10-QPeriod: Q3 FY2003

FAIR ISAAC CORP Quarterly Report for Q3 Ended Jun 30, 2003

Filed July 25, 2003For Securities:FICO

Summary

Fair Isaac Corporation (FICO) reported a significant increase in revenues and net income for the nine months ended June 30, 2003, compared to the same period in the prior year. This growth was largely driven by the acquisition of HNC Software Inc. in August 2002, which substantially boosted the Strategy Machine Solutions segment. The company's revenue more than doubled, and net income saw a substantial rise, demonstrating strong post-acquisition performance and integration. The company also continued its share repurchase program and maintained a solid cash position, indicating a focus on returning value to shareholders while managing its operational growth effectively. Key financial metrics show robust performance, with total revenues increasing by 78% year-over-year for the nine-month period and operating income more than doubling. Despite increased operating expenses, including higher amortization due to acquisitions, the company managed to improve its net income margin. Fair Isaac appears to be successfully integrating its acquisitions and leveraging its expanded product portfolio to drive growth across its various business segments, positioning itself for continued expansion in the enterprise decision management space.

Key Highlights

  • 1Total revenues increased by 78% to $468.3 million for the nine months ended June 30, 2003, compared to $263.1 million for the same period in 2002, primarily driven by the HNC acquisition.
  • 2Net income more than doubled to $75.5 million for the nine months ended June 30, 2003, from $42.1 million in the prior year period.
  • 3The Strategy Machine Solutions segment saw revenue growth of 137% for the nine months ended June 30, 2003, largely due to the inclusion of HNC's products and services.
  • 4Diluted earnings per share increased to $1.48 for the nine months ended June 30, 2003, from $1.17 in the prior year period.
  • 5The company repurchased $222.0 million of common stock during the nine months ended June 30, 2003, as part of its ongoing share repurchase program.
  • 6Cash and cash equivalents increased to $136.1 million as of June 30, 2003, from $96.8 million as of September 30, 2002, indicating a healthy liquidity position.

Frequently Asked Questions

The primary driver of the significant revenue growth was the acquisition of HNC Software Inc., which was completed in August 2002. This acquisition substantially expanded Fair Isaac's product offerings and market reach, particularly within the Strategy Machine Solutions segment.

The acquisition of HNC has positively impacted profitability, leading to a substantial increase in net income and earnings per share for the nine months ended June 30, 2003. Despite increased operating expenses such as amortization related to the acquisition, the company's improved revenue streams and operational efficiencies have driven overall profit growth.

Fair Isaac is actively returning capital to shareholders through its share repurchase program. During the nine months ended June 30, 2003, the company repurchased $222.0 million of its common stock. The company also continued to pay quarterly dividends.

Fair Isaac manages interest rate risk through its investment portfolio, primarily holding available-for-sale securities with relatively short maturities, which mitigates the impact of interest rate fluctuations. For foreign currency exposure, the company uses forward contracts with maturity periods of less than six months to hedge foreign currency receivables and balances, aiming to mitigate exchange rate risks.