10-QPeriod: Q2 FY2022

FAIR ISAAC CORP Quarterly Report for Q2 Ended Mar 31, 2022

Filed April 27, 2022For Securities:FICO

Summary

Fair Isaac Corporation (FICO) reported solid financial results for the quarter and six months ended March 31, 2022, demonstrating continued revenue growth and improved profitability. Total revenues increased by 8% in the quarter and 6% year-to-date, driven by strong performance in the Scores segment which saw a 9% and 13% increase respectively, and a healthy 7% increase in the Software segment's on-premises and SaaS revenue. Profitability saw significant improvement, with operating income up 50% and net income up 52% for the quarter. Diluted EPS also saw a substantial increase of 70% in the quarter. The company's financial health is further supported by robust operating cash flows, although total debt increased due to recent debt issuances to fund various corporate activities, including share repurchases which remained significant. FICO's strategic focus on its FICO® Platform and strong customer retention, as evidenced by its Dollar-Based Net Retention Rate, positions it well for continued growth.

Financial Highlights

50 data points
Beta

Revenue

$357.19M

79.9% Gross Margin

Net Income

$104.38M

29.2% Net Margin

EPS (Diluted)

$3.95

Total Assets

$1.49B

Cash & Equivalents

$174.22M

Free Cash Flow

$120.20M

Financial Statements
Beta
Revenue$357.19M
Cost of Revenue$71.79M
Gross Profit$285.40M
R&D Expenses$36.39M
SG&A Expenses$96.41M
Operating Expenses$205.14M
Operating Income$152.06M
Interest Expense$17.21M
Net Income$104.38M
EPS (Basic)$3.99
EPS (Diluted)$3.95
Shares Outstanding (Basic)26.14M
Shares Outstanding (Diluted)26.42M

Key Highlights

  • 1Total revenues increased by 8% to $357.2 million for the quarter ended March 31, 2022, and by 6% to $679.6 million for the six months ended March 31, 2022, compared to the prior year periods.
  • 2The Scores segment revenue grew by 9% year-over-year for the quarter and 13% for the six months, showcasing continued demand for its core scoring solutions.
  • 3Operating income surged by 50% to $152.1 million in the quarter, and by 37% to $267.6 million for the six months, indicating improved operational efficiency and strong revenue growth flowing to the bottom line.
  • 4Net income rose significantly by 52% to $104.4 million for the quarter and 22% to $189.3 million for the six months, reflecting strong profitability.
  • 5Diluted Earnings Per Share (EPS) saw a substantial increase of 70% to $3.95 in the quarter and 34% to $7.02 for the six months, demonstrating enhanced shareholder value.
  • 6The Software segment's Annual Recurring Revenue (ARR) grew by 11% to $550.3 million as of March 31, 2022, excluding divestitures, and the Dollar-Based Net Retention Rate (DBNRR) for the Software segment was a strong 110% for the quarter, indicating effective customer retention and expansion.
  • 7Cash flow from operations remained strong at $247.5 million for the six months ended March 31, 2022, supporting the company's financial flexibility.

Frequently Asked Questions

Revenue growth was driven by increases in both the Scores and Software segments. Specifically, the Scores segment benefited from higher unit prices for business-to-business offerings and increased business-to-consumer revenue. The Software segment saw growth in its on-premises and SaaS offerings, partly due to a large license deal and SaaS growth, although professional services revenue decreased.

Profitability saw significant improvement. Operating income increased by 50% in the quarter, and net income rose by 52%. This improvement was driven by strong revenue growth outpacing the growth in operating expenses, along with a decrease in cost of revenues as a percentage of total revenues.

As of March 31, 2022, FICO had $174.2 million in cash and cash equivalents. Total debt stood at $1.79 billion, an increase from $1.26 billion at September 30, 2021, primarily due to recent senior note issuances. The company has a $600 million revolving credit facility and a $300 million term loan and stated that its cash, anticipated operating cash flows, and available borrowings are sufficient to meet its requirements over the next twelve months.

The DBNRR of 110% for the Software segment indicates that existing customers, on average, increased their spending with FICO by 10% in the quarter, excluding new customer acquisitions. This is a key indicator of customer satisfaction, successful upselling/cross-selling, and the company's ability to grow revenue from its existing customer base.