10-KPeriod: FY2018

FAIR ISAAC CORP Annual Report, Year Ended Sep 30, 2018

Filed November 9, 2018For Securities:FICO

Summary

Fair Isaac Corporation (FICO) reported a strong fiscal year 2018, with total revenues increasing by 11% to $1.03 billion. The company demonstrated robust growth, particularly in its Scores segment, which saw a 29% revenue increase year-over-year, driven by both business-to-business and business-to-consumer offerings. The shift towards cloud-based solutions is also gaining traction, with cloud revenues accounting for 35% of non-Scores revenues in fiscal 2018, up from 30% in fiscal 2017. This growth was achieved while managing operating expenses effectively, leading to a 16% increase in operating income. FICO continues to focus on its Decision Management strategy, expanding its cloud capabilities and enhancing its product portfolio to address diverse industry needs. The company also demonstrated a commitment to shareholder value by repurchasing approximately $336.9 million of its common stock during fiscal 2018, underscoring its strong cash flow generation. Despite some segment-specific headwinds, such as a revenue decline in Decision Management Software, the overall financial performance indicates a healthy and growing business with a clear strategic direction focused on analytics and decision management solutions.

Financial Highlights

53 data points
Beta

Revenue

$1.00B

68.7% Gross Margin

Net Income

$126.48M

12.6% Net Margin

EPS (Diluted)

$4.06

Total Assets

$1.33B

Cash & Equivalents

$90.02M

Free Cash Flow

$191.75M

Financial Statements
Beta
Revenue$1.00B
Cost of Revenue$312.90M
Gross Profit$687.25M
R&D Expenses$128.38M
SG&A Expenses$376.91M
Operating Expenses$824.79M
Operating Income$175.36M
Interest Expense$31.31M
Net Income$126.48M
EPS (Basic)$4.26
EPS (Diluted)$4.06
Shares Outstanding (Basic)29.71M
Shares Outstanding (Diluted)31.18M

Key Highlights

  • 1Total revenues grew by 11% to $1.03 billion in fiscal year 2018.
  • 2The Scores segment experienced significant growth with a 29% revenue increase, reaching $342.6 million.
  • 3Cloud-based solutions are expanding, representing 35% of non-Scores revenues in fiscal 2018.
  • 4Operating income increased by 16% to $206.4 million, with operating margins improving to 20%.
  • 5FICO actively returned capital to shareholders, repurchasing approximately $336.9 million of common stock in fiscal 2018.
  • 6The company is focused on its 'Decision Management' strategy, with a significant portion of revenue derived from the banking and insurance industries.
  • 7Despite strong overall performance, the Decision Management Software segment saw a 7% revenue decline.

Frequently Asked Questions

FICO's primary growth driver was its Scores segment, which saw a substantial 29% increase in revenue. This growth was fueled by both its business-to-business (B2B) scoring solutions, particularly in originations and account management, and its business-to-consumer (myFICO) services. Additionally, the company's strategic shift towards cloud-based solutions across its Applications and Decision Management Software segments contributed to revenue growth, indicating increasing customer adoption of these offerings.

FICO is demonstrating a balance between investing in long-term growth initiatives and maintaining profitability. While the company increased its spending on research and development (up 16% year-over-year) to support cloud computing and new product development, it also managed its overall operating expenses effectively. This led to a 16% increase in operating income, resulting in a healthy 20% operating margin, indicating efficient cost management alongside strategic investments.

FICO is actively returning capital to shareholders, primarily through its stock repurchase program. In fiscal year 2018, the company repurchased approximately 1.9 million shares for $336.9 million. The Board of Directors has authorized ongoing repurchase programs, demonstrating a commitment to enhancing shareholder value by utilizing its strong free cash flow.

Key risks identified include reliance on a few core products and services, potential market unresponsiveness to its Decision Management strategy, particularly cloud offerings, and the risk of failing to develop successful new products or facing defects and delays. The company also notes risks associated with its dependence on major credit reporting agencies and large customers, the long and variable sales cycles for its products, and the competitive landscape within the analytics and decision management industry.