Sami Nasir

Sami Nasir from Goldman Sachs asked about the traction of a potential move from tri-merge to bi-merge credit reporting, considering the MBA's single score proposition and regulators' focus on bureaus. He also inquired about FICO's software investment cycle, the progress of the platform build-out, and when investments are expected to normalize.

Answer

Will Lansing, CEO, acknowledged significant discussion around bi-merge, noting that while bureaus argue tri-merge prevents underserved consumers, it also creates a monopoly. He highlighted the main challenge as preventing gaming and adverse selection, which could ultimately cost Fannie, Freddie, and taxpayers. On software investments, Mr. Lansing stated FICO continues to invest heavily due to bullish outlook and strong growth, expecting margin expansion to come from increased volume and customers on the new platform rather than reduced R&D spending, which is a lever that will eventually decrease.

Sami Nasir asked if the current strength in new business for executive search would offset the typical seasonal step-down in the third quarter, which usually sees a ramp in the fourth quarter.

Answer

CEO Gary Burnison stated that the company's guidance does not imply a different seasonality, as the holiday season is expected to impact the entire business for about two weeks, which is already factored into the forecast. Regarding consulting, Mr. Nasir questioned the flat margins despite strong bill rates and asked about the remaining runway for the mix shift towards higher-value engagements, as well as potential higher costs capping margin upside. Mr. Burnison responded that there is substantial opportunity and upside in the consulting solution, describing the transformation from selling 'vitamins' (small transactions) to being in the 'health and wellness business' (larger engagements). CFO Bob Rozek added that the current uncertain environment benefits the firm as clients seek help navigating new challenges, leading to strong demand for larger, transformational org strategy engagements.

Sami Nasir asked if the current strength in executive search new business would alter the typical Q3 seasonality, and about the runway for mix shift towards higher-value engagements in consulting, questioning if higher delivery costs cap margin upside despite strong bill rates.

Answer

CEO Gary Burnison stated the Q3 guidance does not imply a change in seasonality due to holiday impact. He affirmed substantial opportunity and upside in consulting, noting the shift from 'vitamins' (small transactions) to 'health and wellness' (larger engagements). CFO Bob Rozek added that the current uncertain environment drives demand for larger, transformational org strategy engagements.