10-QPeriod: Q3 FY2023

FAIR ISAAC CORP Quarterly Report for Q3 Ended Jun 30, 2023

Filed August 2, 2023For Securities:FICO

Summary

Fair Isaac Corporation (FICO) reported a strong fiscal third quarter for 2023, demonstrating robust revenue and profit growth driven by its core business segments. Total revenues increased by 14% year-over-year to $398.7 million, with the Scores segment growing 13% to $201.8 million and the Software segment showing a significant 16% increase to $196.9 million. This top-line growth translated into substantial bottom-line improvement, with operating income rising 26% to $177.0 million and net income surging 38% to $128.8 million. Diluted Earnings Per Share (EPS) saw a healthy 41% increase to $5.08, reflecting effective cost management and operational efficiency. The company's Software segment continues to be a key growth driver, evidenced by a 20% increase in Annual Recurring Revenue (ARR) to $645.9 million and a strong Dollar-Based Net Retention Rate (DBNRR) of 117%. This indicates FICO's ability to retain and expand revenue from its existing software customer base. While operating cash flow for the first nine months was slightly lower year-over-year, the company maintained a healthy cash position and managed its debt effectively, demonstrating financial stability. Investors can take comfort in FICO's consistent revenue growth, improving profitability, and strong customer retention in its software offerings.

Financial Highlights

50 data points
Beta

Revenue

$398.69M

82.0% Gross Margin

Net Income

$128.76M

32.3% Net Margin

EPS (Diluted)

$5.08

Total Assets

$1.58B

Cash & Equivalents

$163.02M

Free Cash Flow

$121.83M

Financial Statements
Beta
Revenue$398.69M
Cost of Revenue$71.85M
Gross Profit$326.84M
R&D Expenses$41.45M
SG&A Expenses$108.08M
Operating Expenses$221.66M
Operating Income$177.03M
Interest Expense$24.55M
Net Income$128.76M
EPS (Basic)$5.16
EPS (Diluted)$5.08
Shares Outstanding (Basic)24.96M
Shares Outstanding (Diluted)25.34M

Key Highlights

  • 1Total revenue increased by 14% year-over-year to $398.7 million for the quarter ended June 30, 2023.
  • 2Net income increased by 38% year-over-year to $128.8 million for the quarter ended June 30, 2023.
  • 3Diluted EPS grew by 41% year-over-year to $5.08 for the quarter ended June 30, 2023.
  • 4The Software segment's Annual Recurring Revenue (ARR) grew 20% year-over-year to $645.9 million as of June 30, 2023.
  • 5Dollar-Based Net Retention Rate (DBNRR) for the Software segment was a strong 117% for the quarter ended June 30, 2023.
  • 6The Scores segment revenue increased by 13% year-over-year to $201.8 million for the quarter.
  • 7Operating income increased by 26% year-over-year to $177.0 million for the quarter.

Frequently Asked Questions

FICO's revenue growth is primarily driven by increases in both its Scores and Software segments. The Scores segment benefited from higher business-to-business (B2B) scores revenue due to increased unit pricing, while the Software segment saw growth from its SaaS offerings and a multi-year license renewal, contributing to a 16% increase in Software segment revenue for the quarter.

The Software segment is demonstrating strong performance. Annual Recurring Revenue (ARR) increased by 20% year-over-year to $645.9 million. Furthermore, the Dollar-Based Net Retention Rate (DBNRR) stood at a healthy 117%, indicating that FICO is not only retaining its existing software customers but also successfully growing revenue from them through upsells, cross-sells, and increased usage.

FICO's total debt remained stable at approximately $1.9 billion as of June 30, 2023. The company has a revolving line of credit and a term loan with specific covenants that it is currently meeting. While interest expense has increased due to higher outstanding debt balances and rates, the company's profitability and cash flows appear sufficient to manage these obligations.

FICO anticipates that its current cash and cash equivalents, along with anticipated cash flows from operations and available credit facilities, will be sufficient to fund its working capital and other requirements for at least the next 12 months and beyond. While operating cash flow for the first nine months of the fiscal year saw a decrease compared to the prior year, this was largely due to non-cash items and timing differences in receipts and payments, with net income showing a significant increase.