10-QPeriod: Q2 FY2015

FAIR ISAAC CORP Quarterly Report for Q2 Ended Mar 31, 2015

Filed April 27, 2015For Securities:FICO

Summary

Fair Isaac Corporation (FICO) reported solid revenue growth for the quarter ended March 31, 2015, with total revenues increasing by 12% year-over-year to $207.1 million. This growth was primarily driven by strong performance in the Applications segment, which saw a significant 16% increase in revenue, largely attributed to multi-year license transactions in fraud solutions and contributions from the recent acquisition of TONBELLER. The company also saw an increase in its Scores segment, buoyed by a new agreement with Experian. Despite revenue growth, net income for the quarter decreased by 9% to $18.9 million, or $0.58 per diluted share, compared to the prior year's quarter. This decline was influenced by higher operating expenses, particularly a 22% increase in cost of revenues and a 24% rise in research and development expenses, reflecting continued investment in cloud computing, SaaS, and new product development. The company also repurchased a substantial amount of its stock during the period, indicating a commitment to shareholder returns.

Financial Highlights

52 data points
Beta

Revenue

$207.11M

65.7% Gross Margin

Net Income

$18.87M

9.1% Net Margin

EPS (Diluted)

$0.58

Total Assets

$1.24B

Cash & Equivalents

$86.84M

Free Cash Flow

$37.34M

Financial Statements
Beta
Revenue$207.11M
Cost of Revenue$70.99M
Gross Profit$136.12M
R&D Expenses$24.34M
SG&A Expenses$73.86M
Operating Expenses$172.71M
Operating Income$34.40M
Interest Expense$7.72M
Net Income$18.87M
EPS (Basic)$0.60
EPS (Diluted)$0.58
Shares Outstanding (Basic)31.34M
Shares Outstanding (Diluted)32.45M

Key Highlights

  • 1Total revenues increased 12% to $207.1 million for the quarter ended March 31, 2015, compared to the prior year.
  • 2The Applications segment was the primary revenue driver, with a 16% increase to $134.4 million, boosted by fraud solutions and the TONBELLER acquisition.
  • 3Net income for the quarter decreased by 9% to $18.9 million, primarily due to increased operating expenses.
  • 4Cost of revenues increased by 22% to $71.0 million, and R&D expenses rose by 24% to $24.3 million.
  • 5FICO repurchased approximately $100.7 million of its common stock during the six months ended March 31, 2015, demonstrating a commitment to shareholder value.
  • 6The company acquired TONBELLER Aktiengesellschaft for $59.6 million in January 2015, strengthening its financial crime and compliance solutions portfolio.
  • 7The company maintained compliance with all financial covenants under its revolving credit facility and senior notes.

Frequently Asked Questions

Revenue growth was primarily driven by the Applications segment, which experienced a 16% increase due to strong performance in fraud solutions from multi-year license transactions and contributions from the recent acquisition of TONBELLER. The Scores segment also saw growth, partly due to a new agreement with Experian that made FICO® Scores available to consumers.

Net income for the quarter decreased by 9% due to higher operating expenses. Specifically, cost of revenues increased by 22% and research and development expenses rose by 24%. These increases reflect ongoing investments in cloud computing, SaaS, and new product development, as well as increased personnel and outside services costs.

The acquisition of TONBELLER, completed in January 2015 for $59.6 million, contributed to revenue growth in the Applications segment, specifically in compliance solutions. It also led to an increase in amortization expense due to the recognition of new intangible assets.

FICO is actively repurchasing its common stock. During the six months ended March 31, 2015, the company repurchased approximately $100.7 million of its stock under an open-ended program, indicating a focus on enhancing shareholder value.