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FAIR ISAAC CORP (FICO)·Q1 2025 Earnings Summary

Executive Summary

  • Strong start to FY25: revenue $440.0M (+15% y/y), GAAP EPS $6.14 (+28% y/y), non-GAAP EPS $5.79 (+20% y/y), and free cash flow $186.8M (+55% y/y). Management reiterated FY25 guidance for double-digit growth in revenue and earnings .
  • Scores segment up 23% y/y; B2B +30% driven by higher mortgage pricing and volume; mortgage origination revenue +110% y/y, now 44% of B2B and 34% of total Scores .
  • Software revenue +8% y/y; ARR +6% y/y with platform ARR +20% and total NRR 105% (platform 112%, non-platform 100%); FX headwind of ~$3M to total revenue (~1%) and ~1.5% to Software revenue .
  • Strategic catalysts: BNPL scoring study with Affirm to incorporate BNPL data using FICO’s proprietary treatment; early adoption momentum for FICO Score 10T in non-GSE mortgage underwriting and securitization .

What Went Well and What Went Wrong

What Went Well

  • Revenue and EPS growth: $440.0M revenue (+15% y/y), GAAP EPS $6.14 (+28% y/y), non-GAAP EPS $5.79 (+20% y/y). “We had another strong quarter and are reiterating our fiscal ’25 guidance.” – CEO Will Lansing .
  • Scores momentum: B2B +30% y/y led by mortgage originations (+110% y/y); mortgage revenue mix 44% of B2B and 34% of total Scores .
  • Cash generation and capital returns: Free cash flow $186.8M (last 4 quarters $673M, +36%), share repurchases of 79k shares in Q1 and 47k in January .

What Went Wrong

  • Platform ARR growth slower than long-term target: Platform ARR +20% y/y vs prior commentary of ~30% target; management cited FX headwinds and temporarily lower usage; expects ARR to accelerate in back half .
  • FX headwind: ~$3M drag to total revenue (~1%) and ~1.5% on Software revenue; Brazil particularly impacted ARR .
  • Mixed origination trends outside mortgage: Auto +5% y/y, but credit card/personal loan/other originations down ~3% y/y; B2C growth only +3% y/y and requires continued investment .

Financial Results

MetricQ3 2024Q4 2024Q1 2025
Revenue ($USD Millions)$447.8 $453.8 $440.0
GAAP Diluted EPS ($)$5.05 $5.44 $6.14
Non-GAAP Diluted EPS ($)$6.25 $6.54 $5.79
Operating Income ($USD Millions)$190.3 $197.2 $179.5
GAAP Operating Margin (%)42.5% (calc from )43.4% (calc from )40.8% (calc from )
Net Income ($USD Millions)$126.3 $135.7 $152.5
Net Income Margin (%)28.2% (calc from )29.9% (calc from )34.7% (calc from )
Consensus Revenue (S&P Global)*N/AN/AN/A
Consensus EPS (S&P Global)*N/AN/AN/A

*Values retrieved from S&P Global – unavailable due to data access limits this cycle.

Segment revenue mix

Segment DetailQ3 2024Q4 2024Q1 2025
Scores Revenue ($USD Millions)$241.5 $249.2 $235.7
Software Revenue ($USD Millions)$206.4 $204.6 $204.3
On-Premises & SaaS ($USD Millions)$183.8 $181.7 $186.0
Professional Services ($USD Millions)$22.6 $22.9 $18.3

KPIs and operating metrics

KPIQ3 2024Q4 2024Q1 2025
Cash from Operations ($USD Millions)$213.3 $226.5 $194.0
Free Cash Flow ($USD Millions)$205.7 $219.4 $186.8
Software ARR ($USD Millions)N/A$721 $729
Platform ARR ($USD Millions)N/A$227 $228
Dollar-Based NRR (Total, %)108 106 105
Platform NRR (%)124 123 112
Non-Platform NRR (%)101 99 100
Revenue Mix – Americas (%)N/A85 87
Revenue Mix – EMEA (%)N/A10 8
Revenue Mix – APAC (%)N/A5 5

Guidance Changes

MetricPeriodPrevious Guidance (Q4 2024)Current Guidance (Q1 2025)Change
RevenuesFY 2025$1.98B $1.98B Maintained
GAAP Net IncomeFY 2025$624M $624M Maintained
GAAP EPSFY 2025$25.05 $25.05 Maintained
Non-GAAP Net IncomeFY 2025$712M $712M Maintained
Non-GAAP EPSFY 2025$28.58 $28.58 Maintained
Net Effective Tax Rate (Outlook)FY 2025~22% ~22% Maintained
Recurring Tax Rate (Outlook)FY 2025~26% ~26% Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 2024)Previous Mentions (Q4 2024)Current Period (Q1 2025)Trend
Platform ARR growth+31% y/y; NRR 124% platform; bookings variable +31% platform ARR; NRR 123% platform; bookings $22M; FY25 guide introduced +20% platform ARR; NRR 112%; FX headwinds; expect acceleration H2 Slower near-term; management confident in H2 rebound
Mortgage pricing & volumesB2B +27%; mortgage origination revenue +? offset by volume decline; rate sensitivity Mortgage royalty set at $4.95/score for 2025; feathered-in pricing Mortgage +110% y/y revenue; pricing and volume driving B2B; elasticity minimal so far Positive momentum; pricing holding; rate path remains uncertainty
FHFA timeline / regulatoryPreparing for FHFA implementation and market adoption Uncertainty under new administration; possible delays FHFA removed specific timeline; industry not ready; minimal impact to FICO’s role Timeline suspended; FICO position seen as resilient
BNPL data integrationN/AN/AAffirm study: proprietary BNPL treatment improves model performance; majority impacts within +/-10 points; potential score increases for frequent BNPL users New initiative; potential product launch
FX impactsN/AModest overall; not quantified ~$3M total revenue drag; ARR FX impact -2% total/-3% platform; Brazil noted Headwind in quarter
ACV bookings/pipelineQ3 strong bookings? (YoY booking metrics) ACV bookings $22M; FY total $85M; variability; H2 stable ACV bookings $21.2M; pipeline strong; variability expected Healthy but volatile
Capital allocationBuybacks ongoing; record FCF 188k shares repurchased; leverage targeted 2–3x 79k shares in Q1; 47k in Jan; appetite to repurchase on dips Continued repurchases

Management Commentary

  • “We had another strong quarter and are reiterating our fiscal ’25 guidance.” – CEO Will Lansing .
  • “Platform ARR grew 20% versus the prior year, while non-platform grew 1%… Dollar-based net retention rate in the quarter was 105%… Platform NRR was 112%” – CFO Steve Weber .
  • “First quarter mortgage originations revenues were up 110% versus the prior year… accounted for 44% of B2B revenue and 34% of total Scores revenue.” – CEO Will Lansing .
  • “We issued a press release on the study we conducted with our partner, Affirm… inclusion of BNPL loan data could drive a FICO Score increase for some consumers, while improving model risk performance for lenders.” – CEO Will Lansing ; details in BNPL release .
  • “The macroeconomic environment remains fluid, but our strategy and execution remain consistent.” – CEO Will Lansing .

Q&A Highlights

  • FHFA implementation delay and GSE privatization: Management sees limited impact to FICO’s central role; the FICO Score remains the best tool for investors; timeline now indeterminate .
  • Platform ARR slowdown: Driven by FX and usage seasonality; bookings flow-through expected to accelerate ARR in back half; no churn observed .
  • Mortgage pricing elasticity: Early indications show minimal elasticity effects; pricing for 2025 socialized as expected .
  • Estimates/guide conservatism: Guidance built on a conservative view of interest rates and seasonality; Q1 in line with plan .
  • FX quantification: ~$3M total revenue (~1% total; ~1.5% Software) knocked by FX in quarter; Brazil highlighted for ARR .
  • Expenses: Modest increases through year; FICO World adds ~$5–6M in Q3; no material step-ups .
  • Capital allocation: Increased buybacks as stock pulled back; ample authorization to ramp purchases .

Estimates Context

  • S&P Global Wall Street consensus estimates for Q1 FY25 were unavailable during this cycle due to data access limits. Values would normally include Primary EPS Consensus Mean and Revenue Consensus Mean; please note this unavailability and consider revisiting once access is restored. Values retrieved from S&P Global – unavailable this cycle.

Key Takeaways for Investors

  • Momentum in Scores remains robust, with mortgage origination revenue up 110% y/y and pricing holding with minimal elasticity concerns; this is a key near-term earnings driver .
  • Platform metrics faced temporary FX and usage headwinds; management expects ARR acceleration in H2 as recent bookings go live, supporting the medium-term software thesis .
  • FY25 guidance maintained across revenue and earnings, reflecting conservative rate assumptions; upside exists if rates fall in the back half boosting mortgage volumes .
  • Strong cash generation continues (FCF $186.8M in Q1; $673M LTM) with active buybacks, offering support on pullbacks and enhancing per-share metrics .
  • FX is a manageable near-term headwind (~$3M revenue impact), but does not alter the core growth narrative in Scores and Platform .
  • BNPL integration initiative with Affirm could become a differentiated scoring enhancement, potentially improving lender risk performance and consumer inclusion; watch for productization updates .
  • Regulatory timeline for FHFA credit scoring changes is suspended; FICO’s entrenched role with investors and lenders suggests limited disruption risk to core mortgage economics .