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    Fair Isaac Corp (FICO)

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    Fair Isaac Corporation (FICO) is a leading applied analytics company that specializes in providing software and scoring solutions to enhance business decision-making processes. The company operates through two primary segments: Scores and Software, offering a range of products that cater to both business-to-business (B2B) and business-to-consumer (B2C) markets . FICO's solutions are widely utilized in industries such as financial services, insurance, telecommunications, and retail, and the company has a global presence in over 100 countries .

    1. Scores - Offers scoring solutions that are integral to credit decision-making processes.
      • B2B Scoring Solutions - Widely used by banks and financial institutions for credit decisions.
      • B2C Scoring Solutions - Includes consumer-focused offerings like myFICO.com subscriptions.
    2. Software - Provides pre-configured analytic and decision management solutions for various business needs, including account origination, customer management, fraud detection, and marketing.
      • Non-Platform Software - Encompasses a range of decision management solutions tailored to specific business needs.
      • FICO® Platform - A modular software offering that supports advanced analytics and decision use cases.
    NamePositionStart DateShort Bio
    William J. LansingChief Executive Officer, Board of DirectorsJanuary 2012William J. Lansing has been serving as the CEO and a member of the Board of Directors of FICO since January 2012. He has held various senior positions, including CEO roles at Infospace, Inc., and others .
    Steven P. WeberExecutive Vice President, Chief Financial OfficerMay 15, 2023Steven P. Weber has been serving as the EVP and CFO of FICO since May 15, 2023. He was previously the Vice President, Interim CFO from January 2023 to May 2023 and has been with FICO in various roles since April 2003 .
    Nikhil BehlExecutive Vice President, SoftwareJuly 2024Nikhil Behl is the EVP, Software at FICO, starting in July 2024. He was previously the EVP, Chief Marketing Officer from August 2023 to July 2024 and VP, Chief Marketing Officer from April 2014 to August 2023 .
    Thomas A. BowersExecutive Vice President, Corporate StrategyAugust 2020Thomas A. Bowers has been serving as the EVP, Corporate Strategy at FICO since August 2020. He was previously the VP of Business Consulting at FICO and held executive roles at American Savings Bank and McKinsey & Company, Inc. .
    Richard S. DealExecutive Vice President, Chief Human Resources OfficerNovember 2015Richard S. Deal has been serving as the EVP, Chief Human Resources Officer at FICO since November 2015. He was previously the SVP, Chief Human Resources Officer from August 2007 to November 2015 .
    Michael S. LeonardVice President, Chief Accounting OfficerNovember 2011Michael S. Leonard has been serving as the VP and Chief Accounting Officer of FICO since November 2011. He was previously the Senior Director of Finance at FICO and worked as a Controller at Natural Alternatives International, Inc. .
    Mark R. ScadinaExecutive Vice President, General Counsel, Corporate SecretaryFebruary 2009Mark R. Scadina has been serving as the EVP, General Counsel, and Corporate Secretary of FICO since February 2009. He held similar roles at Liberate Technologies, Inc. and Intertrust Technologies Corporation .
    James M. WehmannExecutive Vice President, ScoresApril 2012James M. Wehmann has been serving as the EVP, Scores at FICO since April 2012. He held various marketing roles at Digital River, Inc., Brylane, Inc., and Bank One before joining FICO .
    1. You mentioned that there was a few million dollars of additional one-time revenue in the Scores revenue this quarter that isn't necessarily in your run rate; can you clarify the nature of these one-time items and how they might affect future revenue expectations?

    2. Despite significant investment in your software platform and expectations of margin improvement through scalability, with high R&D spending likely to continue, when can we expect to see meaningful margin expansion in the software segment, and what specific milestones will indicate progress?

    3. With your aggressive share repurchase program continuing even as the stock reaches all-time highs and a PE ratio north of 100, how do you justify this capital allocation strategy over other uses such as strategic investments or dividends?

    4. Regarding your partnership with TCS, could you provide more details on how you are managing IP sharing and potential risks, especially as they develop proprietary solutions based on your decisioning IP in verticals where you don't currently participate?

    5. Given the macroeconomic uncertainty and higher interest rates potentially affecting mortgage volumes, how confident are you in implementing planned price increases for mortgage scores in 2025 without impacting demand, and what are your strategies to mitigate potential pushback from customers?

    Program DetailsProgram 1Program 2
    Approval DateJanuary 2024 July 2024
    End Date/DurationTerminated July 2024 Open-ended
    Total additional amount$500.0 million $1.0 billion
    Remaining authorization amount$29.6 million $760.5 million
    DetailsTerminated prior to expiration Remains in effect until expended or further action
    YearAmount Due (in millions)Debt TypeInterest Rate% of Total Debt
    202515$300 Million Term LoanN/A0.7% = (15 / 2209.021) * 100
    20264002018 Senior Notes5.25%18.1% = (400 / 2209.021) * 100
    20289002019 Senior Notes and 2021 Senior Notes4.00%40.7% = (900 / 2209.021) * 100

    Competitors mentioned in the company's latest 10K filing.

    • In-house analytic and systems developers
    • Neural network developers and artificial intelligence system builders
    • Fraud solution providers
    • Scoring model builders
    • Providers of credit reports and credit scores
    • Software companies supplying predictive analytic modeling, rules, or analytic development tools
    • Entity resolution and social network analysis solutions providers
    • Providers of customer engagement and risk management solutions
    • Providers of account workflow management software
    • Business process management and decision rules management providers
    • Enterprise resource planning and customer relationship management solutions providers
    • Business intelligence solutions providers
    • Providers of automated application processing services
    • Third-party professional services and consulting organizations
    • Three major consumer reporting agencies in the U.S. and Canada (partners and competitors in scoring solutions)
    • VantageScore (joint venture by the three major U.S. consumer reporting agencies)
    • CRIF Ratings (operates in the European Union)
    • LexisNexis and ChoicePoint (data providers)
    • Credit Karma, Credit Sesame, Experian, and TransUnion (direct to consumer credit and identity services)
    • Nice Actimize, Experian, Pegasystems, BAE Systems Applied Intelligence, SAS, ACI Worldwide, IBM, Feedzai, and Featurespace (fraud market for banking)
    • Experian, Equifax, Moody’s, Meridian Link, and CGI (customer origination market)
    • Experian and SAS (customer management market)
    • Pegasystems, Equifax, Experian, SAS, Adobe, and Salesforce (marketing services market)
    • Pegasystems, IBM, and SAS (decision platform market)
    CustomerRelationshipSegmentDetails
    Experian
    Distributes FICO® credit scores
    All
    Contributed >10% of total revenues in fiscal 2024.Part of the 45% collectively from the three agencies in fiscal 2024.
    TransUnion
    Distributes FICO® credit scores
    All
    Contributed >10% of total revenues in fiscal 2024.Part of the 45% collectively from the three agencies in fiscal 2024.
    Equifax
    Distributes FICO® credit scores
    All
    Contributed >10% of total revenues in fiscal 2024.Part of the 45% collectively from the three agencies in fiscal 2024.
    NameStart DateEnd DateReason for Change
    Deloitte & Touche LLP2004 PresentCurrent auditor

    Recent developments and announcements about FICO.

    Financial Reporting

      Earnings Call

      ·
      2 hours ago

      FICO recently released its Q1 2025 earnings call transcript, highlighting several key financial and operational updates:

      Financial Performance:

      • Revenue: Total revenue for Q1 2025 was $440 million, a 15% increase year-over-year. The Scores segment contributed $236 million (up 23%), while the Software segment generated $204 million (up 8%).
      • Profitability: GAAP net income was $153 million, up 26% year-over-year, with GAAP earnings per share at $6.14 (up 28%). Non-GAAP net income was $144 million, up 19%, with non-GAAP earnings per share at $5.79 (up 20%).
      • Cash Flow: Free cash flow for the quarter was $187 million, contributing to $673 million over the last four quarters, a 36% increase.

      Management’s Forward Guidance:

      • FICO reiterated its fiscal 2025 guidance, emphasizing confidence in achieving its targets despite potential macroeconomic uncertainties, such as interest rate fluctuations.
      • Management highlighted a strong pipeline for bookings and expects annual recurring revenue (ARR) to accelerate in the latter half of the year, despite some volatility in quarterly bookings.

      Market Conditions and Strategic Initiatives:

      • Mortgage Market: Mortgage originations revenue grew 110% year-over-year, driven by both pricing and volume increases. Mortgage originations accounted for 44% of B2B revenue and 34% of total Scores revenue.
      • Buy Now Pay Later (BNPL): FICO conducted a study with Affirm, showing that including BNPL loan data could improve FICO Scores for consumers and enhance risk modeling for lenders. FICO is working on introducing its proprietary treatment of BNPL data to the credit scoring market.
      • FICO Score 10T: Adoption of FICO Score 10T continues to grow, with significant progress in the mortgage-backed securities market. Loans utilizing FICO Score 10T began trading on the MCT Marketplace, and Cardinal Financial issued the first government-backed security featuring these loans.

      Analyst Questions and Management Responses:

      • Foreign Exchange Impact: The Software segment faced a $4 million revenue impact due to foreign exchange fluctuations, particularly in Brazil.
      • Demand Environment: Management noted stable demand for FICO’s products, emphasizing the strategic importance of its platform, which has helped mitigate budget pressures among customers.
      • B2B Revenue Trends: While B2B revenue grew 30% year-over-year, some subsegments, such as prescreening and account management, experienced slower growth compared to originations.
      • Usage Variability: Lower platform usage in Q1 was attributed to seasonality and customer cost-saving measures, but management expects usage to normalize in future quarters.

      Shareholder Returns:

      • FICO repurchased 79,000 shares in Q1 and an additional 47,000 shares in January, continuing its commitment to returning capital to shareholders.

      Key Takeaways:

      FICO delivered strong financial results in Q1 2025, driven by robust growth in its Scores segment and strategic initiatives like FICO Score 10T and BNPL data integration. Management remains confident in its fiscal 2025 guidance, supported by a strong bookings pipeline and anticipated ARR acceleration in the latter half of the year. However, challenges such as foreign exchange impacts and variability in platform usage were noted.

      For further details, the full earnings call transcript and financial highlights are available on FICO’s Investor Relations website.