10-QPeriod: Q3 FY2018

FAIR ISAAC CORP Quarterly Report for Q3 Ended Jun 30, 2018

Filed July 26, 2018For Securities:FICO

Summary

Fair Isaac Corporation (FICO) reported a strong third quarter for fiscal year 2018, with total revenues increasing by 12% year-over-year to $259.5 million. This growth was primarily driven by a significant 32% increase in the Scores segment, highlighting the continued demand for FICO's credit scoring solutions. The Applications segment also showed steady growth of 6%, contributing to an overall robust performance. Net income rose by 28% to $32.4 million, demonstrating effective operational management and the positive impact of revenue growth. The company also highlighted its ongoing commitment to returning value to shareholders through its stock repurchase program. Financially, FICO maintained a healthy liquidity position with $119.9 million in cash and cash equivalents and an undrawn portion of its revolving credit facility. The company successfully issued $400 million in senior notes in May 2018, which were used to repay existing debt and bolster its capital structure. While the company continues to invest in research and development and its cloud-first strategy, it also managed operating expenses effectively, with cost of revenues and SG&A growing at a pace generally in line with revenue increases. Overall, FICO demonstrated solid financial performance and strategic execution during the quarter.

Financial Highlights

51 data points
Beta

Revenue

$254.99M

69.0% Gross Margin

Net Income

$29.72M

11.7% Net Margin

EPS (Diluted)

$0.95

Total Assets

$1.29B

Cash & Equivalents

$119.93M

Free Cash Flow

$71.97M

Financial Statements
Beta
Revenue$254.99M
Cost of Revenue$79.01M
Gross Profit$175.98M
R&D Expenses$32.48M
SG&A Expenses$97.39M
Operating Expenses$210.46M
Operating Income$44.54M
Interest Expense$8.22M
Net Income$29.72M
EPS (Basic)$1.00
EPS (Diluted)$0.95
Shares Outstanding (Basic)29.71M
Shares Outstanding (Diluted)31.16M

Key Highlights

  • 1Total revenues increased 12% year-over-year to $259.5 million in Q3 FY18.
  • 2The Scores segment was a key growth driver, with revenues up 32% year-over-year.
  • 3Net income saw a significant increase of 28% to $32.4 million.
  • 4The company repurchased $106.9 million of common stock during the quarter.
  • 5Cash and cash equivalents stood at $119.9 million as of June 30, 2018.
  • 6FICO issued $400 million in senior notes to refinance existing debt and support corporate purposes.
  • 7Cloud revenues represented 35% of non-Scores revenues, reflecting progress in the cloud-first strategy.

Frequently Asked Questions

Revenue growth was primarily driven by a substantial 32% increase in the Scores segment, which benefited from strong demand for business-to-business and business-to-consumer scores. The Applications segment also contributed positively with a 6% increase in revenue, reflecting growth in various solutions like compliance and originations.

FICO successfully issued $400 million in senior notes in May 2018, using the proceeds to repay existing debt, including the 2008 Senior Notes, and reduce its revolving credit facility balance. As of June 30, 2018, the company had $119.9 million in cash and cash equivalents and remained in compliance with its debt covenants, indicating a healthy liquidity position.

The 'cloud-first' strategy indicates FICO's focus on delivering its products and services through cloud-based solutions. During Q3 FY18, cloud revenues accounted for 35% of non-Scores revenues, demonstrating a growing adoption and contribution of these offerings to the company's overall business, which is expected to drive future growth.

FICO continues to actively return capital to shareholders through its stock repurchase program. During the quarter ended June 30, 2018, the company repurchased approximately 0.6 million shares for a total of $106.9 million. A new open-ended stock repurchase program of up to $250.0 million was approved in July 2018.