10-QPeriod: Q2 FY2021

FAIR ISAAC CORP Quarterly Report for Q2 Ended Mar 31, 2021

Filed May 5, 2021For Securities:FICO

Summary

Fair Isaac Corporation (FICO) reported solid revenue growth and improved profitability for the quarter and six months ended March 31, 2021. Total revenues increased by 8% year-over-year for the quarter and 6% for the six-month period, primarily driven by strong performance in the Scores segment, which saw revenue growth of 31% and 28% respectively. This growth was fueled by increased demand in both business-to-business and business-to-consumer offerings. The company also highlighted a strategic shift towards emphasizing software over services, impacting revenue recognition timing for term license subscriptions but not overall cash flows. Operating income saw significant increases, up 34% for the quarter and 54% for the six-month period, reflecting improved efficiencies and the strong performance of the Scores segment, partially offset by decreases in the Applications and Decision Management Software segments. FICO continued to return value to shareholders through its stock repurchase program, repurchasing significant shares and maintaining a strong liquidity position with a substantial cash balance and an undrawn revolving line of credit. The company also announced its agreement to divest its Collections and Recovery (C&R) business to further focus on its core Decision Management Platform.

Financial Highlights

50 data points
Beta

Revenue

$331.36M

73.3% Gross Margin

Net Income

$68.67M

20.7% Net Margin

EPS (Diluted)

$2.33

Total Assets

$1.58B

Cash & Equivalents

$197.84M

Free Cash Flow

$152.35M

Financial Statements
Beta
Revenue$331.36M
Cost of Revenue$88.33M
Gross Profit$243.03M
R&D Expenses$43.61M
SG&A Expenses$97.27M
Operating Expenses$230.16M
Operating Income$101.20M
Interest Expense$9.94M
Net Income$68.67M
EPS (Basic)$2.36
EPS (Diluted)$2.33
Shares Outstanding (Basic)29.09M
Shares Outstanding (Diluted)29.53M

Key Highlights

  • 1Total revenue increased by 8% to $331.4 million for the quarter ended March 31, 2021, compared to the prior year period.
  • 2The Scores segment was a key growth driver, with revenue increasing 31% year-over-year for the quarter to $168.7 million.
  • 3Operating income increased significantly by 34% to $101.2 million for the quarter ended March 31, 2021.
  • 4Net income grew by 18% to $68.7 million for the quarter ended March 31, 2021.
  • 5The company continued its share repurchase program, with $205.2 million in repurchases during the quarter.
  • 6FICO entered into an agreement to divest its Collections and Recovery (C&R) business to focus on its core Decision Management Platform.
  • 7Strong cash flow from operations of $231.5 million for the six months ended March 31, 2021, demonstrating healthy operational performance.

Frequently Asked Questions

The primary driver of FICO's revenue growth was the strong performance in its Scores segment. Revenue for this segment increased by 31% year-over-year for the quarter ended March 31, 2021, driven by increased demand for both business-to-business (B2B) and business-to-consumer (B2C) scoring solutions.

FICO is strategically positioning itself by focusing on its Decision Management (DM) strategy, emphasizing its cloud-native platform approach. The company is also divesting non-core businesses, such as the recently announced sale of its Collections and Recovery (C&R) business, to concentrate resources on its core FICO Decision Management Platform.

FICO changed its practice from selling term software licenses with separate components to a single bundled software subscription contract. This transition has shifted the timing of revenue recognition, resulting in less revenue recognized upfront and more recognized over the subscription term. While this impacts the timing of license revenue recognition, the company states it does not change the total revenue recognized over the life of a contract and does not negatively impact cash flows.

FICO maintained a strong liquidity position, with $197.8 million in cash and cash equivalents as of March 31, 2021. The company has a $400 million revolving line of credit, of which $225 million was borrowed at the end of the period. FICO also actively returned capital to shareholders through its stock repurchase program and plans to use proceeds from the divestiture of its C&R business for an Accelerated Share Repurchase program.