10-KPeriod: FY2009

FAIR ISAAC CORP Annual Report, Year Ended Sep 30, 2009

Filed November 24, 2009For Securities:FICO

Summary

Fair Isaac Corporation (FICO) reported a decrease in revenues for fiscal year 2009 compared to the previous year, primarily driven by the challenging global economic environment impacting customer spending on technology projects. This downturn was particularly felt in the Strategy Machine Solutions and Scoring Solutions segments. Despite the revenue decline, the company maintained its commitment to investing in its core Decision Management solutions and implemented a significant reengineering initiative to reduce costs and improve profitability through headcount reductions and facility consolidations. The company's core business remains strong, with continued reliance on its FICO® score and Decision Management systems across major industries like banking and insurance. FICO also highlighted its international growth, even as currency fluctuations presented a headwind. The company is actively managing its expenses and believes its current cash position and credit facilities are sufficient to meet its obligations and fund future operations.

Financial Highlights

54 data points
Beta

Revenue

$630.74M

67.3% Gross Margin

Net Income

$65.10M

10.3% Net Margin

EPS (Diluted)

$1.33

Total Assets

$1.30B

Cash & Equivalents

$178.16M

Free Cash Flow

$137.68M

Financial Statements
Beta
Revenue$630.74M
Cost of Revenue$206.45M
Gross Profit$424.29M
R&D Expenses$73.63M
SG&A Expenses$209.32M
Operating Expenses$513.99M
Operating Income$116.75M
Interest Expense$25.48M
Net Income$65.10M
EPS (Basic)$1.34
EPS (Diluted)$1.33
Shares Outstanding (Basic)48.66M
Shares Outstanding (Diluted)48.78M

Key Highlights

  • 1Revenue declined by approximately 15% in fiscal year 2009, largely due to a broad economic downturn affecting customer technology investments.
  • 2The company implemented a reengineering initiative involving significant headcount reductions and cost-saving measures to improve profitability.
  • 3FICO's core business continues to rely on its widely adopted FICO® scores and Decision Management (DM) systems, serving key industries such as banking, insurance, and retail.
  • 4The company experienced a decline in its Scoring Solutions segment, particularly from credit reporting agencies, due to reduced new account acquisition activities by financial institutions.
  • 5International revenues remained a significant portion of total revenues (32%), though impacted by unfavorable currency translation.
  • 6The company's legal dispute with major credit reporting agencies (Experian, TransUnion) regarding credit scoring products resulted in a jury verdict against FICO, with the company planning to appeal.
  • 7Despite revenue challenges, FICO maintained a stable dividend payment of $0.08 per share.

Frequently Asked Questions

Fair Isaac Corporation's revenues decreased by approximately 15% to $630.7 million in fiscal year 2009, down from $744.8 million in fiscal year 2008. This decline was attributed to a challenging global economic environment that led customers, particularly financial institutions, to reduce spending on technology projects. Operating income also saw a decrease, reflecting the revenue pressures.

FICO operates across four main segments: Strategy Machine Solutions, Scoring Solutions, Professional Services, and Analytic Software Tools. In fiscal year 2009, Strategy Machine Solutions revenues decreased by $49.4 million, and Scoring Solutions revenues decreased by $25.2 million, both significantly impacted by market conditions. Professional Services also saw a substantial revenue decline of $36.7 million.

Management indicated that the difficult business environment experienced in fiscal year 2009 was expected to continue through most of fiscal year 2010. The company planned to continue aggressively managing expenses to maintain earnings and cash flows while investing in its Decision Management solutions.

FICO was involved in litigation against credit reporting agencies (Equifax, Experian, TransUnion) concerning competitive credit scoring products. While a settlement was reached with Equifax, the case proceeded against others. A jury ultimately ruled in favor of the defendants in November 2009, though FICO planned to appeal the verdict and dismissals of certain claims.