Fineos Earnings: Evident Profit Generation Potential

Wide-moat Fineos' first-half 2024 results affirm our thesis for improved medium-term earnings. The results met expectations, with revenue growth, a positive mix shift, and cost control driving improvements in gross profit and EBITDA by around 7% and 60%, respectively, from the previous corresponding period. Gross profit and EBITDA margins improved by around 4% to 74% and 11%, respectively. Free cash flow more than doubled to EUR 5 million from EUR 2 million in the PCP. Notably, subscription revenue now comprise 54% of total revenue, up from roughly 40% three years ago. Fineos’ shift to a cloud-based software-as-a-service model boosts gross profit margins, which we expect to improve further as more customers transition from on-premises licenses to the cloud.