10-QPeriod: Q3 FY2012

FAIR ISAAC CORP Quarterly Report for Q3 Ended Jun 30, 2012

Filed July 30, 2012For Securities:FICO

Summary

Fair Isaac Corporation (FICO) reported total revenues of $160.5 million for the quarter ended June 30, 2012, a 7% increase from $150.7 million in the same quarter of the prior year. This growth was primarily driven by a strong performance in the Applications segment, which saw a 7% revenue increase, fueled by significant growth in license revenue. The Scores segment remained relatively flat, while the Tools segment experienced a robust 20% revenue increase. Net income for the quarter was $20.7 million, a decrease from $23.2 million in the prior year's quarter, impacting diluted EPS to $0.59 from $0.58. For the nine months ended June 30, 2012, total revenues increased by 7% to $490.3 million, compared to $459.4 million in the prior year. The Applications segment continued to be a key driver, with a 7% increase driven by large multi-year license transactions. The Scores segment saw a modest 4% increase, while the Tools segment grew by 13%. Net income for the nine-month period significantly increased to $70.8 million from $46.9 million in the prior year. The company also highlighted strategic growth initiatives, including the acquisition of Entiera Inc. in May 2012, aimed at strengthening its marketing solutions.

Financial Highlights

54 data points
Beta

Revenue

$160.48M

70.2% Gross Margin

Net Income

$20.75M

12.9% Net Margin

EPS (Diluted)

$0.59

Total Assets

$1.07B

Cash & Equivalents

$118.68M

Free Cash Flow

$16.68M

Financial Statements
Beta
Revenue$160.48M
Cost of Revenue$47.83M
Gross Profit$112.65M
R&D Expenses$14.89M
SG&A Expenses$59.12M
Operating Expenses$123.31M
Operating Income$37.17M
Interest Expense$7.91M
Net Income$20.75M
EPS (Basic)$0.61
EPS (Diluted)$0.59
Shares Outstanding (Basic)34.00M
Shares Outstanding (Diluted)35.29M

Key Highlights

  • 1Total revenues for the quarter increased by 7% to $160.5 million, driven by the Applications and Tools segments.
  • 2The Applications segment showed strong revenue growth of 7%, with license revenue seeing a significant 131% increase year-over-year for the quarter.
  • 3Net income decreased by 11% to $20.7 million for the quarter, impacting diluted EPS to $0.59.
  • 4For the nine months ended June 30, 2012, total revenues grew 7% to $490.3 million, with a substantial 51% increase in net income to $70.8 million.
  • 5FICO acquired Entiera Inc. in May 2012 to enhance its marketing solutions, integrating it into the Applications segment.
  • 6The company maintained a strong operating cash flow of $106.4 million for the nine months ended June 30, 2012.
  • 7FICO continued its share repurchase program, with $191.1 million in repurchases for the nine-month period, alongside a consistent quarterly dividend of $0.02 per share.

Frequently Asked Questions

The primary driver of revenue growth was the Applications segment, which saw a 7% increase. This was significantly boosted by a 131% surge in license revenue compared to the prior year's quarter, alongside growth in transactional, maintenance, and professional services revenue.

The acquisition of Entiera Inc. in May 2012 was a strategic move to enhance marketing solutions. While the pro forma impact was not deemed material to the results presented, it contributed $14.9 million in goodwill and $2.5 million in identifiable intangible assets, and has been included in operating results since its acquisition date.

Net income decreased by 11% to $20.7 million due to several factors including higher cost of revenues (up 10% due to increased third-party software and data costs, and travel), increased selling, general, and administrative expenses (up 10% driven by labor and personnel costs), and a higher effective tax rate (31.4% vs. 27.4% in the prior year quarter) due to factors like the expiration of federal R&D credits and foreign tax holidays.

FICO reported $155.7 million in cash, cash equivalents, and marketable securities as of June 30, 2012. The company believes these resources, along with anticipated cash flows from operations and its $200 million revolving line of credit, will be sufficient to fund working capital, operating requirements, and the $49.0 million principal payment due in May 2013 on its Senior Notes. There are no other significant debt obligations maturing in the next twelve months.