10-QPeriod: Q3 FY2020

FAIR ISAAC CORP Quarterly Report for Q3 Ended Jun 30, 2020

Filed July 29, 2020For Securities:FICO

Summary

Fair Isaac Corporation (FICO) reported stable revenues for the quarter ended June 30, 2020, compared to the prior year quarter, with an 8% increase for the nine-month period, driven by strong performance in its Scores segment. Net income remained consistent year-over-year for the quarter. However, the company saw a decrease in operating income for the quarter, while it increased for the nine-month period, bolstered by higher excess tax benefits from stock-based compensation. FICO's 'Scores' segment continued its robust growth, increasing revenue by 14% for the quarter and 23% for the nine months, demonstrating sustained demand for its credit scoring solutions. The 'Applications' segment experienced a revenue decline, primarily due to a large multi-year license renewal in the prior year. The company also highlighted its ongoing cloud-first strategy, with cloud revenues showing a healthy increase. Liquidity remains strong, supported by operating cash flows and a revolving credit facility. FICO continues to return value to shareholders through its stock repurchase program, announcing a new $250 million program. The company acknowledges the potential impacts of COVID-19 but has managed its operations effectively through initial disruptions.

Financial Highlights

50 data points
Beta

Revenue

$313.73M

71.8% Gross Margin

Net Income

$64.08M

20.4% Net Margin

EPS (Diluted)

$2.15

Total Assets

$1.56B

Cash & Equivalents

$125.67M

Free Cash Flow

$98.96M

Financial Statements
Beta
Revenue$313.73M
Cost of Revenue$88.57M
Gross Profit$225.16M
R&D Expenses$41.41M
SG&A Expenses$99.83M
Operating Expenses$230.86M
Operating Income$82.87M
Interest Expense$11.22M
Net Income$64.08M
EPS (Basic)$2.21
EPS (Diluted)$2.15
Shares Outstanding (Basic)29.00M
Shares Outstanding (Diluted)29.74M

Key Highlights

  • 1Total revenues for the quarter ended June 30, 2020, were largely flat year-over-year at $313.7 million, but increased 8% to $920.2 million for the nine months ended June 30, 2020.
  • 2The 'Scores' segment demonstrated strong growth, with revenues up 14% for the quarter to $131.6 million and 23% for the nine months to $375.8 million.
  • 3Net income for the quarter was $64.1 million, consistent with the prior year's $64.1 million. For the nine months, net income increased 29% to $177.3 million.
  • 4Operating income for the quarter decreased 3% to $82.9 million, while for the nine months, it increased 15% to $210.5 million, benefiting from higher excess tax benefits related to stock-based compensation.
  • 5The company repurchased approximately 0.2 million shares for $54.0 million in the quarter and 0.6 million shares for $210.0 million in the nine months ended June 30, 2020, and announced a new $250 million stock repurchase program.
  • 6FICO reported $125.7 million in cash and cash equivalents as of June 30, 2020, and had $103.0 million in borrowings outstanding under its $400 million revolving line of credit.
  • 7The company continues to navigate the COVID-19 pandemic, noting its impact on certain customer purchasing decisions but maintaining operational flexibility and liquidity.

Frequently Asked Questions

For the quarter ended June 30, 2020, FICO reported total revenues of $313.7 million, a slight decrease of $0.5 million (or 0%) compared to $314.2 million in the same quarter of the prior year. For the nine months ended June 30, 2020, revenues increased by 8% to $920.2 million, up from $854.7 million in the prior year period.

The 'Scores' segment was a standout performer, with revenue increasing by 14% to $131.6 million in the third quarter of fiscal year 2020 compared to the prior year, and by 23% to $375.8 million for the nine-month period. This segment's operating income also saw significant growth.

FICO acknowledged that COVID-19 has adversely affected certain purchasing decisions in its Applications and Decision Management Software segments. In the Scores segment, there were mixed impacts with declines in auto and unsecured originations but an increase in mortgage volumes. The company stated that its operational flexibility and strong balance sheet allowed it to manage through the initial impact and maintain cash flow and liquidity, with no material adverse impact on internal controls or financial reporting systems from its work-from-home protocol. FICO continues to monitor the evolving situation.

FICO maintains a strong liquidity position with $125.7 million in cash and cash equivalents as of June 30, 2020, and access to a $400 million revolving line of credit. The company actively returned capital to shareholders through stock repurchases, spending $54.0 million in the quarter and $210.0 million in the nine months ended June 30, 2020. Furthermore, a new, open-ended stock repurchase program of up to $250.0 million was approved.