10-QPeriod: Q3 FY2016

FAIR ISAAC CORP Quarterly Report for Q3 Ended Jun 30, 2016

Filed July 28, 2016For Securities:FICO

Summary

Fair Isaac Corporation (FICO) reported solid financial performance for the quarter and nine months ended June 30, 2016. Total revenues increased by 14% and 7% respectively compared to the prior year periods, driven by growth across its Applications, Scores, and Tools segments. The company demonstrated improved profitability, with operating income rising significantly by 49% year-over-year for the quarter and 29% for the nine-month period, leading to a substantial increase in net income. This strong operational performance was supported by effective cost management and increased revenue from transactional and maintenance services. FICO also highlighted its commitment to shareholder value through a new $250 million stock repurchase program approved in July 2016. Liquidity remains strong with $118.2 million in cash and cash equivalents and an available $400 million revolving credit facility. The company is well-positioned to fund its operations and strategic initiatives, with a clear focus on its Decision Management strategy and continued investment in distribution capabilities.

Financial Highlights

52 data points
Beta

Revenue

$238.78M

72.2% Gross Margin

Net Income

$34.99M

14.7% Net Margin

EPS (Diluted)

$1.08

Total Assets

$1.23B

Cash & Equivalents

$118.16M

Free Cash Flow

$80.66M

Financial Statements
Beta
Revenue$238.78M
Cost of Revenue$66.38M
Gross Profit$172.39M
R&D Expenses$26.42M
SG&A Expenses$87.17M
Operating Expenses$183.46M
Operating Income$55.32M
Interest Expense$6.78M
Net Income$34.99M
EPS (Basic)$1.12
EPS (Diluted)$1.08
Shares Outstanding (Basic)31.15M
Shares Outstanding (Diluted)32.31M

Key Highlights

  • 1Total revenues increased by 14% to $238.8 million for the quarter and 7% to $645.5 million for the nine months ended June 30, 2016, compared to the prior year periods.
  • 2Operating income saw a significant increase of 49% to $55.3 million for the quarter and 29% to $124.7 million for the nine months, indicating improved operational efficiency and profitability.
  • 3Net income grew substantially, up 76% to $35.0 million for the quarter and 45% to $77.3 million for the nine months.
  • 4The company continues to invest in its growth initiatives, particularly in expanding and refining distribution capabilities, while also managing operating expenses effectively.
  • 5A new $250 million stock repurchase program was authorized in July 2016, demonstrating a commitment to returning value to shareholders.
  • 6Strong liquidity position with $118.2 million in cash and cash equivalents and an undrawn $400 million revolving line of credit.
  • 7Acquisition of QuadMetrics Inc. for $5.7 million to enhance cyber-related analytics solutions.

Frequently Asked Questions

Revenue growth was primarily driven by increases in transactional and maintenance services, as well as professional services and license revenues across all segments (Applications, Scores, and Tools). Specific segments like Applications saw growth from fraud and originations solutions, while Scores benefited from business-to-business scores and business-to-consumer services. The Tools segment experienced significant growth in license revenue, partly due to a large multi-year transaction.

FICO demonstrated effective expense management, notably a decrease in cost of revenues as a percentage of total revenues due to improved efficiency and higher-margin software sales. While Selling, General, and Administrative expenses increased as a percentage of revenues due to investments in distribution and marketing, the overall operational improvements led to a substantial increase in operating income (49% for the quarter) and operating margin.

FICO maintains a strong financial position with $118.2 million in cash and cash equivalents and has access to a $400 million revolving line of credit, of which $225 million was drawn as of June 30, 2016. The company anticipates these resources, along with anticipated cash flows from operations, will be sufficient to meet its working capital needs, including a $60 million debt principal payment due in July 2016.

The acquisition of QuadMetrics Inc. for $5.7 million in May 2016 is expected to accelerate FICO's efforts to provide a suite of complementary cyber-related analytics solutions to the market, enhancing their offerings in enterprise security assessment.