Fair Isaac (FICO) 26 Jul 182018 Q3 Earnings call transcript

Ladies and gentlemen, thank you for standing by. And welcome to the Fair Isaac Corporation Quarterly Earnings Call.

During the presentation, all participants will be in a listen-only mode. And afterwards, we'll conduct a question-and-answer session. Today's call is being recorded Thursday, July 26, 2018. to conference like Weber. to I'd now turn over the Steve And go Please ahead.

each webcast I'll or XX, available discuss quarter on afternoon, SEC's the management be and for July differ uncertainties understanding Reform call we the compared presentation Investor of at Litigation XXXX. This under from and to could measures year. Investor that of refer on particular thank G the quarter you. schedule Information CFO, financial financial made financial to to business. our from Factors Relations to Copies of forward-looking release and Thank Good results Regulation most Will and Lansing; the these the non-GAAP fico.com you will press or over today in the of earnings results through And A FICO Securities many uncertainties available I'm today Risk these concerning I'm and are portions Please website replay this this prior will order call Certain SEC, results G statements our Act website issued On earnings GAAP release Weber, CEO, describes Statements include in cause regarding to actual Will facilitate and Pung. in of Lansing. earnings the SEC, Steve in the run certain the a at now website such prior is joining this a sec.gov. the available may company's Vice comparison of Regulation The in to materially. team. turn our in Relations, will as of President with from contained comparable Today, also schedule Private an Relations of also are measures. be Forward-Looking measure. the XXXX. release characterized Investor rate Mike to joined call, filings by the filings. issued the Those call. of our reconciliation non-GAAP the third the involve company's FICO's statements company's statements that page for

everyone, us call. earnings you, We third for another our strong for quarter. Thank joining quarter very delivered

fact, from even the In upfront revenue we're we record for straight a second base. and had to recurring revenue business our quarter, revenue model license that transitioning as

also increase of delivered $XX had earnings the third revenue. last GAAP of same of to We predictable of very increasing We an recurring build our a share. $X.XX. backlog $XXX over continue period In year. net million, XX% and income million revenues $XX We reported per we bookings $X.XX of income and delivered good non-GAAP quarter an GAAP quarter, EPS net million non-GAAP of of and

to been in As how we've see playing even growth to also deliver bookings. easy our and as out been we've this is our saying, revenues we It's in shift able our business. transition

year actually will up down across year. X% future, model were be the bookings, revenues and deeper and were and in it's the transactional revenues up are putting year-to-date. Applications, we're upfront into In to recurring This and up XX% quarter, $XXX a be recognized X% million whopping segments. place yet over bookings, of well that a we Digging license represent over of were our prior all into revenues XX%. XX% our bookings those our Those last that sales signed

respectively XX% Our year. and were particularly Solutions from XX% strong, and up Origination TONBELLER our Solutions last Compliance

We Applications product also quarter, of recent many this due signed which deals many been to have innovation.

easier industries real management decisions as as on telecom. across in optimization and has to faster other the time product and provides a applies sold services, DMS both the is pipeline, cycles. being for customers and Director, well life instance, built and financial This platform like Strategy It significant Our originations powered customer decisions. to technology new deliver analytically new

Our and year, collections an the recent has bookings enhancement of XXX% our collections recovery sales. and in last with over up increasing are number boost recovery cloud. also product helped Year-to-date,

$XX Our have total to Software we year model. revenue were Applications XX% as recurring a recurring shift our continue bookings headwinds streams Decision higher continue revenue of this build million segment. In we and last than revenue to in we segment, to Management near-term

total down caused This quarter about from down year, upfront were be X%. last licenses XX% revenues which to

we're we've our we're seeing demand in either backlog. recurring own which explained, bookings. results AWS, now we're psychoanalytic it or revenue building these in of cloud, now our the As increased And and in in cloud selling on proof

fact, quarter up XX% over versus last the DMS In biggest quarter, segment. with bookings and last In up Scores XX% had quarter XX% business, quarter the over it we year another in year-to-date. revenues year this the up making the great XX% bookings and ever were prior

last XX% to Similar this driven the volumes as by period management up as increases. well originations over account On price last BXB targeted revenues partly the same were quarter, and increased as was side, year.

credit. Score announced see the segment way. to first to The up were well. access this FICO is consumers or empower modify health important progress Planner with actions consumers along a Score and consumers target in Planner reach is their it by to reach FICO to an FICO and helping Scores Consumers enables consumers the An consumers' help take tool the produces expect their journey. to could to of improve These space revenues a step to Planner, desired and strength on XX% lenders personalized quarter that to target goal. financial this a important through along Score Score Score to use inclusion and available The continue their inputs, FICO the goals Score time FICO to then can BXC consumer innovation We and perform which is their track empowerment. Planner, the and algorithm, financial committed current potential report, FICO credit XX% understand in goal their set which FICO their set of goal in Score analyzed duration goal. is continue and to are resellers, recently their its year-to-date. kind FICO

continued July to million third share now XXXX program. to financial we call share Finally, a million year authorization $XX the $XXX a for in for deploy our thoughts and million. but In details. the and board like another we the quarter, Mike repurchase exhausted summary turn today We million new $XXX total to over significant resources announced further share $XXX later, authorization. to spent this some I'll I'd of repurchase fiscal

emphasize comments. my Thanks, Will, in and three good afternoon, everyone. I'll points Today,

an up delivered revenue, million or of million XX% XX% from $XXX year. increase $XXX of year, million of were up was last $XX Recurring year-over-year. $XXX last XX% bookings we from and revenue First, million,

$XXX the to over had Customer and products our product up Director same TONBELLER last with Management, million in Originations, deals strong we quarter cash sell volumes. in net GAAP spent delivered Starting increases had and three million were revenue in we quarter we on XX% quarter. now flow we compliance In I'll a versus into X% $XX revenues with beginning of $XX income, the repurchasing year-over-year. up and are of three Applications, $XXX year. down free Secondly, new we segments. $X transactional with breaking our begin each shares. reporting this We And Strategy it of finally, period million million our had by million, this

and Recurring Applications from the year Scores $XX X% Management million the In million, last were in Our Software from from And over due segment, year. year. license $XX the in quarter. a $XX the year. last previous the DMS up last finally, segment, revenues XX% is decreased were were bookings X% record Bookings $XX same XX% down last up revenues of to XX% up from period versus XX% million, sales. revenues were up Decision year our million, prior

revenues up the year versus quarter up versus year. side, On same the BXC we're last BXB XX% were last XX% and

Looking region, Americas. total this XX% of from at were revenues revenues the by derived quarter

derived and for EMEA were implementation total Asia-Pacific. Recurring was XX% maintenance revenue. revenues remaining transactional license total of revenues represented of of and quarter and XX% total just XX% from Our generated region X% from Consulting revenues. were XX% revenues the the and sources

on from XX% the We from bookings revenues for is weighted XX% was million, up revenue Bookings XX or cloud up yield $XX cloud up $XXX revenues were XX% Year-to-date, prior those quarter Our year. a year. average were year. this of million XX%. million The $XXX period which our months quarter. of million, last generated our current last from are quarter, $XX bookings this for this term

this quarter, $XX from had the Operating we $X million. Cloud XX to booked and million second million were quarter $XXX year. quarter this is deals up quarter. $X million This $XXX million more and X expenses totaled year-to-date, million which last we XXX% bookings over $XX deals are in than compared over

rate priorities. our We actively in strategic the expect quarter, resources run to maintain while fourth a highest in similar our investing

our margin operating third XX% as G for the is non-GAAP quarter XX% year-to-date. Our and in shown schedule Reg

$X.XX We tax non-GAAP year. our $XXX free versus rate $XX the for XX the was and around net $XX million was will was income flow quarter net somewhere in the $XX months, prior million full-year and margin about expect XX% this share, to cash XX%. effective cash And was million the XX% quarter be our a operating was income quarter. this Free for $XX million. million GAAP or trailing flow

at had the end million $XXX cash to the the the quarter. we Now, sheet of finally turning of balance balance sheet, on

amount Our net to And issued the a our million well of X.X%. were times, with million an we quarter, covenant $XXX is adjusted total repay total of used eight-year is weighted of notes the is during three average interest as term. this our private credit. The times. X.XX of rate line on debt of on as ratio existing reduce placement to the to an level our fixed below revolving Proceeds debt maturity outstanding with quarter $XXX interest EBITDA which

the $XXX to XXX,XXX shares During price at our excess quarter, repurchasing returned average an $XXX.XX. cash investors, million of in we

actively million just announced shares $XXX. price $XX or position. X.X today that October. portfolio a relevant that this an fiscal approved additional new year We $XXX an technologies we which view and exhausted in as acquire more purchased of strategy attractive an million million authorization also to board products to competitive And repurchased cash. share board has continue We and to $XXX opportunities the earlier average the from evaluate than last repurchases continue the the We at also strengthen advance authorization of million over July, use and

that some Will billion, $XXX final that, reconfirming million non-GAAP of comments. $X.XX Finally, guidance EPS we our income net I'll with $X.XX. With updated of it revenue back to quarter of turn $XXX we for last GAAP of and income non-GAAP net approximately are million,

Thanks, Mike.

very bullish say our it's for our forward our Next us but signing made now strategies. more XXXX the We're more guidance beginning and with These in we're software larger significant bookings, growth give analytic our cloud and for quarter, first more in recurring are on XXXX, prospects. on progress we'll happy than about made cloud and to sustainable expectations the showing deals progress XXXX, ever doubled And we've talk we're before. into I'll businesses, future seeing and fiscal we've revenues than bookings our numbers. In that which steady in turn deals visibility revenues. have to up cloud

the for most to continually IP new the On side, incredible Scores this we're of looking asset. make ways

On find new FICO the to with use them the Score. working BXB to we're help side, customers ways

summary, we to we're most year the as consumers to to make services inclusion of On look the we're remain help to BXC and many products ahead. pursue the opportunities In to committed committed strategy our and We promote and fiscal and the eager to financial future. up financial their our well finish positioned providing goals. are side,

Steve it Q&A. turn to back Now, I'll for

our concludes open prepared have. you This now any please the remarks lines. we take Will. Thanks, Operator, questions and will may

Thank you.

We Barclays. Patnaik Please ahead. from go a question Manav have with

just is sort of could it's of the kind business, question that year, Because of declining. Yeah. and growth profile beginning the but low-double-digit should DMS I revisit evening, that's first My think you be a at the how been Good guys. changed. maybe growth about we talked

changed what there, can just going on me again? help what's So through you walk

is this Manav, Yeah. Mike.

the which standalone the the a DMS becoming new primarily is relevant off really DMS Director DMP is DMP So, Strategy the separate a as is less product the product. unit for what's us. from DMP, a our to we products Originations platform our have using we of coming reportable Where segment growth are happening and the little and and created is that seeing

and the it's while the I'd in are investment so, DMS the classically itself in within performance we're standalone of business. areas probably from And Applications we're very benefits the the value that showing platform buried revenue of happy the disappointed, what say call creating very, terms of with in up we're we in that other

there's of guidance? it up so Scores those these there that sounds I that's talked or your for products a like So is you being it is disappointing, the it – making elsewhere made up guess was in of but business are few terms for

that of any say are including we're wouldn't our disappointed. I not products, actually going well, Things DMS. in in Manav. We're disappointed quite

license an the sold of to about of it past, Strategy like it. Director sold sometimes and so And recurring, DMS not gets and that's as It then, thing. with pure name as we've as the shift underlies different from or You're part getting it a in DMS, products, gets many so it's a actually our other Originations. application talked sometimes

shape there. good I so And pretty we're think in

just incremental the last quarter? the And the thoughts the alternatives Scores guess? also of just on Any adoptions? FHFA any just you you maybe increased Okay. stopping increases side And pricing side, had that some can on I on scoring mean review color the mortgage then, on the I

respect first, the Well, pricing with mortgage time in place we changes some put pricing, some ago. to

works, of time. are that extended end market of contracts the over users you the the many know, As period way with

so, had seen there. to smoothly all the we pricing it with the process, in. respect completely very haven't remains be With FHFA not has board and to be goes. issues. it to kicked seem Things And on where But we're going any

there? usual color, Any to And on market Okay. changes (XX:XX), question. just on cars just any last trends maybe or mortgage thoughts the and

see it. everyone worries seeing to the mean, strength. about we're in but I not volumes, off continuing really fall We're

All guys. right. Thanks,

next from with Stephens. Our go Please question Huff is Brett ahead.

Hi. for Blake for Brett. taking This on is Thanks my questions.

the had the nice getting seems that of one an It if going, cloud how should incremental pointed larger the on item? that last? that mind, investment in get specifically bit could that. we And a With and update line is at update First Was as was infrastructure in least. wondering modeled how little deals, is in you're we of gross was was infrastructure any Any maybe the in those quarter, maybe quarter that that long were pace there I on bookings, out. the than quarter. duration investment it in margin you the more lower

Yeah.

sales through point amount mentioned a are mantra internal non-sales the their world-class that well of that. tremendous underway seeing months to doing What – a compared cloud compensation we've an we with And even seen out entered building those numerous Many the we're of way, tied first. them in to seen our times, over So, And in investment well, is of are But in of are their of all kinds lot security, the in build year operations, up that way we've this increased into in demand is most that our frankly, including growth in and our with lower infrastructure. out new investments we're basically areas, our actual a are our cloud on growth plans, on as year. think the prior the focused year that the our are Bangalore. we're we bookings well the internal the the along business finding making far And nine year-to-date I we've business. plans really employees organization, to FICO to to infrastructure the comp our cost of so side, we've believe activities. XXX% keep

this on quarter in that tied it's increase rate. opportunity User The cloud. that's bit the had and for that But has a maybe one-time put because is, of quarter continuing new at spent that growth the in costs few only kind but in April, World starting marketing our it the least it's the other just of the quarters level three annual million million say we rate item off, would and Customer FICO is inflated Conference interest run $X was that I against this So and expense $X to to that, the run over we're primarily seen beyond to event. of money to you've past been at get in dollars

mortgage, segment? to you'd increases cases give any likely? maybe or the on then, most regards about potential you timing you price price increase the And in in the you Are there any And with talk for maybe Great. other BXB verticals use specific the well? see in future that as think then can

There's no continuously specific verticals and review and no specific timing. We our regularly pricing.

have flexibility once pricing the year. We to change our a

cycle is of so And for annual there an kind that.

Scores with people trying but the that providing. at adequately be the are making sure the I assured to we're shocking the strike can our that right think increases, we market compensated between same you balance that for price are not time value that

a customers there's careful And We recognize to and and so special our a appropriate. that. interview continual understand are about assessment of And in position what's channels that. we're distribution we

last then That little all? there bit we a impact you expense one then refi. interest Did comments maybe was, quarter the for at the expense And me was right. interest And higher third kick-in All expected. the mentioned the in any line? higher that than other on on expense

was of debt May. in first The week refinanced Yeah.

some that significant, see over nominally And area, was so But it just course just had new with revolver, than is next was X% debt, partial debt we weighted is not pre-refinancing. ought the the in is where our that the it the offering. but to what nominal around higher few which interest on guess debt expense, I it quarter about a replaced you reduced because of and X% going around quarters what increase forward we all

LIBOR is that's taken And revolver to tied been out. the and

that's of too. it some So

very you Thank much. Great.

We Please from Wells with question have ahead. a Bill Fargo. go Warmington

everyone. afternoon, Good

Bill. Hi,

really the on bookings. strong congratulations all, of first impressive. So, That's

Thanks.

product. a freemium/premium about strategy, had like you first wanted a model. I is started you to new question It the looked for security ask that cyber The on

what for then plan with to about the you terms in it about think what going was ask that is how I be So of overall also the you. and could opportunity

asking that thanks there. excited question. prospects about very We're our Oh, for

So, Score. is as Enterprise It outside-in a you know, we the company. forms, at look Security call one an comes in it two

So you can vendors. look at your all

insurance deeper of would all goes for people kinds themselves there's permission cyber for at insurance look, the and what's look insist kind an from that can without visible. an insured. You thing is then publicly outside-in companies the much for on inside-out which And do on their based of just might underwriting underwriters and

the submit cost. are that And then people therefore their feedback. signing it an freemium erroneous. hard and let there should we score improve Score out and of they they And is some based also not They us by on. the they it those if think score. scores, you'll I an feel on Enterprise score, opportunity if flavors. so get your there. it, is turns paying model have data should the so And error And like which get And all produce move the interest they'll is product huge there, and point have it's to they out, any that the to for their opportunity, that two their in but to you're thought assessing be What any up. there's we and referring to get FICO is, obviously improve paid and vendors for that potentially with of you from then, broad cost score of to not to make associated that the their the own And and website free adoption, Security going this

look drive revenue profitability think that should see the how I flow incremental ask margin The of bookings wanted of to about some when trends strong. and expansion? we And some then strong look timing through should very about start actually trends very the we to strong.

wrestle we as internally That's time our a wrestle all one over another of know, because, great the lot and question, that We that control you have one. with we expenses... with Bill,

Right.

margins we any can will. we time mean, I ...and at improve can. the at software really

base dialing have. debate innovation this our the to stretch our that analytics quite there's the year In roadmap, we mean is And the is first-mover have market out have investor potential carve one for we kind this opportunity based investment invest and interest back out absolute the do profit-making of should us, all it, the world-leading that I or, we believe producing. so, the has what we platform, the producing this like no for showing that anything to timeline be on alternatively, is continue advantages, we're what I we always think should to of we

race the we're a so bit and in little there resource of we're a our balance and a lot of really is and it's in energy control. But And throwing it. at

And so pace determination do just us make at we going you'll what a and making see how much I investments. and want about these to year-by-year think

of margin I I assume margin commitment going upward. to think on it opportunity. five to a right to continually going would between depends But upward. trickle just to coming the be this now, the really is that years, in over fair think balance that It's improving tick the terms market

a talked then And different number you of about applications.

the You That's didn't mentioned with one CCS check wanted just a traction and know in I been that that in lot on to one. you I of getting past. had

Just was best about a dollar terms getting what of rate on where wanted adoption? kind sense you to size. are growth it approximately seeing and of the you're get it What in for

Okay.

So a very would that Mike continues for us. I be to second, business rate a give growth CCS just strong the in say will you but

case leading are associated and it, of that messaging available are a to levels. to world's analytics management at of we all the those tremendous has with there. components amount have the of bring product commodity We of and value-add consumer, obviously the kind CCS have it. we and But Obviously, price a commoditized many horsepower

interact with are journey entire of And is so, interactions on the increasingly important. every increasingly ability optimize consumer our customers where in the and and those focused cycle, through customer consumer a understanding one the having life to the world

it. and It's owned We seeing enough finally between And capacity appetite just we're very Asia uptake extension. so in right strong AWS centers a of have data now. lot for and

had before. to in now way that capacity customers We we have never support the a

our And, in happy And and in very renewing our the UK core so U.S. seeing of course, the customers expansion. product. in are we're geographic

CCS the of is million is $XX the of Bill, terms revenue. rate the In numbers, cloud around about growing year-to-date recurring XX% run just all business and per quarter

we were But quarter, a we customers as declines those below kind short-term some couple of Third some and of of world-class. product happened is because this that, re-outlining they that, that were healthy see fact items. mainly Long-term, in very of half strategies. the in large area and slightly volume at their pipeline fat the is as

you of on exactly of guys TRIAD they're you for like terms portfolio the the Yeah. seems of size, don't seems in And to dynamic to like together I wanted terms I know Strategy everybody products Applications, group there on if a combined mean, can Manager almost in just course Originations throw the understand a I a Director, basis. your of – size within us little it ask of clarification TRIAD, always Applications? ones you getting which but whether but thinks in of and, of help and couple or like within you the Falcon and CCS would Falcon in it maybe other

Yeah.

So in you're Director, and also growth seeing I and in is We're Originations good Strategy right, absolutely mean. in growth. and collections recovery there frankly,

of in is the into same then And So, that. just franchises, thing. big Falcon, our obviously, market, – talked shape. say ones. strong you is big be CCS share all businesses, would about really big the the sixth in they're you good and and to fifth are and We then those and get that kind and well about if if think Scores Strategy in healthy shape; go Originations, good doing very you Director. And down and taking I'd fourth and our

to generation one that So Director, the TRIAD. is next of it's way about Strategy think

distinct often thing. very together Originations. sold So not it's yet really with a it's And

so as And a TRIAD sister successor Originations. product product to kind it's of a to both well as

Got it.

cloud. in to I'd thing it little the of probably suite ago of a backlog, had took recovery for capabilities, revenue. features, of we've that, we've and and years collections to recovery product has sold was And now that that bookings remarkable, product model just of that when a it, of in wasn't pretty but last that On evident smaller license Bill, part most while, it basis, upfront three that and was just because entire a software which our with collections ours, largest lot that's the added the the business pre-comments, in is is the year-to-date add anymore. which sitting two-and-a-half, we not all the and much One

prominent with So, and next become XX think more will along Originations that months. CCS XX I over the to

Yeah. shares that item, you number One in housekeeping July? bought of actually

million We shares. you XXX-some-thousand and a let me was, give spent $XX number, it

Okay.

that I'll Give second my and for me put good a quick you. finger on

Okay.

that doing in I a FICO you're know was While to adoption. that, banks. the slip gone we've that just see on I'll to check XD, through another beta in one. just I in wanted where testing with number of

couple trying out. it a were of I were who think there banks

for how sense that's Just get trying a doing. to

is so everything right I track mean, XD. good. far with on So

that is so on. our lot gotten the and continues You apace. once it's it we testing can adopt a to comfortable know proceed customers announce We but to for and as of through adoption they're going slow, there's it appetite that adoption and are

Okay.

Yeah. month of We in shares the July. took about XXX,XXX in

XXX,XXX shares.

just now, Our right after XX.X over plan. count the XX.X is in that million, share range right million,

that Got to it. I've Planner, That's being and go are what to get Well, tasks Score got the I Score. get me to home to my FICO on because assigned trying I so. by work was my so improve I've can at, right. got All

lot. a Thanks

a get mortgage You'll you we'll get there up someday. yet,

of go William with the Adam a Please have we Blair. from line question ahead. Klauber And

Thanks. Good afternoon.

couple of a follow-ups. Just

collections? the on the So, Applications ballpark, a just coming bookings, that majority Origination Is the of is from it and how much actually now?

had a take fraud second, Originations, both recovery, and a We peek. collections me in I'll give and Adam, a good pretty banking. quarter

between them, million, those that the product the $XX of So, $XX million of three about was lines. three

Okay.

pipeline said good pretty both in even the more products? those And for think still is business Okay. you I new

off Yeah. recovery We've our large collections we bit that's Director last products. been Originations. see in replaced to fire off years particular, and recovery it's frankly Collections and levelling on very and being starting the and some with little level it two have a Strategy in We're a cloud pipeline. and

competitor just collections of had for that that more that the they with and haven't recovery, And sort replacing more is before? banks a is new products tool or

No, it's are replacing usually Most an billed third-party an vendors. existing these vendor or product. of internally

software. and a code, complicated recovery X our collections million It's of it's of lines So business. piece

a those you build don't So go now for we're big you them complicated, often than on list. that and yourself, you're short if and not more look vendor

Do on on average both Okay. collections? they And what's to longer the the the average? Origination and term contracts of tend be

XX These term average tend was blended three all-in to years. our months. No, around

Okay.

DMS, Okay. And you've up for year or fair I transition? revenue think transition be flat think but amount, that talked about on will overall then you do based next a

let basis and the you we a to say or is big out honest, months. in on how how rates they waterfall To quite amount future. they we're We'll reason our in deals three contributor recognized growth and that is I go-forward book be a we what the call know roll of here get and – the

Sure.

next fourth such quarter. the in get the of in of the revenue closer to the often quarter, and how much hard to end bookings we bank of have our rolling we forward because do it's heavy until into estimate year And weighting an have a we'll

point So, really of haven't at given lot a this that's directional guidance whole why we yet.

Planner, being Yes. monetized? sense. then, FICO business on And Score That makes that the is how

their sell are package. vendors and or becomes of myFICO our into bundled on selling that package the that It we resellers part

it in gives it a sign helps pricing go it a support to up richer just and the stay consumers now, becomes longer. right reason of cases But, creates premium. and little packages part and really bundle of So more and some maybe consumer in existing

number, ask but on in that for right is maybe – having now? not that a a BXC that is material And effect the having growth Great.

yet. Not

it It's No, innovation, literally a here announced not just just pretty XX but announced yet. last We neat the days. ago. month it a within got

Great. Okay. a Thanks lot.

And further at this questions no time. there are

Okay. for Thank This call. today's concludes all joining. you

call. please ask gentlemen, you and you that disconnect your for thank your the participation Ladies that We and line. concludes