10-KPeriod: FY2002

FAIR ISAAC CORP Annual Report, Year Ended Sep 30, 2002

Filed November 21, 2002For Securities:FICO

Summary

Fair Isaac Corporation (FICO) is presenting its 2002 Annual Report, highlighting a significant strategic shift with the acquisition of HNC Software Inc. on August 5, 2002. This acquisition is expected to create substantial synergies and enhance shareholder value by integrating HNC's sophisticated analytic and decision management software capabilities with FICO's existing strengths. The report details FICO's diverse product and service offerings across four segments: Scoring Solutions, Strategy Machine Solutions, Analytic Software Tools, and Professional Services. These solutions are designed to help businesses automate and improve decision-making processes in areas like customer acquisition, origination, account management, and fraud detection. Financially, the company reported revenues of $392.4 million for fiscal year 2002, an increase from $329.1 million in 2001, though operating income saw a decrease from $72.1 million to $47.1 million. This change is largely attributable to the inclusion of HNC's results from the acquisition date and related integration costs. Despite the decrease in operating income, the company's strong market position in credit scoring and decision analytics, bolstered by the HNC acquisition, positions it for future growth. Investors should note the company's consistent dividend payout and the recent stock splits as indicators of financial stability and management's confidence.

Key Highlights

  • 1Completed the significant acquisition of HNC Software Inc. on August 5, 2002, aiming for integration synergies and enhanced shareholder value.
  • 2Reorganized business segments into Scoring Solutions, Strategy Machine Solutions, Analytic Software Tools, and Professional Services for better operational management and reporting.
  • 3Reported fiscal year 2002 revenues of $392.4 million, an increase from $329.1 million in fiscal year 2001.
  • 4While revenues grew, operating income decreased to $47.1 million in fiscal year 2002 from $72.1 million in fiscal year 2001, largely due to acquisition-related costs and differing inclusion periods.
  • 5The company's FICO scores are a dominant measure of credit risk, used in the majority of U.S. credit decisions, and are distributed through major credit reporting agencies.
  • 6Strategy Machine Solutions include a broad range of products for customer acquisition, origination, and account management, with TRIAD™ being a leading credit account management system.
  • 7The company maintains a consistent dividend payout of $0.08 per share annually across fiscal years 2000, 2001, and 2002.

Frequently Asked Questions

The acquisition of HNC Software Inc. is a major strategic move for Fair Isaac. It aims to integrate HNC's advanced analytic and decision management software with FICO's existing offerings, creating a more comprehensive suite of solutions. This integration is expected to generate significant synergies, enhance competitive positioning, and ultimately drive increased shareholder value by expanding market reach and product capabilities.

The acquisition of HNC, completed on August 5, 2002, means HNC's results are included only from that date forward in fiscal year 2002. This makes direct year-over-year comparisons of financial performance challenging, as the full fiscal year 2001 results do not include HNC. The acquisition also led to increased expenses related to integration, which contributed to a decrease in operating income despite revenue growth.

FICO operates in four primary segments: Scoring Solutions (including FICO scores for credit risk and insurance), Strategy Machine Solutions (for customer acquisition, origination, account management, and fraud detection), Analytic Software Tools (software for businesses to build their own decisioning applications, like Blaze Advisor), and Professional Services (consulting and implementation for their solutions). The company aims to provide end-to-end decision management capabilities.

FICO operates in a highly competitive market with a diverse range of competitors, including in-house development teams, credit reporting agencies, other software providers, and consulting firms. Key competitive factors include technical performance, proprietary data access, product features, price, customer support, and market reputation. FICO believes its unique blend of predictive analytics expertise and integrated solutions provides a competitive advantage.