10-QPeriod: Q3 FY2017

FAIR ISAAC CORP Quarterly Report for Q3 Ended Jun 30, 2017

Filed July 31, 2017For Securities:FICO

Summary

Fair Isaac Corporation (FICO) reported its second-quarter 2017 financial results, showcasing resilience in its core business segments despite an overall revenue decrease. Total revenues for the quarter ended June 30, 2017, were $231.0 million, a 3% decrease from $238.8 million in the prior year's quarter, primarily driven by a decline in the Applications and Decision Management Software segments. However, the Scores segment demonstrated robust growth, with revenues increasing by 14% year-over-year to $69.5 million, highlighting the sustained demand for FICO's credit scoring solutions. Net income for the quarter was $25.2 million, a decrease from $35.0 million in the same period last year, resulting in diluted earnings per share of $0.78 compared to $1.08. This decrease was influenced by increased costs in certain segments and a one-time charge related to restructuring. The company also announced a shift in capital allocation strategy, discontinuing cash dividends in favor of increased share repurchases, and as of June 30, 2017, had $109.5 million remaining under its stock repurchase program. FICO's liquidity remains strong, with substantial cash and cash equivalents and an expanded revolving line of credit.

Financial Highlights

52 data points
Beta

Revenue

$230.99M

69.8% Gross Margin

Net Income

$25.23M

10.9% Net Margin

EPS (Diluted)

$0.78

Total Assets

$1.26B

Cash & Equivalents

$94.21M

Free Cash Flow

$66.84M

Financial Statements
Beta
Revenue$230.99M
Cost of Revenue$69.79M
Gross Profit$161.19M
R&D Expenses$27.84M
SG&A Expenses$84.09M
Operating Expenses$189.56M
Operating Income$41.43M
Interest Expense$6.65M
Net Income$25.23M
EPS (Basic)$0.82
EPS (Diluted)$0.78
Shares Outstanding (Basic)30.91M
Shares Outstanding (Diluted)32.22M

Key Highlights

  • 1Total revenues decreased by 3% to $231.0 million for the quarter ended June 30, 2017.
  • 2The Scores segment showed strong performance with a 14% increase in revenue to $69.5 million.
  • 3Net income decreased to $25.2 million, with diluted EPS at $0.78.
  • 4The company incurred $4.5 million in restructuring and acquisition-related charges.
  • 5FICO discontinued cash dividend payments to focus on share repurchases, with $109.5 million remaining under the authorization.
  • 6Cash and cash equivalents stood at $130.7 million as of June 30, 2017.
  • 7The company amended its credit agreement, increasing its revolving line of credit to $500 million.

Frequently Asked Questions

The overall revenue decline of 3% was primarily driven by decreases in the Applications segment (down 5%) and the Decision Management Software segment (down 23%). This was largely due to lower license revenue, particularly in Applications, influenced by large multi-year license transactions in the prior year's comparable quarter for fraud solutions, and a decrease in license revenue for the FICO® Blaze Advisor® product in Decision Management Software.

The Scores segment demonstrated strong performance, with revenue increasing by 14% year-over-year to $69.5 million. This growth was attributed to a $5.0 million increase in business-to-business scores, driven by transactional scores related to new originations, prescreen, and account management, and a $3.4 million increase in business-to-consumer services, primarily from royalties derived from scores sold indirectly through credit reporting agencies.

In May 2017, FICO's Board of Directors decided to discontinue cash dividend payments to prioritize the use of excess cash flow for share repurchases. As of June 30, 2017, the company had $109.5 million remaining under its authorized stock repurchase program, and during the nine months ended June 30, 2017, it repurchased approximately 0.9 million shares for $120.5 million.

FICO maintains a strong liquidity position with $130.7 million in cash and cash equivalents as of June 30, 2017. Additionally, the company has access to a $500 million unsecured revolving line of credit (with an option to increase by $100 million), of which $296.0 million was outstanding at the end of the quarter. The company believes these resources are sufficient to fund its working capital requirements and upcoming debt principal payments.