10-QPeriod: Q1 FY2019

FAIR ISAAC CORP Quarterly Report for Q1 Ended Dec 31, 2018

Filed January 30, 2019For Securities:FICO

Summary

Fair Isaac Corporation (FICO) reported solid financial results for the quarter ended December 31, 2018, with total revenues increasing by 13% year-over-year to $262.3 million. This growth was primarily driven by a strong performance in the Scores segment, which saw a 25% increase in revenue, and continued growth in cloud-based offerings across other segments. The company demonstrated improved operational efficiency, with operating income rising 33% to $49.0 million, leading to a 22% increase in net income to $40.0 million. FICO continues to execute its Decision Management strategy, with a notable increase in bookings, particularly in transactional and maintenance revenue streams. The company also actively returned capital to shareholders, repurchasing approximately $82.7 million of its common stock during the quarter. Management expressed confidence in the company's ability to fund its operations and meet its obligations through operating cash flows and its revolving line of credit, with no significant debt maturities in the near term.

Financial Highlights

50 data points
Beta

Revenue

$262.26M

71.0% Gross Margin

Net Income

$40.01M

15.3% Net Margin

EPS (Diluted)

$1.32

Total Assets

$1.31B

Cash & Equivalents

$79.90M

Free Cash Flow

$42.38M

Financial Statements
Beta
Revenue$262.26M
Cost of Revenue$76.07M
Gross Profit$186.19M
R&D Expenses$35.43M
SG&A Expenses$100.26M
Operating Expenses$213.25M
Operating Income$49.00M
Interest Expense$9.68M
Net Income$40.01M
EPS (Basic)$1.38
EPS (Diluted)$1.32
Shares Outstanding (Basic)28.96M
Shares Outstanding (Diluted)30.34M

Key Highlights

  • 1Total revenues increased by 13% to $262.3 million for the quarter ended December 31, 2018, compared to the prior year.
  • 2Net income grew by 22% to $40.0 million, reflecting improved operational performance.
  • 3The Scores segment showed robust growth, with revenues up 25% year-over-year.
  • 4Cloud revenues represented 36% of non-Scores revenues, indicating progress in FICO's cloud-first strategy.
  • 5Operating income increased significantly by 33% to $49.0 million.
  • 6The company repurchased $82.7 million of its common stock during the quarter, demonstrating commitment to shareholder returns.
  • 7Bookings increased to $106.6 million, up from $82.2 million in the prior year's comparable quarter.

Frequently Asked Questions

The primary driver of FICO's revenue growth was a strong performance in the Scores segment, which experienced a 25% increase in revenue year-over-year. Additionally, growth in cloud-based offerings across other segments contributed to the overall revenue increase.

FICO maintains a healthy cash position, including offshore balances, and has a $400 million revolving line of credit. The company generated strong operating cash flows and believes these resources are sufficient to fund its working capital requirements and upcoming debt obligations. They also continue to return capital to shareholders through a stock repurchase program.

FICO adopted ASU 2014-09, "Revenue from Contracts with Customers," using the full retrospective method. This standard primarily affected the timing of revenue recognition for license and transactional revenues, requiring adjustments to prior periods. The adoption impacts how FICO recognizes revenue, particularly for on-premises software licenses and term licenses.

Total operating expenses increased by 9% year-over-year, largely driven by a 22% increase in Research and Development expenses (due to investments in cloud computing and SaaS) and an 11% increase in Selling, General, and Administrative expenses (due to increased headcount and higher share-based compensation). Cost of revenues saw a modest 2% increase.