10-QPeriod: Q3 FY2022

FAIR ISAAC CORP Quarterly Report for Q3 Ended Jun 30, 2022

Filed August 3, 2022For Securities:FICO

Summary

Fair Isaac Corporation (FICO) reported total revenues of $349.0 million for the third quarter of fiscal year 2022, a 3% increase year-over-year. This growth was driven by a 4% increase in the Scores segment and a 2% increase in the Software segment. Despite revenue growth, net income for the quarter decreased by 38% to $93.5 million, largely due to the absence of significant gains from asset sales and business divestitures that boosted the prior year's results. Diluted Earnings Per Share (EPS) also saw a 30% decrease to $3.61. Operationally, the company demonstrated strong performance in its recurring revenue streams. The Software segment's Annual Recurring Revenue (ARR) increased by 9% year-over-year to $560.9 million, and its Dollar-Based Net Retention Rate (DBNRR) remained robust at 108%. Cash flow from operations for the nine months ended June 30, 2022, increased to $364.6 million, indicating healthy operational cash generation. However, total debt increased significantly to $1.96 billion, driven by new debt issuances.

Financial Highlights

50 data points
Beta

Revenue

$348.97M

77.5% Gross Margin

Net Income

$93.50M

26.8% Net Margin

EPS (Diluted)

$3.61

Total Assets

$1.46B

Cash & Equivalents

$155.06M

Free Cash Flow

$115.20M

Financial Statements
Beta
Revenue$348.97M
Cost of Revenue$78.69M
Gross Profit$270.27M
R&D Expenses$35.88M
SG&A Expenses$93.25M
Operating Expenses$208.35M
Operating Income$140.62M
Interest Expense$18.72M
Net Income$93.50M
EPS (Basic)$3.65
EPS (Diluted)$3.61
Shares Outstanding (Basic)25.63M
Shares Outstanding (Diluted)25.87M

Key Highlights

  • 1Total revenues increased by 3% to $349.0 million for the quarter ended June 30, 2022, compared to the prior year quarter.
  • 2Scores segment revenue grew by 4% to $179.4 million for the quarter, while Software segment revenue saw a 2% increase to $169.6 million.
  • 3Net income decreased by 38% to $93.5 million for the quarter, impacted by the absence of significant gains from prior year divestitures.
  • 4Diluted EPS decreased by 30% to $3.61 for the quarter.
  • 5Annual Recurring Revenue (ARR) for the Software segment increased by 9% year-over-year to $560.9 million.
  • 6Dollar-Based Net Retention Rate (DBNRR) for the Software segment was a strong 108% for the quarter.
  • 7Cash flow from operating activities increased by $32.6 million to $364.6 million for the nine months ended June 30, 2022.

Frequently Asked Questions

Revenue growth was primarily driven by increases in both the Scores and Software segments. For the Scores segment, growth was attributable to higher unit prices for business-to-business offerings and an increase in business-to-consumer revenue derived from royalties. The Software segment's revenue increase was mainly due to higher platform software revenue, partially offset by a decrease in professional services revenue.

The significant decrease in net income and EPS is largely due to the absence of substantial one-time gains from product line asset sales and business divestitures that were recognized in the prior year's comparable period. These gains significantly boosted the prior year's profitability, making the year-over-year comparison appear weaker.

The company's cash and cash equivalents were $155.1 million as of June 30, 2022. While total debt increased to $1.96 billion, the company believes its cash position and available borrowings from its $600 million revolving credit facility are sufficient to fund its working capital requirements for the next twelve months. The company also has an open-ended stock repurchase program.

The Software segment shows strong performance in recurring revenue metrics. Annual Recurring Revenue (ARR) grew by 9% year-over-year to $560.9 million as of June 30, 2022. The Dollar-Based Net Retention Rate (DBNRR) was a healthy 108%, indicating that the company is effectively retaining and growing revenue from its existing software customers.