10-QPeriod: Q1 FY2003

FAIR ISAAC CORP Quarterly Report for Q1 Ended Dec 31, 2002

Filed February 12, 2003For Securities:FICO

Summary

Fair Isaac Corporation (FICO) reported its financial results for the quarter ended December 31, 2002. The company saw a significant increase in revenues compared to the prior year, driven by the recent acquisition of HNC Software Inc. and other strategic acquisitions. Net income also grew substantially, leading to an increase in diluted earnings per share. Despite a decrease in cash and cash equivalents, the company's balance sheet remains robust with substantial investments in marketable securities and significant goodwill from acquisitions. FICO's management has also been active in repurchasing its own stock. The company is focused on integrating recent acquisitions and leveraging its expanded product and service offerings to drive future growth in its core markets.

Key Highlights

  • 1Revenue surged to $146.7 million in Q4 2002 from $85.1 million in Q4 2001, largely due to the HNC acquisition.
  • 2Net income rose to $19.8 million ($0.38 diluted EPS) from $13.5 million ($0.38 diluted EPS) in the prior year's quarter, though the EPS was flat due to increased share count.
  • 3The company completed the acquisition of Spectrum Managed Care's medical bill review business on December 31, 2002.
  • 4Goodwill increased to $428.3 million as of December 31, 2002, primarily from the HNC acquisition and a smaller acquisition, offset by product line dispositions.
  • 5Total stockholders' equity decreased to $936.6 million from $973.5 million, significantly impacted by large share repurchases totaling $76 million during the quarter.
  • 6Cash and cash equivalents decreased by approximately $37 million sequentially, ending the quarter at $59.8 million, while marketable securities increased.
  • 7The company is in the process of assessing goodwill impairment following the adoption of SFAS No. 142, with potential impacts not yet determined.

Frequently Asked Questions

The primary driver of the substantial revenue increase was the acquisition of HNC Software Inc., which was completed in August 2002. The results of HNC have been included in the consolidated financial statements prospectively from that date.

Fair Isaac adopted SFAS No. 142 and is currently assessing goodwill for impairment. As of December 31, 2002, goodwill stood at $428.3 million, largely reflecting acquisitions. The company has not yet completed its goodwill impairment test and therefore cannot determine the potential impact on its financial results.

Cash and cash equivalents decreased by $37 million sequentially, from $96.8 million to $59.8 million. This decrease was largely due to significant share repurchases totaling $76 million during the quarter, partially offset by cash generated from operating activities.

Following the HNC acquisition, Fair Isaac reorganized into four reportable segments: Scoring Solutions, Strategy Machine™ Solutions, Professional Services, and Analytic Software Tools. These segments are evaluated based on revenues and operating income by management.