10-QPeriod: Q2 FY2017

FAIR ISAAC CORP Quarterly Report for Q2 Ended Mar 31, 2017

Filed April 27, 2017For Securities:FICO

Summary

Fair Isaac Corporation (FICO) reported solid financial results for the quarter ended March 31, 2017, demonstrating continued revenue growth across its key segments and an improvement in profitability. Total revenues increased by 10% year-over-year, driven by strong performance in the Applications and Decision Management Software segments, with Scores also showing consistent growth. The company highlighted robust operational income growth, benefiting from increased revenues and effective cost management, though some segments saw increased operating expenses due to strategic investments in sales, product delivery, and infrastructure. FICO also continued to return value to shareholders through its share repurchase program, indicating a commitment to enhancing shareholder returns. The company maintains a strong liquidity position and adequate capital resources to fund its operations and obligations.

Financial Highlights

51 data points
Beta

Revenue

$228.38M

68.4% Gross Margin

Net Income

$25.08M

11.0% Net Margin

EPS (Diluted)

$0.78

Total Assets

$1.25B

Cash & Equivalents

$115.85M

Free Cash Flow

$61.13M

Financial Statements
Beta
Revenue$228.38M
Cost of Revenue$72.13M
Gross Profit$156.25M
R&D Expenses$26.66M
SG&A Expenses$86.23M
Operating Expenses$188.34M
Operating Income$40.04M
Interest Expense$6.58M
Net Income$25.08M
EPS (Basic)$0.81
EPS (Diluted)$0.78
Shares Outstanding (Basic)31.02M
Shares Outstanding (Diluted)32.26M

Key Highlights

  • 1Total revenues increased by 10% to $228.4 million for the quarter ended March 31, 2017, compared to $206.7 million in the prior year period.
  • 2Operating income grew by 4% to $40.0 million, reflecting improved revenue generation and segment performance.
  • 3The Scores segment revenue increased by 7% to $65.4 million, driven by growth in both B2C and B2B offerings.
  • 4Applications segment revenue saw a significant 10% increase to $134.3 million, boosted by fraud and originations solutions.
  • 5Decision Management Software segment revenue surged by 21% to $28.6 million, primarily due to license and services revenue.
  • 6The company repurchased approximately 0.3 million shares for $44.2 million during the quarter, demonstrating a commitment to shareholder returns.
  • 7FICO ended the quarter with $115.8 million in cash and cash equivalents, indicating a healthy liquidity position.

Frequently Asked Questions

Revenue growth was primarily driven by strong performance across all three segments. The Applications segment saw a 10% increase, fueled by fraud and originations solutions, particularly license revenue from a large multi-year transaction. The Scores segment grew by 7%, supported by increases in business-to-consumer services and business-to-business scores. The Decision Management Software segment experienced a significant 21% revenue increase, largely due to license revenue for FICO® Blaze Advisor® and services revenue for FICO® Decision Optimizer.

While revenues grew, operating expenses also increased, primarily in cost of revenues (up 16%) and selling, general, and administrative expenses (up 11%). These increases were attributed to investments in personnel, product delivery, support, infrastructure, and sales distribution. Despite higher expenses, operating income still grew by 4% due to the substantial revenue increase, and net income saw a significant 9% rise, partly due to the favorable impact of adopting ASU 2016-09 on income tax benefits.

FICO continues to return capital to shareholders through its stock repurchase program. During the quarter ended March 31, 2017, the company repurchased approximately 0.3 million shares for $44.2 million. As of March 31, 2017, there was $155.4 million remaining under its open-ended $250 million repurchase program approved in July 2016.

FICO ended the quarter with a strong liquidity position, holding $115.8 million in cash and cash equivalents, with a significant portion held by foreign subsidiaries. The company believes these balances, combined with its $400 million revolving line of credit and anticipated operating cash flows, are sufficient to meet its working capital needs and upcoming debt obligations. Management anticipates that cost of revenues, R&D, and SG&A expenses as a percentage of revenues will remain consistent in the near future.