10-QPeriod: Q2 FY2003

FAIR ISAAC CORP Quarterly Report for Q2 Ended Mar 31, 2003

Filed April 25, 2003For Securities:FICO

Summary

Fair Isaac Corporation (FICO) reported a strong performance for the quarter and six months ended March 31, 2003. Total revenues more than doubled year-over-year, driven significantly by the acquisition of HNC Software Inc. in August 2002, which bolstered the Strategy Machine Solutions segment. The company also saw positive contributions from its Scoring Solutions segment. Net income also experienced a substantial increase, reflecting the successful integration and revenue growth. Despite increased operating expenses, largely due to the HNC acquisition and investments in research and development, FICO demonstrated improved operating leverage. The company's liquidity remains strong, with significant cash and marketable securities, supported by healthy operating cash flows. The significant stock repurchase program completed in March 2003 indicates a commitment to shareholder returns, alongside consistent dividend payments. Overall, the filing highlights a period of substantial growth and operational improvement for Fair Isaac.

Key Highlights

  • 1Total revenues surged by 82% year-over-year to $158.6 million for the quarter ended March 31, 2003, and by 77% to $305.3 million for the six months.
  • 2Net income increased by 81% year-over-year to $25.6 million for the quarter and by 64% to $45.4 million for the six months.
  • 3The Strategy Machine Solutions segment saw exceptional revenue growth of 154% for the quarter and 133% for the six months, largely due to the HNC acquisition.
  • 4Operating income grew by 96% year-over-year to $41.7 million for the quarter, showcasing improved profitability.
  • 5The company completed a significant stock repurchase program, buying back approximately 4.9 million shares for $222.0 million during the six months.
  • 6Cash and cash equivalents and marketable securities totaled $293.8 million at March 31, 2003, indicating a strong liquidity position.
  • 7The company adopted SFAS No. 142, ceasing amortization of goodwill and indefinite-lived intangible assets, impacting reported amortization expenses.

Frequently Asked Questions

The primary driver of the substantial revenue and income growth was the acquisition of HNC Software Inc. in August 2002. This acquisition significantly expanded the company's product offerings and market reach, particularly within the Strategy Machine Solutions segment.

The HNC acquisition led to an increase in operating expenses, notably in cost of revenues, research and development, and selling, general, and administrative expenses. Amortization of intangibles also increased due to the acquisition. However, the company's revenue growth outpaced expense growth, leading to improved operating income.

Fair Isaac demonstrated a commitment to shareholder returns through a significant stock repurchase program, completing the buyback of approximately 4.9 million shares for $222.0 million during the six months ended March 31, 2003. The company also continued to pay quarterly dividends.

The adoption of SFAS No. 142 on October 1, 2002, resulted in the cessation of amortization for goodwill and indefinite-lived intangible assets. This change affected the reported amortization expense and required the company to perform annual impairment testing for these assets.