10-QPeriod: Q3 FY2013

FAIR ISAAC CORP Quarterly Report for Q3 Ended Jun 30, 2013

Filed July 30, 2013For Securities:FICO

Summary

Fair Isaac Corporation (FICO) reported its quarterly results for the period ending June 30, 2013. The company demonstrated revenue growth across its segments, with a notable increase in the Applications segment driven by acquisitions and its mobility solutions. Overall revenues for the quarter rose by 15% year-over-year, signaling positive momentum in the company's Decision Management strategy. While revenues saw a healthy increase, operating income for the quarter experienced a slight decrease primarily due to higher operating expenses, including increased amortization costs associated with recent acquisitions and higher research and development spending. The company also saw a decrease in net income for the quarter compared to the prior year. Despite these expense pressures, FICO maintained a strong cash position and continued its focus on strategic growth initiatives, including further acquisitions.

Financial Highlights

53 data points
Beta

Revenue

$183.77M

68.6% Gross Margin

Net Income

$19.62M

10.7% Net Margin

EPS (Diluted)

$0.54

Total Assets

$1.16B

Cash & Equivalents

$93.02M

Free Cash Flow

$27.91M

Financial Statements
Beta
Revenue$183.77M
Cost of Revenue$57.66M
Gross Profit$126.12M
R&D Expenses$18.57M
SG&A Expenses$68.67M
Operating Expenses$148.56M
Operating Income$35.21M
Interest Expense$7.43M
Net Income$19.62M
EPS (Basic)$0.55
EPS (Diluted)$0.54
Shares Outstanding (Basic)35.50M
Shares Outstanding (Diluted)36.38M

Key Highlights

  • 1Total revenues increased by 15% to $183.77 million for the quarter ended June 30, 2013, compared to $160.48 million in the prior year period.
  • 2The Applications segment showed robust growth of 17%, driven by acquisitions like Adeptra and CR Software, and increased revenue from mobility and fraud solutions.
  • 3Operating income for the quarter decreased by 5% to $35.21 million, impacted by a 20% increase in total operating expenses.
  • 4Net income for the quarter declined by 5% to $19.62 million ($0.54 per diluted share) from $20.75 million ($0.59 per diluted share) in the same period last year.
  • 5The company completed the acquisition of Infoglide Software, Inc. for $4.4 million in April 2013, adding entity resolution and social network analysis capabilities.
  • 6Cash and cash equivalents increased to $93.02 million as of June 30, 2013, from $71.61 million as of September 30, 2012, and the company had $30 million in borrowings outstanding under its $200 million revolving line of credit.
  • 7Stock repurchases continued, with $47.8 million spent on share buybacks during the nine months ended June 30, 2013, under an authorized program.

Frequently Asked Questions

The Applications segment revenue increased by 17% due to the impact of recent acquisitions, specifically Adeptra (acquired in September 2012) and CR Software (acquired in November 2012), which contributed to growth in mobility and collections & recovery solutions. Additionally, fraud solutions also saw an increase.

Net income decreased primarily due to higher operating expenses. Total operating expenses increased by 20% year-over-year for the quarter, driven by higher cost of revenues (due to integration of acquired businesses), increased research and development spending, and significantly higher amortization of intangible assets related to recent acquisitions. These increased costs outpaced the revenue growth, leading to a decrease in profitability.

FICO maintained a solid liquidity position with $93.02 million in cash and cash equivalents. The company has a $200 million unsecured revolving line of credit, of which $30 million was borrowed as of June 30, 2013. Debt principal payments were made on its Senior Notes, and the company continued to manage its capital structure through share repurchases and dividend payments, while remaining compliant with its debt covenants.

Management expects cost of revenues as a percentage of revenues to remain consistent or slightly decrease in the coming quarters. Similarly, research and development and selling, general, and administrative expenses as a percentage of revenues are expected to be consistent with or slightly lower than current levels. However, amortization expense is expected to be slightly lower than the quarter ended June 30, 2013, due to certain intangible assets becoming fully amortized.