10-QPeriod: Q2 FY2002

FAIR ISAAC CORP Quarterly Report for Q2 Ended Mar 31, 2002

Filed May 15, 2002For Securities:FICO

Summary

Fair, Isaac and Company, Inc. (FICO) reported solid financial results for the quarter ended March 31, 2002. The company demonstrated continued revenue growth, with a 7% increase to $87.1 million compared to the prior year's quarter. Net income also saw a significant boost of 33%, reaching $14.2 million, translating to diluted earnings per share of $0.59, up from $0.47 in the same period last year. The company highlighted strong performance in its Scoring and Consulting segments, with Consulting revenues seeing a substantial 60% increase driven partly by the recent acquisition of Nykamp. Despite a slight dip in Software & Maintenance revenues, the overall operational strength is evident. FICO also announced a significant upcoming merger with HNC Software Inc., valued at approximately $810 million, which is expected to expand its market reach and solution offerings. This strategic move, alongside continued organic growth, positions FICO for future expansion.

Key Highlights

  • 1Revenue increased by 7% to $87.1 million for the three months ended March 31, 2002, compared to $81.3 million in the prior year period.
  • 2Net income grew by 33% to $14.2 million for the three months ended March 31, 2002, compared to $10.7 million in the prior year period.
  • 3Diluted earnings per share rose to $0.59 for the three months ended March 31, 2002, from $0.47 in the comparable prior year period.
  • 4The company announced a significant merger agreement with HNC Software Inc., valued at approximately $810 million, expected to close in Q4 FY2002.
  • 5The Consulting segment experienced robust revenue growth of 60% for the quarter, partly attributed to the acquisition of Nykamp.
  • 6Cash and cash equivalents significantly increased to $106.1 million as of March 31, 2002, from $24.6 million at September 30, 2001.
  • 7A three-for-two stock split was announced on April 22, 2002, to be effected as a stock dividend.

Frequently Asked Questions

Revenue growth was primarily driven by increased performance in the Scoring segment, particularly from risk and insurance scoring services, and the Consulting segment, boosted by the acquisition of Nykamp and increased consulting services related to specific products like MarketSmart. The Strategy Machine segment also contributed positively due to growth in MarketSmart and newer products.

The merger with HNC Software Inc. is a significant strategic development valued at approximately $810 million. It is expected to enhance the combined company's ability to offer a more comprehensive suite of solutions across various core markets such as financial services, retail, and insurance, while also opening new opportunities in government and healthcare. HNC stockholders are expected to own approximately 35% of the merged entity.

The company's cash position has improved significantly. Cash and cash equivalents increased from $24.6 million at September 30, 2001, to $106.1 million at March 31, 2002. This increase is attributed to strong operating cash inflows, proceeds from investment sales, and stock option exercises, partially offset by acquisitions and investment maturities.

While cost of revenues saw a slight increase due to outsourcing mainframe operations, and Research and Development expenses remained stable, Sales, General, and Administrative expenses as a percentage of revenue decreased. This reduction was primarily due to lower personnel and facility costs.