Fair Isaac - Q3 2024
July 31, 2024
Transcript
Operator (participant)
Good day, ladies and gentlemen, and thank you for standing by. Welcome to the third quarter 2024 FICO earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during this session, you will need to press star one one on your telephone. You will then hear an automated message advising you your hand is raised. To withdraw your question, please press star one one again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Dave Singleton. Please go ahead.
Dave Singleton (VP of Investor Relations)
Good afternoon, and thank you for attending FICO's third quarter earnings call. I'm Dave Singleton, Vice President of Investor Relations, and I'm joined today by our CEO, Will Lansing, and our CFO, Steve Weber. Today, we issued a press release that describes financial results compared to the prior year, and on this call, management will also discuss results in comparison with the prior quarter to facilitate an understanding of the run rate of the business. Certain statements made in this presentation are forward-looking under the Private Securities Litigation Reform Act of 1995. Those statements involve many risks and uncertainties that could cause actual results to differ materially. Information concerning these risks and uncertainties is contained in the company's filings with the SEC, particularly in the Risk Factors and Forward-Looking Statements portions of such filings.
Copies are available from the SEC, from the FICO website, or from our investor relations team. This call will also include statements regarding certain non-GAAP financial measures. Please refer to the company's earnings release and Regulation G schedule issued today for a reconciliation of each of these non-GAAP financial measures to the most comparable GAAP measure. The earnings release and Regulation G schedules are available on the investor relations page of the company's website at fico.com or on the SEC's website at sec.gov. A replay of this webcast will be available through July 31, 2025. Now I'll turn the call over to our CEO, Will Lansing.
Will Lansing (CEO)
Thanks, Dave, and thank you everyone for joining us for our third quarter earnings call. In the investor relations section of our website, we've posted some financial highlight slides that we'll be referencing during our presentation. Today, I'll talk about this quarter's results and our increased guidance for the full fiscal year. We continue to deliver strong quarterly results, including impressive growth in our ACV bookings and free cash flow. As shown on page two of the third quarter financial highlights, we reported Q3 revenues of $448 million, up 12% over the last year. We delivered $126 million of GAAP net income in the quarter, down 2%, and GAAP earnings of $5.05 per share, down 1% from the prior year.
On a non-GAAP basis, Q3 net income was $156 million, with earnings of $6.25 per share, up 9% and 10%, respectively. We had a difficult comp in year-over-year net income, as Q3 of 2023 included an $8.5 million one-time reimbursement of third-party data implementation costs, as well as a $9.5 million reduction in income tax expense associated with the valuation of our R&D credits. We delivered record free cash flow of $206 million in our third quarter and $551 million over the last four quarters. We continue to return capital to our shareholders through buybacks.
In Q3, we repurchased 196,000 shares at an average price of $1,293 per share, and we announced a new board authorization for $1 billion of share repurchase. In our score segment on page six of the presentation, our third quarter revenues were $241 million, up 20% versus the prior year. Breaking that down, in B2B, current quarter revenues were up 27% versus the prior year. In B2C, the current quarter revenues were down 2% versus the prior year. Third quarter mortgage originations revenues were up 80% versus the prior year. Mortgage origination revenue accounted for 49% of B2B revenue and 39% of total scores revenue. Auto originations revenues were down 3%, while credit card, personal loan, and other originations revenues were down 7% versus the prior year.
We continue to drive strong adoption for FICO Score 10T for non-GSE mortgages. Based on 2023 firm-reported data, clients with over $126 billion in annualized mortgage originations and about $380 billion in eligible mortgage portfolio servicing have signed up for the FICO Score 10T. Firms are using FICO Score 10T to make credit decisions, deliver to investors, and for securitization. FICO Score 10T for conforming mortgages will be rolled out based on the timeline of the FHFA's implementation of enterprise credit score requirements. In our software segment, we delivered $206 million in Q3 revenue, up 5% from last year, driven mainly by growth in SaaS software, partially offset by decline in professional services. We continue to drive strong growth in ARR and NRR through our land and expand strategy, with expand driven by increased customer usage.
As shown on page seven, total ARR was up 10%, with platform ARR growing 31% and non-platform ARR growing 3%. Total NRR for the quarter, shown on page eight, was 108%, with platform NRR at 124% and non-platform NRR at 101%. Our total ACV bookings for the quarter were an impressive $27.5 million. We continue to drive more FICO Platform SaaS bookings, which aligns with our strategy. We expect this trend to continue as our recent FICO World event has been a catalyst for driving pipeline growth, especially for the FICO Platform. I'm very proud of the strength of our software business, both the industry-leading technology as well as our remarkable team. This quarter, we secured another award for our FICO Platform, the Business Intelligence Platform of the Year from Data Breakthrough.
In July, Nikhil Behl was promoted to EVP for software, leading all technology and go-to-market functions. Nikhil has been instrumental in strengthening our brand value, reputation with customers and regulators, strategic competitive positioning for FICO Scores and FICO Platform, and market-leading business growth. We continue to excel in our Scores business as well. Our team is focused on innovation to provide new ways to add value for our customers. FICO Score is a tool that market participants rely on to make many crucial decisions, including pre-qual, underwriting, pricing, insuring, securitizing, rating, selling, assessing capital requirements, assessing prepayment risk, and determining collection strategies. The FICO Score has long been freely chosen because it's trusted as the most predictive and reliable independent credit score, enabling lenders to fairly expand credit access to more consumers.
The FICO Score was widely adopted because it democratized and expanded access to credit, while simultaneously underpinning the safety and soundness of the market. It's worth pointing out that over half of mortgage market is non-conforming, and also overwhelmingly uses FICO Scores. The FICO Score has provided and will continue to provide tremendous value to the credit ecosystem. As part of our ongoing commitment to industry-leading credit decision, we've made significant commitments to financial knowledge and financial inclusion. We've once again partnered with Chelsea Football Club, both men's and women's teams, and U.S. Soccer Foundation for the Fields of Financial Empowerment summer tour. The goal is to build excitement for and access to financial education and resources to help more people, including the next generation of fans, make more informed credit decisions.
As part of the campaign, FICO hosts free Score A Better Future Fundamentals, financial education workshops for students from traditionally underserved communities. Students improve financial literacy and have the opportunity to attend a Chelsea football game. I'll talk about our outlook for the balance of the year, including our increased guidance after Steve provides further financial details.
Steve Weber (CFO)
Thanks, Will, and good afternoon, everyone. As Will mentioned, we had another good quarter, with total revenues of $448 million, an increase of 12% over the prior year. Scores segment revenues for the quarter were $241 million, up 20% from Q3 of 2023. B2B revenues were up 27%, driven primarily by mortgage origination revenues. Our B2C revenues were down 2% versus the prior year due to volume declines in our myFICO.com business. Software segment revenues in the third quarter were $206 million, up 5% versus Q3 2023. On-prem and SaaS software revenue grew 7% year over year, while professional services declined 9%. This quarter, 85% of total company revenues were derived from our Americas region, which is a combination of our North America and Latin America regions.
Our EMEA region generated 10% of revenues, and the Asia Pacific region generated 5%. Our total software ARR was $710 million, a 10% increase over the prior year. Platform ARR was $215 million, representing 30% of our total Q3 2024 ARR, up from 25% of total in Q3 of 2023. Platform ARR grew 31% versus the prior year, while non-platform ARR grew 3% to $495 million this quarter. Our platform land and expand strategy continues to be successful. Our dollar-based net retention rate in the quarter was 108%. Platform NRR was 124%, while our non-platform NRR was 101%. Platform NRR was driven by a combination of new use cases and increased usage.
Our software ACV bookings for the quarter were $27.5 million. As a reminder, ACV bookings include only the annual value of software sales and exclude professional services. Our expenses for the quarter and total operating expenses were $258 million this quarter, versus $222 million in the prior year, an increase of 16% year over year and 8% versus the prior quarter. Our third quarter included our FICO World event and a true-up for our annual incentive rewards, and we expect Q4 expenses to be down modestly from our Q3 run rate. As Will noted, the prior year includes an $8.5 million one-time reimbursement of third-party data implementation costs and a reduction to income tax expense of $9.5 million, associated with the valuation of our R&D tax credits.
Our non-GAAP operating margin, as shown in our Reg G schedule, was 52% for the quarter, compared with 51% in the same quarter last year. GAAP net income this quarter was $126 million, down 2% from the prior year's quarter. Our non-GAAP net income was $156 million for the quarter, up 9% from the prior year's quarter. The effective tax rate for the quarter was 24.5%. We believe that our fiscal year 2024 net effective tax rate is expected to be around 22%, while our recurring tax rate is expected to be around 26%. Recurring tax rate is before any excess tax benefit and other discrete items. Free cash flow for the quarter was $206 million, a 69% increase from the previous year.
The trailing 12 month free cash flow was $551 million, compared to $467 million in the prior quarter. At the end of the quarter, we had $199 million in cash and marketable investments. Our total debt at quarter end was $2.13 billion, with a weighted average interest rate of 5.3%. Currently, 61% of our total debt is fixed rate. Our floating rate debt is prepayable at any time, giving us the flexibility to use free cash flow to reduce outstanding floating rate debt balances in future periods. During the quarter, we secured a $450 million term loan and used those proceeds to reduce our revolving line of credit and to provide additional debt capacity.
Turning to return to capital, we bought back 196,000 shares in the third quarter at an average price of $1,293 per share. That exhausted the existing board authorization, which was approved in January, and we have just announced a new board authorization for $1 billion. We continue to view share repurchases as an attractive use of cash. And with that, I'll turn it back to Will for his thoughts on the rest of the year and the increase in our full year guidance.
Will Lansing (CEO)
Thanks, Steve. We are executing on our strategy. Our customers are delighted with our innovative products. Our execution is generating strong financial results, including impressive ACV bookings, record free cash flow, and an increase in FICO Platform and FICO 10T adoption. The business is strong. I'm pleased to report that today we're again raising our full year guidance as we enter the fourth quarter of our fiscal year. We're raising our full year revenue guidance to $1.70 billion. GAAP net income is now expected to be $500 million, with GAAP earnings per share of $19.90. Non-GAAP net income is now expected to be $582 million, with non-GAAP earnings per share of $23.16. With that, I'll turn it back to Dave, and we'll open up the Q&A session.
Steve Weber (CFO)
Thanks, Will. This concludes our prepared remarks, and we're now ready to take questions. Operator, please open the line.
Operator (participant)
Thank you. As a reminder, to ask a question at this time, please press star then one, one on your telephone. If you wish to remove your question, please press star one, one again. One moment while we compile our Q&A roster. Our first question is going to come from the line of Faiza Alwy with Deutsche Bank. Your line is open. Please go ahead.
Faiza Alwy (Equity Research Analyst)
Yes, hi. Thank you so much. So I wanted to start with the software business and just ask you if you could comment on the selling environment, if there's any change from a macro perspective, anything new or different you're hearing from, from your customers? And then, you know, I know at FICO World, we had talked about, you know, improvement of the platform and talking about decomposition of the platform. So just give us a sense of if there's any update there, and any additional color.
Will Lansing (CEO)
Well, FICO World is always and was this year the biggest pipeline-generating event that we have. And so we came out of FICO World with a very, very healthy pipeline. I would say that the selling environment, you know, has not changed that much over the last year or so. And I would also emphasize that increasingly, customers are buying FICO software as a strategic move, and so it's a very considered purchase, and it's it, you know, it, it's not just like going out and finding a point solution to a small problem, to a specific problem. It's a bigger, it's a bigger thing than that, and that hasn't changed. That's kind of the new way of operating.
Faiza Alwy (Equity Research Analyst)
Got it. Thank you. And then just a question on mortgage revenues. You obviously had very strong growth in the quarter. I'm curious how, you know, volume trended in the quarter. I know you don't give a breakdown, but was it in line with your expectations? Are there any, you know, dynamics you're seeing around, you know, soft pulls, where I believe lenders have the option to go to, you know, one or two bureaus? Like, with that, are you seeing an impact on volumes from that and just the general environment around mortgage?
Will Lansing (CEO)
You know, our mortgage volumes are a lagging indicator relative to other mortgage data that you have. You know, our mortgage volumes are down versus a year ago. They're pretty much flat versus last quarter. And that, you know, none of that is particularly surprising.
Faiza Alwy (Equity Research Analyst)
All right. Thank you so much.
Operator (participant)
Thank you. And one moment as we move on to our next question. And our next question is going to come from the line of Surinder Thind with Jefferies. Your line is open. Please go ahead.
Surinder Thind (Equity Research Analyst)
Thank you. First question on just the guidance raise. It implies revenues are going to be down roughly $10 million quarter-over-quarter. Just any color there? I know you normally are conservative in the guide, but just can you do the walk for us from 3Q to fiscal?
Will Lansing (CEO)
Yeah. So we are pretty conservative with the way we guide. So, you know, we want to make sure that, you know, a lot of this on the scores, we don't have much control over, right? So we don't really know what's going to happen there. I would say that generally, the fourth quarter is a little lighter, seasonally, for mortgage. Mortgage volumes aren't as high typically then as they are in the spring. So there might be some, you know, a little bit of volume decline there, but a lot of it just depends on the environment, which we don't have a lot of visibility to.
Surinder Thind (Equity Research Analyst)
Thank you. And then in terms of just when I think about the non-platform business here, the NRR was 101%. That's the slowest pace of growth in about two years. So any color there, that you can help with? Is there some movement of revenues from non-platform to platform at this point? How should we think about that?
Will Lansing (CEO)
You know, I wouldn't say that it's cannibalization, if that's what your question is getting at. You know, we're pretty pleased with our classic offerings with 101% NRR. We've been trying to manage that business in this, you know, relatively flat way, and we're pleased that it's turning out that way. But you know, as you can see, the growth is on the expand side on the platform. You know, it's. We don't. We let the market tell us what it wants, but we're not displeased with the way it's shaking out.
Steve Weber (CFO)
Yeah, and I would say, I mean, we had higher numbers last year, and at the time, we said there were some things driving that. Some of it was, you know, some of the CI increase we had, and we had some advantages last year from some FX as well, and we knew that was not gonna maintain this year. So it's kind of what we thought was gonna happen. It would settle more to around 100%.
Surinder Thind (Equity Research Analyst)
Okay, thank you. I'll get back in the queue for additional questions.
Operator (participant)
Thank you. And one moment as we move on to our next question. And our next question is gonna come from the line of Scott Wurtzel with Wolfe Research. Your line is open. Please go ahead.
Scott Wurtzel (Vice President and Analyst)
Hey, good afternoon, guys, and thank you for taking my questions. Wanted to start on the auto origination side. You know, revenue's down 3% versus modestly up last quarter. Just wondering, similar to how you did a mortgage, maybe comment on the volumes there and how they trended versus last quarter.
Steve Weber (CFO)
Yeah, volumes were relatively flat, but the, the really is a mix shift. So we had, we had more of a mix shift to, you know, more market share in the, in the tiers that are a little bit less price for us, unit cost is a little bit lower. So that's really the difference between the volume and the, you know, the revenue. So the, the price per score went down slightly because of a mix shift.
Scott Wurtzel (Vice President and Analyst)
Got it. That's helpful. And then on the software side, on the platform ARR, I mean, I think, you know, it's pretty good to see the sort of rate of deceleration moderate from 2Q to 3Q at sort of this low thirties level. I mean, do you kind of see this as a sort of sustainable growth rate for platform ARR over the near to medium term here?
Steve Weber (CFO)
Probably, yeah. I mean, we don't, you know, we think we're pretty confident in that or at around that rate. You know, it can change as we go out farther, but, you know, we think that's a sustainable rate. And we've got... You know, it helps when you have a good quarter like this in terms of signing new deals, too, because that'll, you know, that, that'll help boost ARR in the future. So, you know, we don't have really good visibility, too, 'cause a lot of it depends on how quickly our customers can, you know, get online, and how much usage they have. But, you know, there's a lot of growth there. You know, so we're pretty confident that we can maintain these levels.
Scott Wurtzel (Vice President and Analyst)
Great. Thanks, guys.
Operator (participant)
Thank you. One moment as we move on to our next question. Our next question is gonna come from the line of Kyle Peterson with Needham. Your line is open. Please go ahead.
Kyle Peterson (Managing Director of Equity Research)
Great, thanks. Good afternoon, guys. Just wanted to start out on software, particularly the bookings, you know, looked pretty nice on the ACV basis, compared to a lot of the prior quarters. So how should we think about, you know, some of the implementation cycles and kind of when, you know, some of those bookings will start to translate to revenue here?
Will Lansing (CEO)
It's you know, as you know, it's a long sales cycle, as long as 400 days, and it takes not that long to get live once it's all said and done. But, you know, I think that the flow-through is the subsequent year. I mean, that's the easiest way to think about it.
Steve Weber (CFO)
It does depend on the customer, how sophisticated they are, how ready they are. But yeah, I mean, then, you know, if we sign deals now in the next 6-9 months, you should start seeing a flow-through on that.
Kyle Peterson (Managing Director of Equity Research)
Got it. That's very helpful. And then, you know, just to follow up, you know, on, you know, particularly on, you know, if we do get rate cuts, whether it's, you know, later this year or next year, maybe if you could walk us through some of the, the different sensitivities. I know your business now looks quite a bit different, you know, maybe compared to past cycles. So, you know, especially on those first, you know, 1-2 rate cuts, you know, what are some of the, you know, the impacts that, you know, we should be mindful of, you know, if those do come to fruition?
Will Lansing (CEO)
You know, we're already seeing a little bit of an uptick in refi, and it's not exactly, you know, a gigantic leap of faith that as rates come down, we'll see volumes go up. We fully anticipate that. You know, your guess is as good as ours as to the timing of the rate cuts. We would hope to see some rate cuts, you know, towards the end of this year and next year, and volumes go up with that.
Kyle Peterson (Managing Director of Equity Research)
All right. That's helpful. Thanks, guys.
Operator (participant)
Thank you. One moment as we move on to our next question. Our next question is gonna come from the line of George Tong with Goldman Sachs. Your line is open. Please go ahead.
George Tong (Senior Research Analyst)
Hi, thanks. Good afternoon. Within the scores business, card and personal loan revenue fell 7% in the quarter, which is a little bit better than the 9% decline in the prior quarter. Can you talk about some of the trends you're seeing among subprime or lower-tier consumers that may be impacting card and personal loan performance, and also talk about overall bank lending conditions?
Steve Weber (CFO)
Yeah, I mean, the subprime market's obviously seen the biggest pullback, which is not surprising, right? You're late in the credit cycle, you have a lot more, you know, uncertainty, and that's kind of where you see that it happened first. Bank by bank, it kind of varies depending on what they're, you know, looking at and what kind of, you know, what kind of campaigns they may or may not be running. But, you know, we see banks being relatively conservative with new originations, and I think they're kind of waiting to, you know, see what happens and see what the economic environment looks like. So it's really not surprising. You know, we saw, probably a little over a year ago, strong growth there, when mortgage started to...
to slow down and rates started to go up, we saw strong growth there, but now I think there's just more uncertainty in the market, and they're just kind of being more cautious in their originations.
George Tong (Senior Research Analyst)
Got it. That's helpful. And then switching to the software side, software operating margins contracted about 430 BPS year-over-year-
Steve Weber (CFO)
Yeah
George Tong (Senior Research Analyst)
-in the quarter. Can you talk about some of the reasons behind what drove that?
Steve Weber (CFO)
That's almost completely- it's almost completely around that, that, that, you know, that reimbursement we had last year.
Jeff Meuler (Senior Research Analyst)
Got it.
Steve Weber (CFO)
So that, you know, that's. It was a big number we had, and that was all on the software side. So that's, that's the driver of that.
George Tong (Senior Research Analyst)
So as that laps, when would you expect the flip to margin expansion in the software business?
Steve Weber (CFO)
Well, we'll get some margin expansion next quarter because, I mean, again, we had some costs by FICO World. This quarter is not gonna repeat next quarter. So we'll have some. Our costs will decline next quarter, and that'll end up with some, you know, margin expansion. We, you know, these costs are big enough where any one given quarter, something like FICO World is gonna have an impact on that quarter's margin.
George Tong (Senior Research Analyst)
Got it. Very helpful. Thank you.
Operator (participant)
Thank you. One moment as we move on to our next question. Our next question comes from the line of Ashish Sabadra with RBC. Your line is open. Please go ahead.
Ashish Sabadra (Business, Education and Professional Services Analyst)
Hi, thanks for taking my question. Just on the software revenue growth, particularly the on-prem and SaaS, and within that, when I look at software recognized over the contract term, the growth there moderated. How should we think about the growth profile there?
Steve Weber (CFO)
Ashish, we can't hear you. We can't hear you.
Ashish Sabadra (Business, Education and Professional Services Analyst)
Sorry. Let me know-
Steve Weber (CFO)
That's better.
Ashish Sabadra (Business, Education and Professional Services Analyst)
Better. Yes. So I wanted to focus on the on-prem and SaaS software revenue growth, and within that, even the software recognized over contract term, that moderated a bit, still pretty strong, at 80%, but did moderate from mid-teens. How should we think about those puts and takes on the revenue growth going forward?
Steve Weber (CFO)
Yeah, I mean, a lot of that's the fact that we had, you know, the Omega growth out, you know, the non-platform growth out what we saw last year. So that right there drives most of the... You know, and then obviously, the platform side is growing 50% either. But so, you know, we think these kind of growth rates going forward, as I said earlier, that's probably more likely what we're gonna see to continue. You know, and as the numbers get bigger, it's harder to drive 50% growth or even 40% growth. So we're pretty happy with the 30% growth on the platform side. And on the non-platform, if we think we can get, you know, better than 100%, we're happy with that as well.
Ashish Sabadra (Business, Education and Professional Services Analyst)
That's very helpful. Thanks. Thank you.
Operator (participant)
Thank you. And one moment as we move on to our next question. And our next question comes from the line of Simon Clinch with Redburn Atlantic. Your line is open. Please go ahead.
Simon Clinch (Partner)
Hi, thanks for taking my question. I wanted to cycle back to, yeah, the 30%+ growth in the platform software ARR. And just, I was wondering if you could just go in a little bit more detail as to why you think that is a sustainable level of growth, and just perhaps flesh that out a little bit more for us, please?
Steve Weber (CFO)
Well, I mean, we've got I mean, again, we had a really good quarter, you know, with new bookings, and we've got a lot of install base that's rapidly expanding. I mean, there, when we install, you know, most of our customers, you know, look for new ways to use it, and we see that in the net retention rate, and that's a. That number continues to be well, to do well, and we continue to add more business to it. So, you know, we can't guarantee it, but we've got a lot of reasons, both, you know, data-driven and anecdotally, to think that we're gonna continue to see that kind of growth.
Simon Clinch (Partner)
Okay, thanks. And just to follow up on that, could you, I mean, just frame the approach to pricing within the software business? You mentioned, like last year, in the, I think it was the non-platform side, you had sort of, higher inflationary pricing, but just wondering if you could talk a bit about the strategy around, the pricing, pricing value and, and, how to think about that going forward.
Steve Weber (CFO)
Our strategy around software pricing is, you know, we're very focused right now on making our software accessible and encouraging adoption. And so, you know, while there's probably room for value pricing in our software business, that's not where our direction is. Our direction is to put the software in the hands of our customers and then watch revenue grow as their usage increases. And their usage increases, you know, within the initial applications that they put the platform to use for, and then also as they discover new uses. You know, the expand part of our land expand strategy is very much wrapped around the customer taking control of what they can do with the platform and coming up with new use cases.
We tend to design in a way that we don't have to renegotiate contracts and go back and do a lot of contractual work for them to do more revenue with us. We tend to design it in a way that they can, you know, select how much usage they want and, you know, our revenue goes up automatically as their usage goes up.
Simon Clinch (Partner)
Thanks so much. Appreciate it.
Operator (participant)
Thank you, and one moment as we move on to our next question. Our next question is gonna come from the line of Jeff Meuler with Baird. Your line is open. Please go ahead.
Jeff Meuler (Senior Research Analyst)
Yeah, thanks. Instead of me getting to ask a question about cash flow this quarter, I just get to say congrats on the nice cash flow. Can you give us some perspective on the geographic kind of trends within software? And I guess I'm just. It looks like America's revenue was down a little year-over-year, so any particular call-outs? And then EMEA was up a lot.
... so just any mega wins in EMEA or any reason to think that you're at an inflection point there, and it's really taking off?
Will Lansing (CEO)
Jeff, I don't think that we have tremendous changes regionally. You know, I wouldn't try to read too much into, you know, into the data on a quarterly basis. You know, we have strength of platform across all the regions. I think Asia Pacific was a little behind the other regions in terms of platform adoption, and there were some structural reasons for that. For example, AWS was not available in India before, and now it is. But, you know, we're seeing adoption across all the regions.
Steve Weber (CFO)
Yeah, I would think some of what you see, might see with the volatility is when we have that point-in-time license revenue, and that could skew things in one given quarter. But we've had a lot of adoption in the last year in North America, and we're starting to see a lot more interest, too, in EMEA as well.
Jeff Meuler (Senior Research Analyst)
And then when you're calling out the FICO 10T adoption and then the non-conforming mortgage market, is that almost exclusively about upgrades from prior versions of the FICO Score, given how high your penetration is? Or are you finding, I guess, like, incremental volume as part of that adoption?
Will Lansing (CEO)
It's a bit of both, but probably more of the upgrade.
Steve Weber (CFO)
Yeah, I mean, for the most part, everybody was using the traditional FICO Scores, and now they're just moving to the 10T, you know, ahead of the adoption by the FHFA.
Jeff Meuler (Senior Research Analyst)
Right. Okay, thank you.
Operator (participant)
Thank you. And again, ladies and gentlemen, if you have a question at this time, please press star one one on your telephone. One moment as we move on to our next question. Our next question is gonna come from the line of Manav Patnaik with Barclays. Your line is open. Please go ahead.
Manav Patnaik (Equity Research Analyst)
Thank you. Good evening. I just wanted to, you know, ask Will, you know, I think you tried to reference some of these in your prepared remarks, but, you know, in the face of, you know, some public criticism around the price of your scores, like, how, you know, how is your approach or thought process around, you know, the value of your score, maybe the timing around which you get to that value? Has that changed at all?
Will Lansing (CEO)
Well, you know, You've heard us say in the past, and I certainly continue to believe, that what we charge for the FICO Score is so much less than the value that we provide, that I would say there's not a lot of change in our thought process. Our thought process is that over time, we're gonna close some of that gap. And, and, you know, I think, you know, I think anyone who actually studies the numbers and gets into the details of it sees that FICO Scores are a, you know, a tiny, tiny piece of the overall process, whether you're talking mortgage or any other kind of credit evaluation process. And so, so I would say no, no real change anticipated.
Manav Patnaik (Equity Research Analyst)
Okay. And then somewhat similarly, on the software side, you know, I think you talked about that value proposition being unique and niche, et cetera. But, you know, we've heard obviously a lot of other software companies during earnings season talk about, you know, the weak environment and the slowdown. It doesn't sound like you're seeing any of that, but anything you'd like to call out? Was there maybe some, you know, could it be at a lag that you see some of these headwinds, or perhaps you're not seeing them at all?
Will Lansing (CEO)
We're really not seeing that. That's not, that's—I mean, we, we've certainly heard that, and I guess the industry is experiencing that, but we haven't felt that.
Manav Patnaik (Equity Research Analyst)
Okay, fair enough. Thank you, guys.
Operator (participant)
Thank you. This will conclude today's question and answer session. Ladies and gentlemen, this will also conclude today's conference call. Thank you for participating, and you may now disconnect. Everyone, have a great day. Goodbye.