Fair Isaac (FICO) 4 Nov 192019 Q4 Earnings call transcript

Greetings, and welcome to the Fair Isaac Corporation Quarterly Earnings Call.

During the presentation, all participants will be in a listen-only mode. Afterwards we will conduct a question-and-answer session. [Operator Instructions] As a reminder, this conference is being recorded today, Monday, November 4, 2019.

I would now like to turn the conference over to Steve Weber. ahead. go Please

the our Good FICO's Dave. Vice and you we today thank of CFO, and Thank McLaughlin. Mike quarter afternoon earnings joining Today, by joined I'm fourth issued Relations; facilitate prior will Weber, Will rate to results also run call. for prior a in Lansing; Investor our you, describes understanding quarter On year. comparison compared release results and that the everyone, in discuss to order this CEO, I'm President of press to business. our financial the Steve call, of management

cause contained Certain filings the in our results Information such the the materially. or FICO these in presentation Risk Private this portions XXXX. to particular Copies may website and uncertainties SEC, under SEC, Reform are concerning in the is Litigation of Forward-looking as available could Relations from team. Act Statements the filings. the of forward-looking many Factors statements actual with made Securities involve Those from Investor differ company's be from in statements characterized that uncertainties

release SEC's or webcast November This the today on Regulation Relations this page measures call include certain Investor earnings available on through regarding financial the at of replay and available website The X, G Please most comparable are these release the company's at schedule be will to earnings fico.com G Regulation sec.gov. will the refer XXXX. of company's of the schedule statements website measures. issued each A reconciliation for to financial a non-GAAP of also and non-GAAP measure. GAAP

Will turn I'll the Lansing. And call over to now,

a $XXX last I'm kept report In an solid of quarter, of increase Steve. quarter, XX% revenues very we year. off another we million, same you, the period delivered fiscal to fourth our XXXX. of over which reported pleased remarkable Thank

of $XX year non-GAAP On XXXX. up GAAP of XX% per earnings last from For XX%. fiscal XXXX. $X.XX billion flow XX% as and up of up GAAP the revenue, up was cash earnings delivered $X.XX full delivered fiscal share We free well we a XX% the and basis recorded million from $X.XX net up growth per from XX% year, we share, income,

particularly breadth our of I'm the with pleased in business. strength

predictable application Our next business growing more the this has past in compliance strong our years, deliver difficult and for the our growth also been license over we revenue, of year segment, several able steadily project In revenue. we're scores double-digit we were stream had ratable year. upfront a we our well up with very a as both less some in We'll fraud double-digit software business comps recurring but year. particularly solutions software growing and have building but previous with to year

quarter, X% good. also versus in up quarter the had quarter our new last vision XXXX. quarter signed DMS delivered XX% We fourth the We bookings year. X%. results. deals growth for full of revenue management up million were from last year's growth DMS The up with In the year and transactional which the our was $XX segment XXX% fiscal same this we're decision We validating strategic segment, our overall from largest delivered XX% ever financial segment, in

full versus XX% million the year. deals, $XXX last For we up year, DMS new of signed

year. the had our Scores quarter prior to up and remain very marketplace very in for ever the up in versus successful full that SaaS performed scores XX% business bookings another our decisioning cloud there's up up the These Overall, business, XX% XX%. In with XX% in we our were solutions increasing significant analytics-driven of the are year SaaS year and with total more best-in-class or committed for the a products software. more We demand annual convinced delivering than revenues well full XX%. revenue software year.

side, volumes drove prior year. up over with revenues quarterly the BXB XX% strong strategic the pricing our coupled On

the BXB For full year revenues XX%. were up

for the BXC were year. the full Our in and X% XXXX revenues up versus QX

not We and expect see next positive I'll grow which for in magnitude. continue the pricing includes done but including implement pricing the our plan difficult year's We environment but strategic guidance past, pricing some single-digit, estimate business strategic scores. In include scores discuss any because later, the macro are guidance, it to timing increases. which in and high we've a to not increases, some to it's we regular as volume does to

for an we're increased to us ahead about and operating excited many business can we model opportunities we our leverage. As how XXXX, refine the look deliver to

cloud to transition investment. to involved that We has significant having developed disruption that as robust of license growth several to accelerating dramatically business our revenue focused ratable income would margins. based us able without to focus do heavy we've platform cloud-based of revenue. increase goal been Our while remain We decisioning on years upfront we've a decisioning software enable to a platform to beginning cloud software a And first business. shifted from our on our statement scale

doing To things. accomplish this, two we're

structure. we're First, cost our improving

reached. As we're can now efficiencies cloud a for in business, our position that look be gained grown the scale from we've to we've

development as customers. relentlessly can can, through still We'll it driving are we our possible. our we so make increasing this and architecture savings focusing efficient and improve on to pass as that costs do to evolving costs, our reducing on standardization We margins where out

effort costs. past, business done in are essential efficient This an our looking if ourselves the continually and on Second, there ways investments as we've re-engineering savings reduce company. more at the cost or line be asking either something to bottom a be is run and we're can we part and in of fund any pass-through The do of parts important basis. to the it's regular well non-essential other business

to As these ahead. stewards be and strive great assets opportunities always, of see we good

for further over financial for Mike but I'll details. about to turn talk more XXXX, our me the let outlook first call

good Thanks everyone. Will and afternoon

exceeding had income net year. revenue and terrific for As over guidance. to a our the XX% both said, an increase Revenue million, was we $XXX Will the solid quarter year another finish prior of

year. $X.XX was reported XX% period from were included $XXX last revenues up revenue increase Bringing increased revenues year. million, The of $XXX up full last over and based renewals our full upfront year full million, last for license was that were same large applications recognized in were into the billion revenue. license year; X% year revenue revenue which multi-year versus usage segments, applications year Our X% higher up by sales, volumes driven as term two out

our – year. usage contracts. million, FY services up license out, segment, to due revenues limited DMS And volumes previous bookings increased over revenue XXXX. from year and increase $XXX XX% XX% million, to DMS In as $XX the was QX were Will were well our the pointed were This Software, XXX% Decision from million year. or as up revenues DMS period Management last same due Full based increased $XX this up sales as quarter, and

last were $XXX same from and the the XX% period our same million, was segment up period XX% period up BXB year, scores over up X% BXC Finally, were year. year the revenues from last revenues same last

were year. $XXX the year, last million, from XX% For scores up full revenues

transactional total and revenue. Consulting revenues. revenues of generated XX% revenues year, represented of for were derived and revenue EMEA of X% from this remaining geographic total maintenance Pacific. region sources XX% was Recurring up total XX% XX% from million our revenues and implementation and of distribution, quarter terms license region, Asia Americas derived were were the were XX% In revenues for quarter’s from our SaaS XX% from the $XXX XXXX. the of revenues total

We had The million, fourth bookings a SaaS revenues, quarter of and typically is bookings bookings for XX% increase of million was XX% $XXX bookings Full exceptionally from record previous $XXX in QX the strongest $XXX million, XX% XXXX. a year, of were bookings the up represents year. year. from yield. quarter current Those period up FICO’s million this from year $XX strong. generated XX% last year

mentioned for last finish have up loading year this back managed and a take we we they previously our but as of go live. we quarters our as a solutions expected. timing to the bookings, for some quarter year As end few on were the to will catch bookings expectations often full impact running behind quarter, revenues The

variable have seasonality. to quarter-to-quarter some continue FICO highly historically from at Bookings and they be

see XXXX. QX the typical of expect year full but we consistent expect down XXXX, be growth to seasonality, with for from good to in bookings QX We XXXX bookings

side prior expense of quarter, this expenses the the ledger, due quarter, costs, totaled data On the personnel $XXX million and from expense. our $X marketing increased million center costs to up

was shown non-GAAP full for delivered We XXX as and our fiscal margin, the schedule, expansion full the non-GAAP in Our XX% the for points basis quarter of G Reg both margin year. year. operating

the net prior income Working net income down $XX was and the quarter from to statement million, the up for taxes, XX% GAAP income year.

same income net for $XX from the quarter million year. up non-GAAP XX% Our last quarter, was the

full from excess year $XXX Non-GAAP the up net expense million, income tax including GAAP from million, tax $XX was prior benefits. was XX% net $XXX in income year. the For reduced million

year tax stock full of million The expense or awards. rate effective XXXX settlement reduced tax excess was upon benefits recognized $XX from of XX% for tax exercise including the

We to benefit before XXXX excess with and XX% be FY approximately an to effective rate expect to that's tax estimated resulting is in. in XX% net XX% our be rate of XXXX to The $XX tax recurring million. all about about tax estimated XX% compared XX%

the same $XX was year. period for million Free million cash last $XX the quarter flow to in compared

$XXX was up XX% For last the cash year, flow $XXX from million, million. full free year's

flow incentive vary see as As and quarterly timing considerably has in end you some as result compensation. of our as prior of seasonality receipts results, FICO's of free year well can can payment a quarter cash primarily

offset from balance up million cash in at from the to sheet, is repurchases. cash. had the partially of generated $XXX quarter the share million XX to last operations, due This Turning we end of million $XX by quarter

debt rate weighted Our million $XXX average stands now at interest with of a total X.X%.

in at average of per quarter return $XXX shares share. the back we XXX,XXX to of fourth price capital, Turning bought an

total $XXX we of on we about an repurchased remaining of shares at $XXX For fiscal end of per the At authorization. of price spent. $XXX XXX,XXX for a share repurchase total current million million September, had a our average XXXX

back Finally, before I to and of provide over capital and would the I year. allocation everyone Will, philosophy, like of to guidance turn FICO's the capital return remind mike for

capital Our of simply, don't capital remaining tight own the dollars investment our will our cost opportunities debt, through carry amount a need shareholders lean of all the a a to cash are excess of allocation in we that stock that balance, to deliver to well ship returns and prudent Maintain Put principles cash believe buybacks. use strive stock. return we and run buy we simple.

cash we expect cash to us FY believe use any are at stock. is comfortable into acceptable spending free our Therefore, we our you XXX% balance. our approximately current with an should to balance barring XXXX, debt level M&A Looking and buy on flow back of

in buybacks M&A go our the up flow use given flow free on generation, spend free we That cash overall and the amount stock. actual any quarter essentially of that don't on to the based back year upon M&A of course, may Of opportunities on buying market or that we cash over spend we down plan may for arise our course all conditions.

share quarter at equal an count go Importantly, we upon back we'll the price. moment EPS is guidance, stock equal a buy through average in assumption price that today's underlying each stock based in to our the which amounts

today factors. Our actual in the lay to our and what we assuming assumptions stock other behind vary EPS grants, wanted the will based due clearly actual compensation we stock share price, from to count out movements calculation. inevitable But are

FY to over XXXX. Will With for his back that, on thoughts I'll it turn

cyber Thanks intelligence, speaking with this week countries thousand our decision analytic is to demonstrate and to their FICO This most in than Conference Mike. held and solutions, to our Decisioning Global York. optimize difficult from innovation, a solutions us is artificial World, help with today and event to professionals chance customers risk invaluable discuss growth here learning, More New an us machine meet fraud XX We're decisions. sold-out our management best-in-class innovations, you them from for are automate which strategies.

leading to excited made As and we've The we what lies move into and have investments side on the ahead. growth the we've making in software progress been bookings pleased for sustainable revenue. been recurring fiscal with XXXX, I'm

the ever than continue stronger of On is value drive assets. business we side, to out these Scores incredible the and

for guidance of all following XXXX. this we the With in mind, providing are fiscal

revenues We $X.XXX approximately an XXXX. increase guiding about X% fiscal billion, are of versus of

share approximately approximately versus non-GAAP up income net of of GAAP share of XXXX. per $XXX guiding million, are of GAAP net million $XXX per We X% earnings $X.XX, non-GAAP and $X.XX. earnings income

the over who I'll take now call will turn Q&A. back Steve, to

for Thanks Will. our lines. remarks. And concludes please now This open Operator, prepared we're your ready the questions.

Manav of first Barclays. the line Thank you. [Operator Our comes Instructions] Patnaik from question with

is open. line Your

guys. evening Good

think I if it. give on high was software you the assumes wondering could talked the the on just Scores. on you Will, And some a us piece side, your Just that for bookings you guidance the first in elaborate you bit? question, color just XXXX comments about seasonality mentioned I that little Mike, single-digit could if the of

make a because high and will right, see and and We little to Mike. Scores, revenue mostly that's – – that year. in below upfront we I'll for recurrent over be that Yes, were that's comment in to turn result to single-digit forced revenue it of that some a then for comps was is some license XXXX, revenue next which going difficult software take

of what on normalize So software we that, a if completely grew. all the which growth order actually we're you for with consistent headed X% is

X.X% between X%, breakout it will more about average Yes, Scores the to the overall than of add that, software than course if the software about growth end being growth projected probably Scores the want and and growth probably growth X% is and of less that's than up higher is precise I'd you think two.

cloud it. just missed you your got the it, Falcon and on comment business roll-out rate quick then can the on well? a percentage cloud I the maybe remind the the on just just us of Okay, of perspective, And growth from as

you question? repeat get didn't could first the I one. Sorry, quite the

are at? the cloud what The that that's percentage your growing on now of revenues and

And clients at – Well, can expect $XXX to cloud grow low-XXs platform building. equivalent It's to shift is we're we to we revenue of is continue the in strategically that which you the percentages the that have to as quarter-to-quarter. equivalent we percentage million yourself. SaaS teens to to growing do and which

And then track. Falcon your X, is Falcon question on on X

XXXX. terms but Falcon full platform, So onto we getting the actually but robust into take we will call it be to Falcon now, X in cloud well launched we that's the have Falcon mean available on. – until going in the X, Falcon of I earlier, what later

guys. lot a thanks right, All

Thank you.

Warmington from with line the Bill of comes question Next Wells Fargo.

is open. line Your

everyone. evening good So

Hi, Bill.

years And the high congratulations $XXX million, that's of I'm think previous at million, showing. was strong $XXX ago at bookings the a on couple least I at what a

deals looked a, million the distribution. the to question $X So, I about if you deal on could a you I wanted million another XX between talk point for know little was and a record like had $X It and bit market changes to force spot? deals you've in? the any how segment success the that the emerging what if as sweet verticals which that you're – be And seeing driving what in seems sales made configuration your to are of

– first So, we verticals. are

been, success still it's it predominantly but has and Telco So always we're getting increasing in financial services Auto. as

we deals so there. And continue to work

of of non-financial configuration, expertise we verticals. adding are for domain terms sales these the force services, some In

we Telco so Group that Group, and we're we a So now, have at way. an have it going Auto

circle and to $X and so question back about to specific seasonality Mike, is this I I give $X deal the I'll over And which you Bill, deals for bookings, the size Manav's And earlier. the were neglected million it this quarter, happened can numbers do over those of million. nine XX be of of answer

as trends you couple to almost of again If at sort booking last of quarter then XX% the quarter be occur quarterly typically. variable FICO throughout in know. the fourth for are will high the year years, for bookings you see you that look first of the Bookings and in XX% teens ramps the to typically

the as So first a would them specific about be taper what quarter. we're we to prediction expect they'll not making usual. seasonally in But off

while of cost you software another software efficiencies the putting and the side. is heavy investment I've cost in then on first a on talk although margins, business, time on in increasingly about And heard the margin imply the guidance Okay. some software focusing XXXX would the fiscal on year this

or XXXX is see probably the potentially the business in and start is to we year So that that software growth expenses in more XXXX event? a the the slow

we one higher an think offering, think we about more it XXXX do have carries and The way cloud I cost. with that have safer that more that that in is effort – as but we bet. direction is we a

of as to a have in the is, And cloud, but costs that's more go side we so unit against, our flip down. that work thing scale

busy trying to there scale. savings were there in to so identify infrastructure be And where is – from had, that we're cloud come our

to each freed the investment little returned year up true, or time, same at a but as we the trying offset And shareholders. additional tightly it’s of so to manage two to another that's we cash either other bit, because can, investment, we're expenses see for love as

how But changing see effort a we'll So this we're making it to margins. on goes. focused the commitment without

back couple I come unit wanted the a And the I the referenced to left. back quarters client there who then quarter. then had And know in in you a had clients check of some volumes have business, on and few CCS strong been some of Okay. had

often not And ties so I with – but CCS, that necessarily.

ask So I just to for there. wanted some color

It's as business is some business business, strong. But did we more a business like usual. lose recently. generally healthy is the – CCS business, commodity where it's

terms we're would rates of product for platform at more least at we expect, terms down a of normalized that projected there to the continue higher to and DMS stands me the as expect that Within takes to onto much the be in past. rate low nothing really reasons. growth different than as growth average in apps move family will grow clients and puts out any that that strategic go around the the single-digit we Yes, you is projecting, of to should back that,

for just Score, update one on UltraFICO Got from me. it. last the Thanks. doing? Well, that's could I how an If ask

it where goes. the customers in we'll in test, it's is – it's with see UltraFICO and Yes, pilot

more year. later track. is It's on plan of to Our in kind get the still launch a full-scale to

we're to seeing the returns happy our results early with – predict. in seeing improvements far, ability are and So we're

very much. Thank you

Bill. you, Thank

comes question Huff from Brett with Next Stephens.

open. is line Your

Good sort the price the how not going? afternoon, if increases. Two wrong the of through and but for the you talk normal of are parts, can questions. guys. I'm that in that including little price auto I any you then increases a correct you years there think, – special guidance, volume most rolled the you price about Thanks strategic or Can us me one, taking increases tell increases assuming that noted bit you're

want this we you why quarter, And kind there's or know of a look there they about card you talk that we the and to the BXB, feather in within call we are look it. next in or year fiscal the then to to in specific where think I as maybe penetration about kind talked that did business like into focus I on? used whatever is acceleration those. that Did things vertical – in that you're is XXXX, going of more word into Scoring feather saw that?

time So just to thinking with auto, lot a because, where not strategically is to starting very it's felt any we're by we about it smoothly of would reprice, see gone come say that the and fully and I surprisingly spent impact in. means, how not

certain current the not is still numbers. it reflected we're in again So on but the timing, not

things. credit have respect to and With other then we another have else and is different one Scores large pre-screening kinds everything you mortgage, way our and business, or strategic management a auto card pre-qual. areas, related, at in It's of of quite we have account if portfolio look almost we

very a in can in in can surgical we more it's saying, approach that And oh portfolio it's of are us as that our last that being little price. simple identifying X, raised – pockets demanded handle and bit in just the so a definitely basically as prices case that not

to is time not as potential the there. describe but very And much so this it's easy around,

I kind you a I talk And one platform is FICO where but underlying of thanks. homogenization to of think AWS, in X the maybe the are the is I using you the – platform? sort or on example platform common the your about fully think of on think that Okay, Falcon gave infrastructure? the little bit that in then not can cloud, DMS moving that Is yet. that everything common we

question. great Yes,

the dozen a them franchises you three we have half know of platform. moved and to major As are

So, now Blaze, is which our on on Director, now origination the Strategy is platform platform. and TRIAD, on is is successor the to the platform. now rules the engine

and number CCS. solutions a Debt of major The Manager, Recovery there. and are are harder our So and extent to a Collections Falcon lesser ones

and product. in we're working moving the team we Falcon a our team, the large ready based so, just strong And – is very being definitely Falcon have X Falcon from priority cloud on cloud highest to platform

is CCS the the but interconnections are platform along, far there. not with as

so, visible. base. And Manager is that's code complex Debt And very a less

may a way And may separate platform. it a together. remain to We so, find it bring

make We that's interoperable will one it review. but or under way another, still

in of can't there. promise but XXX% that we're the platform on So we'll our major I solutions have months, XX almost

together my that the Is bit the to as don't improvement. So the but follow Are margin be little You to that question tied a the was before want that was comment about just – up maybe on to months, timing. you mean dots XX am “safer XXXX asked putting one going correctly? of I on promise question those beyond think I to there kind bet” made? that. fiscal

go through with economics mean the our form, be being That's Yes, frankly, customers. question more And the that business for should economics that. there's when has whole have platform; along platform savings to in and of the our good improve going mean, some on here. I idea us it I customers. its are to the – to for able pass good when the should no full we

That's the Great. I time. I all appreciate had.

[Operator Instructions] Baird. from of the Jeff line comes Next question Meuler with

open. is line Your

Yes, thank you.

QX in there's what's typical growth is mortgage other assumption? I'd auto callouts on it’s terms it guidance, have be just other I single-digit mid Or basically In scores market in assumed especially that then any the revenue of guess pricing volume And a the wondering until and anniversaried? the if the effect, you you assume? piece is

The standard – include auto the Yes, price it auto no, not of year. did kind auto. increases. was is And last does we it

kind of growth get from volume the high stronger what assuming you'll benefit yet you you that anniversaried, mortgage you assume just given of so guess, have in related I you plus mid outsized mortgage is did something to there assumption, I'm the Or auto because haven't recently? market been QX? end growth has Right, that the are single-digit wondering single-digit

Mike?

that. Yes, I can

in as in We portfolio, you data increases It single-digit of mortgage origination scores low seen otherwise, is, consistent reflected have the that's of the from what and price the in guidance and external but described, across of scores see not MBA cost some type across the increases nothing really with specifically volume really strength can in you in segment. board, the kind price lingering living increases. effects there past for any directly

special And adjustments. then like but that into Okay. guess I it guidance, planning additional not baked sounds you're some it's the pricing

Just mortgage order your have they pricing, pricing revenue next auto just impact do on the have the any round rough potential as to this similar sizing? a the or of magnitude

to certainly as the potential the they have you potential. Yes, know, is would we won't there. I rough do commit say sizing, but

Have you. conference. a good Thank Okay.

you. Thank

it I'll conclude you. session Gentlemen, does to yourselves. Q&A of turn that And the for call Thank the back continue. today. Please

Thank you. for look and everyone to Thank with forward Thank you you. We you talking call. today's to that concludes joining, again.

And your please you disconnect. participation. that you I We does call for much the today. ask very that thank conclude for