10-QPeriod: Q1 FY2017

FAIR ISAAC CORP Quarterly Report for Q1 Ended Dec 31, 2016

Filed January 31, 2017For Securities:FICO

Summary

Fair Isaac Corporation (FICO) reported solid financial results for the quarter ending December 31, 2016. Total revenues increased by 10% year-over-year to $219.6 million, driven by strong performance in the Applications and Scores segments. The company demonstrated robust profitability, with net income more than doubling to $37.9 million, largely due to the adoption of a new accounting standard for share-based payments which reduced income tax expense. FICO continues to return value to shareholders through its stock repurchase program, repurchasing $30.4 million in shares during the quarter, with $199.6 million remaining under its authorization. The company's operating income also saw a healthy increase of 13% to $34.9 million. While the Decision Management Software segment experienced an operating loss, this was attributed to increased investments in sales, distribution, and cloud infrastructure. FICO maintains a strong liquidity position with $88.1 million in cash and cash equivalents and an undrawn portion of its revolving credit facility, enabling it to meet its financial obligations, including an upcoming senior note principal payment.

Financial Highlights

51 data points
Beta

Revenue

$219.60M

68.1% Gross Margin

Net Income

$37.90M

17.3% Net Margin

EPS (Diluted)

$1.16

Total Assets

$1.22B

Cash & Equivalents

$88.10M

Free Cash Flow

$28.66M

Financial Statements
Beta
Revenue$219.60M
Cost of Revenue$70.00M
Gross Profit$149.60M
R&D Expenses$26.14M
SG&A Expenses$85.21M
Operating Expenses$184.67M
Operating Income$34.93M
Interest Expense$6.17M
Net Income$37.90M
EPS (Basic)$1.22
EPS (Diluted)$1.16
Shares Outstanding (Basic)30.99M
Shares Outstanding (Diluted)32.54M

Key Highlights

  • 1Total revenues grew 10% year-over-year to $219.6 million, driven by the Applications and Scores segments.
  • 2Net income significantly increased by 97% to $37.9 million, benefiting from a $17.3 million tax benefit related to the adoption of ASU 2016-09.
  • 3Operating income increased by 13% to $34.9 million, reflecting improved operational performance.
  • 4The company repurchased $30.4 million of its common stock during the quarter, demonstrating a commitment to shareholder returns.
  • 5FICO's liquidity remains strong with $88.1 million in cash and cash equivalents and an available revolving credit facility.
  • 6The company's core banking and credit-related businesses continue to be a significant revenue driver, with 74% of revenue derived from this industry.
  • 7Bookings increased by 21% year-over-year, indicating positive future revenue potential.

Frequently Asked Questions

The primary driver for the substantial increase in net income was the adoption of ASU 2016-09, an accounting standard for share-based payments. This adoption resulted in a $17.3 million tax benefit recognized as a reduction of income tax expense, significantly boosting net income.

The Applications segment saw a 12% revenue increase, driven by fraud and origination solutions. The Scores segment experienced a 6% revenue increase, fueled by business-to-business and business-to-consumer scores. The Decision Management Software segment's revenue grew 6%, but it incurred an increased operating loss due to investments in sales, distribution, and cloud infrastructure.

FICO maintains a strong financial position with $88.1 million in cash and cash equivalents as of December 31, 2016. They also have access to a $400 million revolving line of credit, of which $305 million was outstanding. The company believes these resources are sufficient to fund operations and upcoming debt obligations.

FICO expects cost of revenues as a percentage of revenues to remain consistent or be slightly higher than the current quarter. Research and development, and selling, general, and administrative expenses are expected to remain consistent as a percentage of revenues. Net interest expense is expected to be consistent with or lower than the current quarter due to an upcoming principal payment on senior notes.