe that there is a huge opportunity, and there is going to be big winners and losers in this market in terms of the carriers we have versus other carriers.

Speaker #1: And indeed, they need to be compliant. But it should free up time then for carriers to really focus on their clients and change their business models.

Speaker #1: I'll talk about that in November when I come down for the event in Sydney. But I do believe that there's a huge opportunity, and there's going to be big winners and losers in this market in terms of the carriers we have versus other carriers.

Michael Kelly: Okay. Thank you very much, Michael. We will look forward to seeing you in November.

Jules Cooper: Okay. Thank you very much, Michael. We will look forward to seeing you in November.

Speaker #5: Okay, thank you very much, Michael. We look forward to seeing you in November.

Michael Kelly: Thanks, Jules.

Speaker #1: Thanks, Jules.

Operator: Thank you. Your next question comes from Richard Harrisberg from Canaccord Genuity. Please go ahead.

Speaker #2: Thank you. Your next question comes from Richard Harrisburg from Canaccord Genuity. Please go ahead.

Richard Harrisberg: Hi, Michael. Hi, Ian. Congrats again on a great result, and thanks very much for taking my questions. I just wanted to ask on The Guardian legacy migration and how that's been going, maybe you could give us a bit of color. I wanted to ask you about the ARR number that you put out of EUR 88 million. I am assuming that that doesn't include The Guardian legacy aspect. Maybe you could just give us any color around when that starts to hit in terms of revenue, the implementation type timeline. Yeah, any detail, that would be great. Thanks.

Speaker #3: Hey Michael, hey Ian. Congrats again on a great result, and thanks very much for taking my questions. I just wanted to ask about the Guardian legacy migration.

Speaker #3: And how that's ongoing. Maybe you could give us a bit of color? I wanted to ask you about the ARR number that you put out of €88 million.

Speaker #3: I'm assuming that that doesn't include the Guardian legacy aspect, so maybe you could just give us any color around when that starts to hit, in terms of revenue—the implementation type, timeline—yeah, any detail, that would be great.

Speaker #3: Thanks.

Michael Kelly: Yeah, Richard. Good to hear from you again. Yeah, sure. The first thing is the number doesn't include the legacy. Our Guardian number hasn't shifted in terms of our licenses yet. They are driving all their new business onto the FINEOS AdminSuite for the lines of business that we currently serve. They are going to expand lines of business and do more with us. The legacy side of things, we have been working with them and helping them to line up the legacy data in terms of it coming across to FINEOS. Indeed, they are using AI on the legacy migration side on that old legacy mainframe. We have developed the FINEOS Migrator product, which again is an automated product around reading in the business and the employers into our suite. Again, we will be able to assist them and go.

Speaker #1: Yeah, Richard, good to hear from you again. Yeah, sure. The first thing is the number doesn't include the legacy. Our Guardian number hasn't shifted in terms of our licenses yet.

Speaker #1: They are driving older new business onto the FINEOS AdminSuite for the lines of business that we currently serve. They are going to expand lines of business and do more with us.

Speaker #1: And then, on the legacy side of things, we have been working with them and helping them to line up the legacy data in terms of it coming across to FINEOS.

Speaker #1: And indeed, they're using AI. On the legacy migration side, on those old legacy that old legacy mainframe. We've developed the FINEOS Migrate product which, again, was an automated product around reading in the business into our and the employers into our suite.

Speaker #1: So again, we will be—they're kind of lined up now to do it. Over the next few months, we'll start it. As in, we've started it.

Michael Kelly: They are kind of lined up now to do it, and over the next few months, we will start it. As in we have started it, all the prep work has already been taking place. We will start taking data across in the next few months, and it will come across in increments. We expect that that is going to pick up through 2027, and towards the second half of 2027, we will start to see that legacy kind of data start to make a big impact on FINEOS.

Speaker #1: All the prep work has already taken place, and we'll start moving data across in the next few months. It will come across in increments.

Speaker #1: So we expect that that's going to pick up through 2027, and towards the second half of '27, we'll start to see that legacy kind of data starting to make a big impact on FINEOS.

Richard Harrisberg: That is really helpful. So just to be clear, it is kind of an incremental over time. You should start to see revenue benefits from that sort of in the H2 FY27. It is not sort of a light switch moment where you flick a switch and it is a big lump increase.

Speaker #3: That's really helpful. So just to be clear, it is kind of incremental over time. You should start to see revenue benefits from that sort of in the second half of FY27.

Speaker #3: It's not a sort of light switch moment where you flip a switch and it's a big lump increase.

Michael Kelly: Correct.

Richard Harrisberg: Right.

Michael Kelly: It will be through H2 2027 into 2028, 2029, and that should kind of conclude it. It is a big process. They have a multi-billion book, so they cannot just, it is not a light switch, as you say in a complex business like this.

Speaker #1: Correct. It'll be true in the second half of '27, into '28 and '29. And that should kind of conclude it. It's a big process. They have a multi-billion-dollar book.

Speaker #1: So they can't just—it's not a light switch, as you say, in a complex business like this.

Richard Harrisberg: No, that is really helpful. Thanks. I just wanted to ask as well on the penetration rate that you guys have in existing customers, just over 10%. Obviously, it would be nice to say you would like to get that to 100%, but do you guys sort of have internal targets the next two to four years? What is like a reasonable number of how you sort of start to think of the cross-sell opportunity and where that penetration rate might get to at some point in the future?

Speaker #3: No, that's really helpful. Thanks. And then, I guess I just wanted to ask as well about the penetration rate that you have in existing customers—just over 10%.

Speaker #3: Obviously, it would be nice to say you'd like to get that to 100%. But do you guys sort of have internal targets over the next two to four years?

Speaker #3: What's a reasonable number when you start to think about the cross-sell opportunity, and where that penetration rate might get to at some point in the future?

Michael Kelly: Yeah. Look, I could not give you a percentage in terms of penetration within that base. But what I can tell you is that each one of them is targeted, and Ian Lynagh carries all the spreadsheets, and it is in our sales force as well. But each one of them is targeted around AdminSuite and additional product cross-sell, up-sell, more lines of business coming over, migrations, and so on. So we have that trajectory, particularly with our big guys, the six. We have two of them, as I said, as full AdminSuite users, New York Life Insurance Company being our original partner. We have an opportunity in a few years' time to reprice that, but that won't be until just beyond five years' time. But the others are all basically lined up, and they do not have any other option at the start except to look at us.

Speaker #1: Yeah, look, I couldn't give you a percentage in terms of penetration within that base. But what I can tell you is that each one of them is targeted.

Speaker #1: And Ian carries all the spreadsheets, and it's in our Salesforce as well. But each one of them is targeted around Admin Suite and additional product cross-sell, upsell, more lines of business coming over, migrations, and so on.

Speaker #1: So we have that trajectory, particularly with our big guys, the six. We have two of them, as I said, as full admin suite users—New York Life being our original partner.

Speaker #1: We have an opportunity in a few years' time to reprice that, but that won't be until just beyond five years' time. The others are all basically lined up.

Speaker #1: And they don't have any other option to start, except to look at us. It wouldn't make any sense for them to go off and try to buy a policy and billing system, like over the last few years where a number of players moved in with policy and billing and tried to cut us off.

Michael Kelly: It wouldn't make any sense for them to go off and try and buy a policy and billing system. Like over the last few years where a number of players moved in with policy and billing and tried to cut us off, those days are over. Those companies have not been successful. We're back to a kind of a steady trajectory now where as we prove ourselves, whether they use us for claims or claims and options, they are thinking, "What are we going to do with the legacy and what's next?" Of course, we're having the discussions as well. More lines of business, which is kind of going across the org and then more product in terms of going end-to-end. That's the opportunity with these carriers. They've all got legacy in the back end, and they all need to change.

Speaker #1: Those days are over. Those companies have not been successful. And so, we're back to a kind of steady trajectory now, where as we prove ourselves—whether they use us for claims or claims and absence—they are thinking: What are we going to do with the legacy? What's next? And so on.

Speaker #1: Of course, we're having those discussions as well. So, more lines of business, which is kind of going across our org, and then more product in terms of going end to end.

Speaker #1: That's the opportunity with these carriers. They've all got legacy in the back end, and they all need to change. And they've all realized as well that data is the key to operational efficiency and customer success.

Michael Kelly: They've all realized as well that the data is the key to operational efficiency and customer success.

Richard Harrisberg: Yep. No, absolutely. Good one. Maybe I'll just ask one more question just around the AI and the capabilities you're putting into the product. Obviously, I understand there's a slow process of customers being very careful and cautious in how they implement that. Have you started to have discussions around pricing of the AI elements specifically? Is there going to be a price for AI usage within the modules? Is that going to be all-inclusive? Is that coming into contract negotiations as well, which we kind of touched on earlier today? That'd be great.

Speaker #3: Yep, no, absolutely, Kiran. Maybe I'll just ask one more question—just around the AI and the capabilities you're putting into the product. Obviously, I understand there's a slow process of customers being very careful and cautious in how they implement that.

Speaker #3: But have you started to have discussions around pricing of the AI elements specifically? Is there going to be a price for AI usage within the modules?

Speaker #3: Is that going to be sort of all-inclusive? Is that coming into contract negotiations as well, which we kind of touched on earlier today?

Michael Kelly: Yes. As of 2025, our release 25, which is 2025 release 4, 25.4, all our clients can easily move to the full AdminSuite. As I said, most of the clients are still using claims, 50, whatever it is, of them just use claims or claims and absence. Also, as of 25.8, they have the AI core at the heart. That release of our platform has the AI built in. We can start to open that up to them, and as I said, they are very cautious and they want it all tested. Yes is the answer. As I said earlier in the answer to Jules, I do believe that it's going to become an expectation that a system like ours is driven by AI.

Speaker #3: That would be great.

Speaker #1: Yeah. As of '25, our release '25, which is 2025 Release 4 (25.4), all our clients can easily move to the full admin suite. So, as I said, most of the clients are still using Claims—50%, whatever it is, of them just use Claims, or Claims and Absence.

Speaker #1: Also, as of '25-8, they have the AI core at the heart. So, that release of our platform has the AI built in. So we can start to open that up to them.

Speaker #1: And as I said, they are very cautious and they want it all tested, and so on. So yes is the answer. Now, as I said earlier in the answer to Jules, I do believe that it's going to become an expectation that a system like ours is driven by AI.

Michael Kelly: As we move forward, we do price today by usage, and we put a margin on that. As time goes on, as I said, as these things become more and more commoditized, and I do see AI like something like Workflow was 25 years ago. I think that over time we will build all that pricing in. Yes, we will see uptick in our numbers through the AI. As we sell new deals, we will be expected to have the AI embedded, and we will be expected to show AI and the automation and also the insights in the system. I see it very much as a competitive moat expander for FINEOS to drive ahead and to go hard at the market.

Speaker #1: So, as we move forward, we do price today by usage, and we put a margin on that. But look, as time goes on, as I said, as these things become more and more commoditized—and I do see AI like something similar to what workflow was 25 years ago—I think that, over time, we'll build all that pricing in.

Speaker #1: Yes, we'll see uptick in our numbers through the AI, but as we sell new deals and we will be expected to have the AI embedded and we will be able to we will be expected to show AI and the automation and also the insights in the system.

Speaker #1: So I see it very much as a competitive moat expander for FINEOS to drive ahead and go hard at the market. And let's face it, we're dealing with clients that have been abused, and really some of them have spent hundreds of millions going down wrong roads and continue in some cases.

Michael Kelly: Let's face it, we are dealing with clients that have been abused and really some of them have spent hundreds of millions gone down wrong roads and continue in some cases. Really we have got to prove to these clients that we have a better approach and we are trustworthy, long-term, good partners for the industry. We do see pricing increasing, but it is probably not the most important thing to me. The most important thing is that we get the product right and that we use it to pull more business into us, totality-wise, get rid of that legacy.

Speaker #1: So, really, we've got to prove to these clients that we have a better approach and that we're trustworthy—long-term, good partners for the industry. So, look, we do see pricing increasing, but it's probably not the most important thing to me.

Speaker #1: The most important thing is that we get the product right and that we use it to pull more business into us. In totality, we need to get rid of that legacy.

Richard Harrisberg: Great. Thanks for that, Michael. Well done again. Good momentum heading into next year's targets. Congrats.

Speaker #3: Great, thanks for that, Michael. And yeah, well done again—good momentum heading into next year’s targets. So, congrats.

Michael Kelly: Thanks, Richard.

Speaker #1: Thanks, Richard.

Operator: Thank you.

Michael Kelly: Much appreciated.

Speaker #2: Thank you.

Operator: Your next question comes from. Thank you. Your next question comes from Max Moore from Veritas Securities. Please go ahead.

Speaker #1: Much appreciated it.

Speaker #2: Thank you. Your next question comes from Max Moore from Veritas Securities. Please go ahead.

Max Moore: Michael and Ian, I hope you can hear me okay.

Speaker #4: Michael and Ian, I hope you can hear me okay?

Michael Kelly: Yep.

Speaker #1: Yep.

Operator: Yeah.

Ian Lynagh: Yeah.

Max Moore: Well done, firstly. Just a quick question, maybe a follow-up on the pipeline and the sales cycle, something we might have seen with other software companies and the impacts of the Middle East war and AI just generally, that customers are potentially sitting on their hands a bit more. Have you seen that trend, or you see that maybe normalized to last year where the nature of needing to migrate from their legacy systems is forcing them to speed up the process?

Speaker #2: Yep.

Speaker #4: Well done, firstly. Just a quick question—maybe a follow-up on the pipeline and the sales cycle. Something we might have seen with other software companies is the impact of the Middle East war and AI, just generally, that customers are potentially sitting on their hands a bit more.

Speaker #4: Have you seen that trend, or do you see that maybe, normalized to sort of last year, where the nature of needing to migrate from their legacy systems is forcing them to speed up the process?

Michael Kelly: Yeah, look, I think the war side of things has settled down. Strangely enough, I think we all feel it's kind of a weird place to be globally in terms of the geopolitical setup. But I think that's settled down. Our clients are really fighting for business, continuing to try and drive their OpEx and growth, and they're just as aggressive and focused on modernization as they've always been. I think the AI has been a disrupter, and it's probably the biggest technology change since the World Wide Web. Let's face it is a complete game changer. I think that it has been a disrupter because the usual thing happens, big consultants go in and tell them that they can build new systems for them around AI and whatever else, and POCs have begun, and a lot of that is starting to be put away.

Speaker #1: Yeah. Look, I think the war side of things has settled down. Strangely enough, I think we all feel it's kind of a weird place to be, globally, in terms of the geopolitical setup.

Speaker #1: But I think that's settled down. Our clients are really fighting for business, continuing to try and drive their OPEX and growth, and they're just as aggressive and focused on modernization as they've always been.

Speaker #1: I think AI has been a disruptor, and it's probably the biggest technology change since the World Wide Web. Let's face it: it is a complete game changer.

Speaker #1: And I think that it has been a disruptor because the usual thing happens: big consultants go in and tell them they can build new systems for them around AI and whatever else.

Speaker #1: And POCs have begun, and a lot of that is starting to kind of be put away. So, if anything, I'd say that they're kind of getting sensible now around the focus.

Michael Kelly: If anything, I'd see that they're kind of getting sensible now around the focus. So I think we probably see things calming down in terms of back to, yes, you do have to replace your legacy. You'll get the AI in there, and you'll be better off doing that than spending lots of time and money on different point systems and various technologies. So it's been a learning curve, and IT teams have been very keen to get out there and do things on AI and show what they can do. As they've kind of done things and then they see the complexity and the risks, and they see the maintenance factors and the costs, they're kind of coming back in a little bit because the business are saying to them, "Okay, what's the benefit of what you've done?

Speaker #1: So, I think we probably see things calming down in terms of back to, yes, you do have to replace your legacy. You'll get the AI in there, and you'll be better off doing that than spending lots of time and money on different point systems and various technologies.

Speaker #1: So it's been a learning curve, and IT teams have been very keen to get out there and do things on AI and show what they can do.

Speaker #1: And as they've kind of done things, they see the complexity and the risks, and they see the maintenance factors and the costs. They're kind of coming back in a little bit, because the business is saying to them, "Okay, what's the benefit of what you've done? Yes, you've been a year doing this."

Michael Kelly: Yes, you've been a year doing this. Yes, you've been able to do that a little bit faster or whatever. But what's the ultimate benefit? What are we getting out of this? What's the bottom line?" The business are actually starting to bring the IT people back in and really focus on the strategic focus around AI.

Speaker #1: Yes, you've been able to do that a little bit faster or whatever. But what's the ultimate benefit? What are we getting out of this?

Speaker #1: What's the bottom line? So the businesses are actually starting to bring the IT people back in and really focus on the strategic focus around AI.

Max Moore: Just one more quickly. Just interested in, yeah, how you are using AI to speed up and migrating legacy books and then maybe also onboarding customers. I am interested to see if there is anything you can reference how as your product becomes a bit more off the shelf and more developed, how quick you can onboard a customer now versus maybe 18 months ago.

Speaker #4: And just one more, quickly. I'm just interested in how you're using AI to speed up migrating legacy books, and then maybe also onboarding customers.

Speaker #4: I'm interested to see if there's anything you can reference—how, as your product becomes a bit more off-the-shelf and more developed, how quickly you can onboard a customer now versus maybe 18 months ago.

Michael Kelly: Very good question. If you look back, it took us seven years to build the AdminSuite, two years to onboard and bring New York Life's EUR 4 billion book over to FINEOS, in terms of migrations and everything else. Guardian went live in a year, then they basically got it fully rolled out and connected up everything in the second year, and we are doing the migration now. OneAmerica will go live within a year, and they have gone end to end in terms of quote to claim, and they have basically got the AI core in there. So effectively, as we move more towards more new deals, they get the latest version of the product, which is kind of easier to start on and faster to go on. So there is that kind of natural trajectory that is making it easier to onboard, do upgrades, and do the migrations as well.

Speaker #1: Very good question. If you look back, it took us seven years to build the admin suite, and two years to onboard and bring New York Life's $4 billion book over to FINEOS.

Speaker #1: In terms of migrations and everything else, Guardian went live in a year. Then they basically got it fully rolled out and connected up everything in the second year.

Speaker #1: And we're doing the migration now. OneAmerica will go live within a year, and they're going end-to-end in terms of quote to claim. And they've basically got the AI core in there.

Michael Kelly: So effectively, as we move more towards more new deals, they get the latest version of the product, which is kind of easier to start on and faster to go on. So there is that kind of natural trajectory that is making it easier to onboard, do upgrades, and do the migrations as well.

Speaker #1: So, effectively, as we move more towards new deals, they get the latest version of the product, which is easier to start on and faster to go live with.

Speaker #1: So does that kind of natural trajectory that's making it easier to onboard, do upgrades, and do the migrations as well? So yeah, we do see a momentum picking up.

Michael Kelly: We do see a momentum picking up. Because a lot of our clients have already upgraded to the platform, as in FINEOS AdminSuite for claims, and they are well-positioned now to do the upgrade to the AdminSuite and take on the AI core. Some of them may stay on claims, and they can have the AI core there, and we can do the document summarization, case summarization, all the things we do around insights and automation. That is just going to make them feel more that they need to leave the legacy behind because the gap will grow between what they have got in their hands on FINEOS and what is behind.

Speaker #1: And a lot of—because a lot of our clients have already upgraded to the platform, as in FINEOS AdminSuite for Claims, and they're well positioned now to do the upgrade to the AdminSuite and take on the AI Core.

Speaker #1: Some of them may stay on claims, and they can have the AI core there. We can do the document summarization, case summarization—all the things we do around insights and automation.

Speaker #1: And that's just going to make them feel even more that they need to leave the legacy behind, because the gap will grow between what they've got in their hands on FINEOS and what's behind.

Michael Kelly: The AI gives us a really strong opportunity to completely rewrite the whole of the UX, the user experience, the customer experience, and it gives us that opportunity to drive more margin for them and leverage our business as well. Internally, we are getting some great results with the AI as well. Again, we are really focused in now more and more on innovation, and you will kind of see that coming through in FINEOS in the next few months. We may make an announcement or two during the next few months that will show you that. But as I said at the start, we are a North American high-tech core system that is very focused on a niche space. That gives us those competitive advantages that we talked about over the years in these updates.

Speaker #1: AI gives us a really strong opportunity to completely rewrite the whole UX—the user experience, the customer experience—and provides us with a chance to drive more margin for them and leverage our business as well.

Speaker #1: Internally, we're getting some great results with the AI as well. And again, we are really focused now, more and more, on innovation. You'll kind of see that coming through in FINEOS in the next few months.

Speaker #1: We may make an announcement or two during the next few months that will show you that. But, as I said at the start, we're in the North American high-tech core system.

Speaker #1: That's very focused on a niche space, and that gives us those competitive advantages that we've talked about over the years in these updates.

Max Moore: Appreciate it, guys, and yeah, well done again.

Speaker #4: I'm pretty excited, guys. And yeah, well done again.

Michael Kelly: Thanks very much.

Speaker #1: Thanks very much.

Operator: Thank you. Your next question comes from Sinclair Curry from MA Moelis Australia. Please go ahead.

Operator: Thank you. Your next question comes from Sinclair Currie from MA Moelis Australia. Please go ahead.

Speaker #2: Thank you. Your next question comes from Sinclair Curry from MOLs Australia. Please go ahead.

Operator: Hi. Thanks for taking the question. I am sorry. I know it is late. Just one question around the new business underwriting and quoting. Just be interested to understand how you see the scope of that as an add-on or a cross-sell to one of your large clients, and what do you see as the sort of sales cycle with that? Is it something which you can get in people's hands relatively quickly? A quicker decision for your clients to make?

Sinclair Currie: Hi. Thanks for taking the question. I am sorry. I know it is late. Just one question around the new business underwriting and quoting. Just be interested to understand how you see the scope of that as an add-on or a cross-sell to one of your large clients, and what do you see as the sort of sales cycle with that? Is it something which you can get in people's hands relatively quickly? A quicker decision for your clients to make?

Speaker #3: Hi, thanks for taking the question, and sorry—I know it's late. Just one question around the new business underwriting and quoting. I’d be interested to understand how you see the scope of that as an add-on or a cross-sell to one of your large clients.

Speaker #3: And what do you see as the sort of sales life, the sales cycle with that? Is it something that you can get in people's hands relatively quickly—a quicker decision for your clients to make?

Michael Kelly: Yeah. Hi, Sinclair. Good questions. The new business quote and underwrite is at a crucial part of the business. Most carriers are really big into their customer service and their claim service. Obviously, they make their money through the claim service and really being efficient around that. They get the growth from the quote and underwrite and how that integrates into the new business environment. It is a very hot area. We do expect we will be selling that standalone and obviously as part of the full suite. As part of the full suite, it gives a carrier real benefits in that the quote underwrite and the rating go straight into the billing and onto the policy admin. There are massive benefits. Today, they do not have that. They have broken up core systems, and the quote underwrite rate is usually separate.

Speaker #1: Yeah, hi Sinclair. Good questions. So, yeah, the new business quote and underwrite is at a crucial part of the business. Most carriers are really big into their customer service and their claim service.

Speaker #1: Obviously, they make their money through the claims service and really being efficient around that. But they get the growth from the quote and underwrite, and how that integrates into their kind of new business environment.

Speaker #1: So, again, it's a very hot area. So, we do expect we'll be selling that standalone and, obviously, as part of the full suite. As part of the full suite, it gives a carrier real benefits in that the quote, underwrite, and the rating kind of go straight into the billing and onto the policy admin.

Speaker #1: So there's massive benefits. Today, they don't have that. They've broken up core systems, and the quote, underwrite, rate is usually separate. They do put a lot of investment into that because they're looking for that frictionless new business coming through.

Michael Kelly: They do put a lot of investment into that because they are looking for that frictionless new business coming through. We are putting a lot of focus into it now, to cohesively integrate it into the suite, which we have done, and then look for those differentiators that we have as a full suite for that quote underwrite rate. We have got this bookending approach that we can easily do with clients. We have obviously got the strongest claims and absence system in the carrier market in North America. The quote underwrite rate is coming hard and fast on our new technology platform, which is true SaaS and really very lightweight and has the AI and everything embedded. I do think that is going to be a grower for us. It is a Trojan horse type approach. You basically move in and say, "Where have you got your problems?

Speaker #1: Again, we're putting a lot of focus into it now, to cohesively integrate it into the suite—which we've done—and then look for those differentiators that we have as a full suite for that quote/underwrite/rate.

Speaker #1: So, we've kind of got this bookending approach that we can easily do with clients. We've obviously got the strongest claims and absence system.

Speaker #1: In the carrier market in North America, the quote-underwrite rate is now coming hard and fast on our new technology platform, which is TrueSaaS and is really very lightweight, with AI and everything embedded.

Speaker #1: So I do think that's going to be a grower for us. And it's a Trojan horse-type approach. You basically move in and say, where have you got your problems in the claims area?

Michael Kelly: In the claims area, the underwriting area, or should we just take the whole enchilada? What do you want to do first? Is it a line of business you want to go into the full enchilada on, or do you want to, where are your pain points? Where are your problems?" Most carriers have a few of those, and then they start prioritizing. It all depends on budgets and return and so on that they can get. It takes time to set up a deal, as you know, because they have to get budgets, and because these budgets need to obviously take into account their own work and retirement of legacy and everything else and the cycles around that. We do see the quote underwrite as very much a compelling proposition going forward.

Speaker #1: The underwriting area, or should we just take the whole enchilada? What do you want to do first? Is there a line of business you want to go into the full enchilada on, or do you want to... Where are your pain points, where are your problems?

Speaker #1: And most carriers have a few of those, and then they start prioritizing. It all depends on budgets and return, and so on, that they can get.

Speaker #1: So it takes time to set up a deal, as you know, because they have to get budgets. And because these budgets need to, obviously, take into account their own work and retirement of legacy and everything else, and the cycles around that.

Speaker #1: So, we do see the quote underwrite as very much a compelling proposition going forward.

Michael Kelly: Thanks a lot. Appreciate your time.

Sinclair Currie: Thanks a lot. Appreciate your time.

Speaker #3: Thanks a lot. I appreciate your time.

Operator: Thank you. There are no further questions at this time. I will now hand back over to Mr. Kelly for any closing remarks.

Speaker #2: Thank you. There are no further questions at this time. I'll hand back over to Mr. Kelly for any closing remarks.

Michael Kelly: Yeah. Thanks very much, and I appreciate everybody staying on. I know we overrun a little bit. We are pretty passionate, as you can see, about this business. Ian is traveling down tonight to talk to investors and analysts over the next week or so. We will both be down in November, and we will be running an event as well. Again, similar to what we did before earlier this year, and we are also running a customer event in Sydney. Looking forward to that, and very happy to have any follow-ups or whatever. Either of the two of us are available for investors and analysts. Thank you very much.

Speaker #1: Yeah, so thanks very much. I appreciate everybody staying on. I know we overran a little bit. We're pretty passionate, as you can see, about this business.

Speaker #1: And Ian is traveling down tonight to talk to investors and analysts over the next week or so. We'll both be down in November, and we'll be running an event as well.

Speaker #1: Again, similar to what we did earlier this year. We're also running a customer event in Sydney, so we're looking forward to that. We're very happy to have any follow-ups or questions—either of the two of us are available for investors and analysts.

Speaker #1: Thank you very much.

Operator: That does conclude our conference for today. Thank you for participating. You may now disconnect.

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