10-QPeriod: Q2 FY2018

FAIR ISAAC CORP Quarterly Report for Q2 Ended Mar 31, 2018

Filed April 26, 2018For Securities:FICO

Summary

Fair Isaac Corporation (FICO) reported solid financial results for the quarter and six months ended March 31, 2018. Total revenues saw a significant increase, driven primarily by strong performance in the Scores segment and continued growth in cloud-based offerings within the Applications and Decision Management Software segments. The company demonstrated robust operating income growth, although net income for the six-month period saw a slight decrease year-over-year, largely due to the impact of the Tax Cuts and Jobs Act. FICO continues to prioritize returning capital to shareholders through its stock repurchase program. Operationally, the company's strategic focus on Decision Management (DM) is progressing, with an increasing emphasis on cloud-first strategies. The Scores segment, in particular, showed substantial revenue and operating income growth. Despite some revenue declines in the Decision Management Software segment, overall revenue growth was positive. FICO's financial position remains strong, supported by healthy cash flows from operations and a substantial revolving credit facility, enabling the company to meet its liquidity needs and pursue strategic initiatives.

Financial Highlights

51 data points
Beta

Revenue

$256.26M

69.0% Gross Margin

Net Income

$31.17M

12.2% Net Margin

EPS (Diluted)

$1.00

Total Assets

$1.29B

Cash & Equivalents

$107.87M

Free Cash Flow

$42.17M

Financial Statements
Beta
Revenue$256.26M
Cost of Revenue$79.49M
Gross Profit$176.77M
R&D Expenses$32.52M
SG&A Expenses$96.13M
Operating Expenses$209.82M
Operating Income$46.44M
Interest Expense$7.12M
Net Income$31.17M
EPS (Basic)$1.04
EPS (Diluted)$1.00
Shares Outstanding (Basic)29.98M
Shares Outstanding (Diluted)31.30M

Key Highlights

  • 1Total revenues increased by 13% year-over-year for the quarter and 10% for the six-month period, reaching $257.9 million and $493.2 million, respectively.
  • 2The Scores segment was a key growth driver, with revenues up 34% year-over-year for the quarter and 26% for the six-month period.
  • 3Operating income grew by 20% for the quarter and 17% for the six months, demonstrating strong operational leverage.
  • 4Net income for the six months ended March 31, 2018, decreased by 5% to $59.6 million, primarily due to the tax impact of the Tax Cuts and Jobs Act.
  • 5The company repurchased approximately $75.0 million and $124.6 million of common stock during the quarter and six months ended March 31, 2018, respectively.
  • 6Cloud revenues continued to grow, accounting for 24% of total revenues in both the quarter and six-month periods, up from 22% in the prior year.
  • 7The company maintained compliance with all financial covenants under its $600 million revolving line of credit and its senior notes.

Frequently Asked Questions

The primary driver of revenue growth was the significant increase in the Scores segment, which saw revenues rise by 34% year-over-year for the quarter and 26% for the six-month period. Continued growth in cloud-based offerings across other segments also contributed positively.

The Tax Cuts and Jobs Act, enacted in December 2017, significantly impacted the six-month period's net income. FICO recorded provisional charges for the re-measurement of deferred tax assets and a provisional charge for the deemed repatriation transition tax, which led to a decrease in net income compared to the prior year, despite an increase in operating income.

FICO continues to return capital to shareholders through its stock repurchase program. In the quarter ended March 31, 2018, the company repurchased approximately $75.0 million of its common stock, and for the six-month period, repurchased approximately $124.6 million.

FICO has sufficient liquidity, with $107.9 million in cash and cash equivalents and an available $600 million revolving line of credit. The company expects these resources, along with anticipated cash flows from operations, to be sufficient to fund its working capital requirements and upcoming debt obligations, including a $131.0 million principal payment due in May 2018.