FAIR ISAAC CORP (FICO)·Q2 2025 Earnings Summary

Executive Summary

• Q2 FY2025 revenue was $498.7M (+15% y/y) and GAAP diluted EPS was $6.59 (+28% y/y); non-GAAP diluted EPS was $7.81 (+27% y/y) .
• Versus S&P Global consensus, revenue was a slight miss ($500.6M estimate*) while EPS was a clear beat ($7.44 estimate*); management reiterated full-year guidance, citing macro uncertainty .
• Scores segment growth remained robust (+25% y/y to $297.0M), led by B2B (+31% y/y); mortgage origination revenue rose +48% y/y and pricing actions are feathering in across categories .
• Software ARR growth moderated (+3% y/y; platform ARR +17% y/y; non-platform -3% y/y), with CCS usage headwinds tied to customer outreach timing; NRR totaled 102% (platform 110%, non-platform 96%) .
• Potential catalysts: continued platform innovation (FICO Marketplace launch, dacadoo AI underwriting partnership) and FICO World announcements; capital structure flexibility increased with $1.5B 6.000% senior notes due 2033 .

What Went Well and What Went Wrong

• What Went Well

  • “We again delivered strong results with revenue growth of 15%, and even stronger earnings growth” and reiterated FY25 guidance for double-digit growth in revenue and earnings .
  • Scores segment strength: B2B +31% y/y, mortgage origination revenue +48% y/y; management highlighted growing adoption of FICO Score 10T across originations and servicing portfolios .
  • Non-GAAP operating margin expanded to 58% (+450bps y/y), supported by disciplined opex and efficiencies; FCF was $65M in the quarter and $677M TTM (+45% y/y) .

• What Went Wrong

  • Software growth mixed: segment revenue +2% y/y with total ARR +3% y/y; non-platform ARR -3% and CCS usage headwinds as customers delayed/down-sized outreach programs amid macro volatility .
  • Revenue slightly missed consensus; management chose not to raise FY25 guidance due to uncertainty, implying limited near-term visibility on usage normalization .
  • Professional services declined 9% y/y and was impacted by milestone timing into April; opex expected higher in H2 due to FICO World and marketing .

Financial Results

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• “We had another strong quarter, and we are reiterating our fiscal ’25 guidance” .
• “Platform ARR growing 17%… non-platform ARR declining 3%… CCS usage headwinds as some customers delay/downsize outreach due to macro volatility” .
• “We bought back 112,000 shares… average price of $1,849 per share… we continue to view share repurchases as an attractive use of cash” .
• “Macro remains fluid… well positioned for the year… expect FICO World to showcase innovation and drive pipeline” .

Q&A Highlights

• Guidance stance: Team typically “beat and raise,” but held guide given uncertainty; comfortable with the range and will raise when confidence improves .
• Software dynamics: ARR deceleration driven by CCS usage growth slowing; pipeline/bookings healthy; no discernible changes in sales cycles or bank/geography behavior .
• Pricing: Auto, mortgage, credit card repriced effective Jan 1; benefits feather in over the year; company doesn’t split price vs volume mix .
• ACV→ARR conversion: Typically 6–9 months to begin, 9–12 months to fully ramp depending on customer sophistication .
• Capital returns: Buybacks are consistent rather than market-timed, but company may “heavy up” when valuation dislocation occurs .

Estimates Context

Values retrieved from S&P Global.*

Where estimates may adjust: models should reflect stronger Scores B2B/mortgage pricing tailwinds and tempered software usage growth/NRR; opex higher in H2 due to FICO World/marketing .

Key Takeaways for Investors

• Momentum in Scores persists: +25% y/y with B2B +31% and mortgage origination +48% y/y; pricing tailwinds should continue to feather in through FY25 .
• Software growth mixed: ARR +3% y/y with platform +17% but non-platform -3% and CCS usage headwinds; expect PS revenue to recover near term as milestones and pipeline convert .
• Profitability strong: non-GAAP operating margin 58% (+450bps y/y) and GAAP operating margin ~49%; disciplined cost management despite planned H2 event/marketing spend .
• Cash generation/returns: $65M FCF in quarter and $677M TTM; buybacks remain a core capital allocation lever (112k shares at ~$1,849 avg.) .
• Guidance intact: FY25 revenue $1.98B, GAAP EPS $25.05, non-GAAP EPS $28.58 maintained; management conservative given macro; watch usage normalization for upside .
• Product catalysts: FICO Marketplace expands data/model ecosystem; dacadoo partnership introduces AI-driven life underwriting; expect additional platform/fraud solution updates from FICO World .
• Trading implications: EPS beat vs slight revenue miss with reiterated guide and conservative tone; near-term stock moves likely driven by platform announcements and evidence of CCS usage re-acceleration.

Non-GAAP Adjustments

• Q2 non-GAAP EPS of $7.81 excludes share-based comp, income tax adjustments, and excess tax benefit; non-GAAP net income was $192.7M vs GAAP $162.6M; FCF excludes capex .
• FY25 non-GAAP EPS guide ($28.58) reconciles via share-based comp (+$6.31), tax adjustments (-$1.58), excess tax benefit (-$1.20) .

Additional Q2 Press Releases (Relevant)

• FICO Marketplace launched to accelerate enterprise AI decisioning via a curated ecosystem of data/models/decision assets; initial partners include LexisNexis, Plaid, Prove, Mitek, SentiLink .
• dacadoo partnership integrates health risk quantification with FICO Platform to enable hyper-personalized life insurance underwriting .
• Capital structure: priced $1.5B 6.000% senior notes due 2033 to refinance revolver/term loans and for general corporate purposes .