10-QPeriod: Q1 FY2021

FAIR ISAAC CORP Quarterly Report for Q1 Ended Dec 31, 2020

Filed January 28, 2021For Securities:FICO

Summary

Fair Isaac Corporation (FICO) reported a strong quarter ended December 31, 2020, with total revenues increasing by 5% year-over-year to $312.4 million. This growth was primarily driven by a significant 26% surge in the Scores segment, which reached $144.7 million in revenue. The company demonstrated improved profitability, with operating income rising 83% to $94.7 million and net income increasing 57% to $86.5 million. This performance was supported by effective cost management, including a notable 16% reduction in Selling, General, and Administrative expenses, partly due to COVID-19 related measures and strategic cost initiatives. Despite a transitional shift in software revenue recognition impacting the Applications and Decision Management Software segments, FICO maintained a healthy cash flow from operations of $77.9 million. The company also continued its commitment to shareholder value through a $50.0 million stock repurchase program during the quarter. FICO’s balance sheet remains solid, with sufficient liquidity and compliance with debt covenants, indicating a stable financial position heading into the next fiscal year. The company's focus on its decision management strategy and cloud-enabled solutions positions it for continued growth, although potential headwinds from the ongoing pandemic and industry shifts are acknowledged.

Financial Highlights

50 data points
Beta

Revenue

$312.41M

71.3% Gross Margin

Net Income

$86.49M

27.7% Net Margin

EPS (Diluted)

$2.90

Total Assets

$1.58B

Cash & Equivalents

$144.66M

Free Cash Flow

$74.90M

Financial Statements
Beta
Revenue$312.41M
Cost of Revenue$89.53M
Gross Profit$222.89M
R&D Expenses$40.65M
SG&A Expenses$93.91M
Operating Expenses$217.69M
Operating Income$94.72M
Interest Expense$9.64M
Net Income$86.49M
EPS (Basic)$2.97
EPS (Diluted)$2.90
Shares Outstanding (Basic)29.13M
Shares Outstanding (Diluted)29.79M

Key Highlights

  • 1Total revenues increased 5% to $312.4 million in Q4 2020 compared to the prior year quarter.
  • 2The Scores segment was a key growth driver, with revenues up 26% to $144.7 million, fueled by increased mortgage volumes and consumer-向け scores.
  • 3Operating income saw a substantial increase of 83% to $94.7 million, demonstrating strong operational leverage and cost controls.
  • 4Net income grew by 57% to $86.5 million, indicating robust profitability.
  • 5Selling, General, and Administrative (SG&A) expenses decreased by 16% to $93.9 million, reflecting successful cost optimization efforts.
  • 6Cash flow from operating activities was strong at $77.9 million, showcasing effective cash generation.
  • 7The company repurchased $50.0 million of its common stock during the quarter, demonstrating a commitment to returning value to shareholders.

Frequently Asked Questions

The primary driver of FICO's revenue growth was its Scores segment, which experienced a significant 26% increase in revenue year-over-year. This growth was attributed to higher mortgage volumes and increased sales of consumer credit scores through platforms like myFICO.com.

FICO effectively managed its expenses, notably reducing Selling, General, and Administrative (SG&A) expenses by 16%. This reduction was partly due to the ongoing COVID-19 pandemic impacting travel and marketing activities, as well as strategic cost initiatives implemented in September 2020, including workforce reductions and office consolidation.

FICO has transitioned from selling term software licenses with separate components to a bundled software subscription contract. This change impacts the timing of revenue recognition, leading to less revenue recognized upfront and more recognized over the subscription term. This shift has negatively affected revenue recognition for term software licenses in the Applications and Decision Management Software segments, although it does not impact total revenue over the contract life or cash flows.

FICO maintained a healthy liquidity position with $144.7 million in cash and cash equivalents as of December 31, 2020. The company also has a $400 million revolving line of credit available. FICO had $131.0 million in borrowings outstanding under this line of credit and $750.0 million in senior notes. The company was in compliance with all debt covenants and did not foresee material risks related to meeting these covenants due to COVID-19.