10-KPeriod: FY2004

FAIR ISAAC CORP Annual Report, Year Ended Sep 30, 2004

Filed December 14, 2004For Securities:FICO

Summary

Fair Isaac Corporation (FICO) is a global leader in enterprise decision management solutions. For the fiscal year ended September 30, 2004, the company reported total revenues of $706.2 million, a 12% increase over the prior year, driven by strategic acquisitions and growth across its key segments. Net income was $102.8 million, with diluted earnings per share of $1.41. The company's financial performance was significantly impacted by acquisitions, including the substantial acquisition of London Bridge Software Holdings plc, which expanded its offerings in collections and recovery and international markets. FICO's business is diversified across four reportable segments: Strategy Machine Solutions, Scoring Solutions, Professional Services, and Analytic Software Tools. The Strategy Machine Solutions segment, which includes account management, marketing, fraud, and insurance solutions, remains the largest revenue generator. The company continues to invest in research and development, with R&D expenses increasing to $71.1 million, reflecting its commitment to innovation in predictive modeling and decision management technologies. While facing a competitive landscape, FICO's strong market position, particularly in credit scoring with its FICO® scores, provides a stable revenue base.

Key Highlights

  • 1Total revenues increased by 12% to $706.2 million for the fiscal year ended September 30, 2004.
  • 2Net income was $102.8 million, with diluted earnings per share of $1.41.
  • 3The acquisition of London Bridge Software Holdings plc in May 2004 significantly expanded the company's product portfolio and international reach.
  • 4Research and development expenses increased to $71.1 million, underscoring FICO's focus on innovation.
  • 5The company continues to see strong demand for its core FICO® scores, a standard in credit risk assessment.
  • 6Revenues from international customers represented 22% of total revenues in fiscal 2004, indicating global growth.
  • 7The company repurchased $101.1 million of its common stock during fiscal 2004 under its share repurchase program.

Frequently Asked Questions

Fair Isaac operates across four reportable segments: Strategy Machine Solutions, Scoring Solutions, Professional Services, and Analytic Software Tools. In fiscal year 2004, Strategy Machine Solutions, its largest segment, saw revenue growth driven by account management, marketing, fraud, and insurance solutions, partly due to acquisitions. Scoring Solutions also experienced growth, primarily from increased risk scoring services at credit reporting agencies. Professional Services revenue increased with model development and integration services, while Analytic Software Tools saw higher sales of perpetual licenses.

The acquisition of London Bridge Software Holdings plc in May 2004 was a significant event for Fair Isaac. It expanded the company's capabilities in collections and recovery, strengthened its international presence, and contributed $55.7 million to revenue growth in fiscal year 2004. The acquisition involved a total purchase price of $310.2 million and resulted in the recognition of substantial goodwill and intangible assets.

Fair Isaac derives a significant portion of its revenue (approximately 81% in fiscal 2004) from transactional or unit-based pricing arrangements, such as scoring services, network services, and software hosted internally. Other revenue streams include perpetual software licenses, annual license fees under long-term agreements, and annual software maintenance fees. Non-recurring revenue comes from upfront perpetual licenses and professional services. The strong recurring revenue base provides a degree of stability to the company's financial performance.

Fair Isaac anticipates that future revenue growth will continue to be influenced by strategic acquisitions, in addition to organic growth. The company actively evaluates opportunities to acquire complementary technologies and businesses. Investments in research and development are also crucial for enhancing existing products and developing new technologies to meet evolving market demands. Expanding its international presence is also a key part of its growth strategy.