10-QPeriod: Q2 FY2009

FAIR ISAAC CORP Quarterly Report for Q2 Ended Mar 31, 2009

Filed May 7, 2009For Securities:FICO

Summary

Fair Isaac Corporation (FICO) reported its financial results for the quarter and six months ended March 31, 2009. The company experienced a notable decline in revenues across most of its segments, attributed to the challenging global economic environment impacting its customers, particularly financial institutions. Despite revenue pressures, FICO has focused on cost management and reengineering efforts, leading to a reduction in operating expenses and a slight increase in operating income for the quarter. The company's liquidity remains strong, supported by cash reserves and an available credit facility, though debt levels are significant. Key challenges include ongoing economic uncertainty, reduced customer investment in technology, and competitive pressures in its core markets. FICO's strategy involves continued investment in Decision Management solutions while managing costs through its reengineering plan. Investors should monitor the company's ability to navigate the difficult economic landscape, adapt to evolving market demands, and execute its strategic initiatives to drive future growth.

Key Highlights

  • 1Total revenues decreased by 18% to $159.3 million for the quarter ended March 31, 2009, compared to the prior year period, reflecting broad-based weakness across segments.
  • 2Operating income increased by 7% to $30.4 million for the quarter, driven by a 22% reduction in total operating expenses due to cost-cutting measures and restructuring efforts.
  • 3Cash and cash equivalents increased significantly to $201.3 million at March 31, 2009, from $129.7 million at September 30, 2008, indicating strong cash generation from operations.
  • 4The company reported $295 million in borrowings under its $600 million unsecured revolving credit facility, indicating substantial debt utilization.
  • 5Restructuring charges were $0.9 million for the quarter, a significant decrease from $6.1 million in the prior year, as reengineering efforts progressed.
  • 6The "Scoring Solutions" segment saw a revenue decline of 21% year-over-year, impacted by reduced new account acquisition activities by financial institutions.
  • 7FICO's "Strategy Machine Solutions" segment showed resilience with an increase in operating income, despite a revenue decrease, due to effective cost management.

Frequently Asked Questions

FICO's total revenues decreased by 18% to $159.3 million for the quarter ended March 31, 2009, compared to $193.2 million for the same period in the prior year. This decline was observed across most of its operating segments, notably "Strategy Machine Solutions" and "Scoring Solutions," primarily due to the challenging global economic environment affecting customer spending.

FICO's cash and cash equivalents significantly increased to $201.3 million as of March 31, 2009, up from $129.7 million at September 30, 2008. This improvement was driven by strong cash flow from operations. However, the company also has substantial debt, with $295 million outstanding under its $600 million revolving credit facility and $275 million in Senior Notes, indicating a significant leverage position.

FICO's reengineering plan, aimed at cost reduction, has led to a significant decrease in operating expenses. For the quarter ended March 31, 2009, total operating expenses decreased by 22% year-over-year. This cost control, combined with a decrease in restructuring charges to $0.9 million from $6.1 million in the prior year, helped boost operating income by 7% to $30.4 million, despite the revenue decline.

FICO faces significant risks due to the ongoing global economic downturn, which impacts its customers, particularly financial institutions. This leads to reduced technology investments, consolidation among clients, and decreased demand for services like credit scoring and new account acquisition. Additionally, competitive pressures and evolving technologies in the analytics industry pose ongoing challenges.